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Venture Capital Financing Definition

What is Venture Capital Financing?

A Brief Explanation of Venture Capital Financing | Definition

Venture capital (VC) financing is a method of providing capital to target companies. Venture capital is specialized form of private equity. Venture capital refers to investing in early-stage, high-potential, high risk, growth startup companies. Venture capital firms engage in their investments much like private equity firms. A venture capital firm, the general partner, will enter into a limited partnership with investors, the limited partners, to create a venture capital fund. The main difference between private equity and venture capital is the stage at which the investments take place and the strategies used to receive a return on the initial investment.

Venture capital has a long history in the United States, but became widely known during the internet bubble in 1995. Before this time venture capital returns were generally low compared to leveraged buyouts seen in private equity. However, VC investments in early-stage tech companies allowed the venture capital to become widely popularized as huge margins were returned in investors.

 

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