Venture Capital

Venture Capital: Venture capital is financial capital provided to start up firms with perceived long term high growth potential, by investors. These start up companies are typically high risk, high potential entities, usually with a novel business model or technology, which are either too small with limited operational history to go public and have not yet reached a stage to secure funds from traditional sources. Venture capital funds generate money by owing equity in such start up companies, with the aim of generating a profitable return through an eventual realization of the company’s assets, such as with an IPO.

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While venture capital allows for small start ups to significantly expand their business in a short span of time, the investors in these cases have to assume a certain amount of risk as these companies are generally new and unproven. Thus in return, venture capitalists, in addition to owning a good portion of the company’s equity, also get significant control to influence the major decisions of the organization.

Edited and Updated 08th March 2014

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