VentureCapital

Venture capital is a form of private equity financing provided to early-stage, high-potential companies. Venture capital firms raise pools of money from limited partners and invest in startups in exchange for equity, often taking a hands-on role in governance and strategy.

VC investment typically occurs in rounds such as seed, Series A, B, and beyond. Funds have finite lifespans (roughly 7 to 10 years) and deploy across portfolio companies; successful exits generate returns to the fund and its LPs.

Investment process includes sourcing, due diligence, term sheets, and negotiation of governance provisions such as board seats, liquidation preferences, anti-dilution protections, and vesting. Common compensation includes management fees and carried interest (carried typically around 20%).

Valuation and exit: Investors seek scalable business models; returns depend on a small number of outsized successes. Exits occur via initial public offerings, strategic acquisitions, or secondary sales.

History and scope: Originating in postwar United States, venture capital gained prominence in Silicon Valley during the late 20th century and expanded globally in the 2000s. Major markets include North America, Europe, Israel, and parts of Asia.

Criticism and role: VC funding supports innovation but concentrates risk, can incentivize rapid growth over profitability, and may entrench unequal access to capital. Governance terms can affect control and long-term strategy.