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Venture capital is a type of investment firm that invest in early-stage, high-potential, growth companies. The objective is to generate a huge profit through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares (stocks or ownership) in the invested company.
Venture capital firms gathers money from institutional investors (universities’ endowments, pension funds, trusts, etc.) and very rich individuals.
A VC or venture capitalist is a person or investment firm that invest in startups and they are expected to bring managerial and technical expertise.
Venture capital is most attractive for new companies with short history are not secure enough to get loans from banks or they do not have enough power to do an IPO. In exchange for the high risk of those startups, venture capitalists usually get significant control over company decisions (by sitting in the board of the company because they are also shareholders of the startup).
