Venture capital is equity investing by professionally managed investment funds, providing seed, start-up, early-stage, expansion-stage and later-stage funding to high-growth trajectory private companies. This funding is provided to small start-ups to larger and more mature businesses.
Venture capital has served as a driving force in the development and commercialization of science, technology and business products and solutions. The venture capital market provides a critical link between innovation and finance, and fills a significant void in available financing alternatives, by providing selected fund-seeking businesses with access to a pool of capital especially attuned and tooled for illiquid, high-risk venture investments. Venture capital funding always involves a longer-term, illiquid equity investment in a company believed to have exceptional growth potential (and exit opportunities).
The investments are made by professionally managed venture capital funds (“VCs”) which are typically organized as limited partnerships. VCs raise their own funding from large institutional investors and wealthy individuals.