Recent Examples of venture capital from the Web
In 2017, women received just 2.2% of venture capital funding.
The program allows the endowment to co-invest with venture capital firms in start-ups with intellectual property licensed through the university.
Sivakumar said, referring to Conway’s venture capital firm.
Magic Leap has topped venture capital lists in Florida by raising $1.9 billion in financing from companies including Google and Chinese e-commerce company Alibaba.
As a result, a slew of HD mapping companies are taking different stabs at the problem, each gobbling up venture capital and competing for lucrative contracts.
But nationwide, less than 1 percent of venture capital funding goes to black founders.
Bakken left in late 2014 to start HealthX Ventures, a Madison venture capital firm that invests in digital health care businesses.
The company appears to justify that claim on the grounds that American venture capital, the opportunity to play with the latest tech, and the chance to win Google jobs is worth trading for the keys to the city.
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'venture capital.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
First Known Use of venture capital
Financial Definition of VENTURE CAPITAL
What It Is
How It Works
There are three general types of venture capital: seed capital, for ideas that have not yet come to market; early-stage capital, for companies in their first or second stages of existence; and expansion-stage financing, for companies that need to grow beyond a certain point to become truly successful. Venture capital can also help a company merge with or acquire other companies.
Although some venture capital comes from private individuals, most venture capital comes from venture capital firms. These firms are often partnerships that obtain their investment funds from wealthy individuals, investment banks, endowments, pension funds, insurance companies, various financial institutions, and even corporations wishing to foster new products and technologies.
A venture capital firm must raise the money it needs to make investments in new businesses. This fund-raising is typically done by circulating a prospectus to potential investors who then agree to commit money to the fund. Once the venture firm has enough commitments, the firm may begin collecting or "calling" those commitments when it wants to make an investment. If and when the venture capital firm invests all of the fund's money, or if it simply wants to expand its investing activities, it may start another fund. Most funds have a fixed life, meaning they must make their investments within a certain period (usually about ten years). Venture capital firms may have several funds going at the same time.
The managers of many venture capital funds receive an annual management fee (usually 2% of the invested capital) and a portion of the fund's net profits (typically 20%). These fees compensate the managers for their expertise and the responsibility to help their investments become successful.
Typically, venture capitalists decide which companies to invest in by reviewing hundreds of business plans, meeting entrepreneurs and company managers, and performing extensive due diligence on investment candidates. They are very selective because they are seeking opportunities in which their investments will grow rapidly and provide a successful exit within a certain timeframe. When they do make a decision to invest, venture capital firms typically purchase a company's preferred stock and/or lend money to the company.
One of the most common and controversial characteristics of venture capital funding is that venture capital firms usually take active management roles and board seats in the companies they invest in. This often means that entrepreneurs give some control over their businesses to venture capital firms, who usually own a portion of the company (in some cases, controlling interest). However, venture capital firms can also provide crucial managerial or technical expertise, particularly in areas where the entrepreneur is less confident. This is especially the case when the venture capitalist specializes in the entrepreneur's industry or niche.
An important part of a venture capital investment is the exit, or the venture capital firm's plans for selling its investment in a company. Usually the exit, also known as the harvest, takes place anywhere from three to ten years, often via an initial public offering or through the merger or sale of the company.
Why It Matters
Venture capital is an important and necessary form of investment because it fosters entrepreneurship, especially in high-tech and other innovative industries. This in turn promotes job creation and economic growth. At the investment level, venture capital can be tremendously lucrative because it allows investors to get in at the ground level of what could be some of tomorrow's leading companies.
However, venture capital is not without risk. In fact, it is one of the riskiest investments available because many new companies fail or underperform. Venture capital firms anticipate this by diversifying their investments and hoping that their successful investments more than compensate for their losses. Nonetheless, venture capitalists must be willing to take significant long-term risks for what can be high returns.
What It Is
How It Works
Venture capitalists look to invest money in start-up companies which they believe have the potential for high returns. For this reason, venture capitalists grant venture capital generally given two conditions: that they have ownership in the company commensurate with the share of venture capital they provide (often 50% ownership or more); and that they receive a rate of return on their invested money commensurate with the risk.
If the venture capitalist feels that his investment in a company will yield consistent, high returns year after year, he is likely to maintain his share of ownership in the company. In many cases, however, venture capitalists maintain their ownership of a company only until the company is ready to issue an IPO (Initial Public Offering) or be sold to a buyer. In this instance, the venture capitalist sells his ownership for the proceeds from the IPO, or to the buyer as the case may be. This subsequently allows him to take the money he's made and look for new prospective start-up companies in which to invest.
To illustrate, suppose Bob, a venture capitalist, meets with the directors of start-up company XYZ. Having seen XYZ's current operations and long-range business plans, Bob decides to invest $1 million in XYZ. In return, Bob is automatically granted 50% ownership in the company as well as a 25% annual return on the money he has invested in exchange for the risk he knows he is taking. One year later, XYZ has successfully reached a level of productivity and positive cash flow that allows it to survive on its own. The board of directors, along with Bob, decides it would be best to raise funds for continuing expansion through the issuance of an IPO. Bob subsequently receives $1.25 million (the $1 million he initially invested plus the 25% return).
Why It Matters
Venture capitalists can serve start-up companies by readily providing them with funding that a bank might not. The advantage for a start-up company is that this option exists should a loan not be granted. The advantage for a venture capitalist is that by taking a risk and investing in an early stage company, he may gain very lucrative returns on his investment should the company succeed. A secondary advantage is that he is entitled to an ownership stake in the company and, therefore, a voice in how the company is run.
VENTURE CAPITAL Defined for English Language Learners
Definition of venture capital for English Language Learners
: money that is used to start a new business
Learn More about venture capital
Britannica.com: Encyclopedia article about venture capital
Seen and Heard
What made you want to look up venture capital? Please tell us where you read or heard it (including the quote, if possible).