Venture Capital: A Definition

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What is Venture Capital?

Venture Capital: A Definition

You may have heard of venture capital but be unsure of what it actually is, what it entails, and how you may be able to use it for your company's financing needs. Here's a quick 101.

Venture capital, according to Wikipedia, is a type of private equity capital given to finance new, growing or struggling companies. Because the financing is typically higher-risk than most banks will approve, outside investors are sought, and those that invest usually get high returns on their investments as well as sometimes partial ownership of the company.

Venture capital is popular in certain industries that require large up-front investments, which can't be financed by more traditional means. These industries include:


Life Sciences


The financing can be used for a multitude of purposes, from growing the business (marketing and advertising budget, increasing inventory) to keeping the company from sinking.

Types of Venture Capital Investors
The venture capital investors may be individuals looking for a high-return (and by nature high-risk) investment, or institutions that provide venture capital to candidates that meet certain requirements. Typically, investors want to see that a business has the potential to grow, thus increasing their investment. They may require certain standards to be met within a certain timeframe (usually 3-7 years) in order for their funding of the business to continue.



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