Venture capital (VC) is financial capital provided to high-potential, high risk, growth startup companies. These can generally be in any stage of businesses. The VC also invests in different rounds of financing and routinely invests in second or third rounds after the initial investment. The venture capital fund makes money by owning equity in the companies it invests in, which usually has a disruptive technology or business model in technology industries, such as biotechnology, IT and software. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore, all venture capital is private equity, but not all private equity is venture capital.
In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).
Venture Capital is way in which public and private sectors can construct an institution that systematically creates networks for the companies, firms and industries, so that they can progress efficiently . This institution can assist in identifying and combining pieces of companies, like finance, technical expertise and other business models.
