Venture Capital is the money invested by big firms or individuals in start-ups and small businesses with exceptional growth potential. There are certain firms that invest these types of capital and they are called venture capital firms.
In the United States alone, there are about 650 of these types of firms, which provide funding to about 2,600 firms per year. As mentioned, in 2007, such firms invested $29.9 billion in just over 2,600 companies.
It commonly refers to funds that are invested by a third party in a business either as private equity or as a form of secondary debt. It can also be something other than a direct monetary investment like - technical support or other necessary services.
Funds are provided by individuals or organizations to firms with high potential for growth or the ones who have grown fast since the start and are set to keep expanding. The investor receives a share of ownership and frequently enjoys some control.
Types of Venture Capitals
There are three major types of venture capital that are usually invested by these firms at different stages of small businesses with potential. They are -
- Early-stage financing
- Expansion financing
- Acquisition/buyout financing
Use of the Term in Sentences
- Venture capital often becomes the main reason a small start-up is able to start expanding so that it can make a mark in the market.
- Venture capital firms are always looking for the next promising venture to invest in.