Venture capital is a form of financing especially for funding high technology, high risk and perceived high reward projects. It provides funds to the entrepreneurs following new and hitherto unexplored avenues and ideas. It is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
Venture Capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. Such investments are uncertain as they are illiquid, but are competent in giving impressive returns if invested in the right venture. It is a type of financing provided to privately-held businesses by investors in exchange for partial ownership of the company.
Features of Venture Capital investments –
- High Risk
- Lack of Liquidity
- Long term horizon
- Equity participation and capital gains
- Venture capital investments are made in innovative projects.