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Venture Capital

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Key Highlights

  • Venture capital (VC) is money invested in young, high-potential startups and small businesses with big growth possibilities.

  • VC funds collect money from wealthy individuals or institutions (called limited partners) and are run by experienced investors (general partners).

What is Venture Capital?

Venture capital (VC) is money invested in young, high-potential startups and small businesses with big growth possibilities. Investors, called venture capitalists, provide cash and often expertise in exchange for a share of the company. The goal? Big returns if the company succeeds, like when it goes public or gets bought.

Key Points

What Makes It Special?

Startups often can’t get bank loans because they’re new, risky, and lack assets. That’s where venture capital steps in. VCs invest in these companies, taking on high risk for a chance at high rewards. Beyond money, they offer guidance, like business strategy, marketing tips, or tech know-how. Investments often take 5–10 years to pay off, and VCs might get equity (ownership) or other financial arrangements.

Types of Venture Capital Funding

VC funding depends on where a startup is in its journey:

  • Pre-Seed & Seed Funding: Early money to turn ideas into reality, like building a prototype or business plan.

  • Series A, B, C, D: Later rounds to grow the business, enter new markets, or create new products.

  • Expansion & Late-Stage Funding: Cash to scale up, boost production, or prep for a big move like going public.

  • Bridge Funding: Short-term funds to tide a company over before a major event, like an IPO or sale.

How VC Funds Work?

VC funds collect money from wealthy individuals or institutions (called limited partners) and are run by experienced investors (general partners). These funds typically last 7–10 years. The VCs invest in startups early on, then aim to cash out later through events like IPOs or acquisitions. They often team up with other investors, share equity, and get priority if the company fails.

Why Venture Capital Matters?

VCs are a lifeline for startups that banks won’t touch. Beyond money, they bring valuable advice, connections, and strategies to help businesses grow fast- especially in tech. They help reduce risks and shape.