What Is Venture Capital?

Venture capital is a widely used phrase that doesn't have an exact definition. It typically refers to investment funds or partnerships — and, increasingly, venture capital divisions within large corporations — that focus on investing in promising start-up and emerging companies. Venture

capitalists (VCs) have invested in some of today´s most famous corporate names, including Apple, Genentech, Intel, and Compaq. Typically, the investment is in company stock; the venture capitalist gets an ownership interest for the money invested.

Beyond supplying the company with money, the VC also provides assistance and expertise with business planning — bringing industry knowledge, experience in growing businesses and expertise in taking the company public some day. But you should be clear that venture capitalists' primary motive is to make a lot of money on their intended investment. And that should be the measure of any VC's past performance.

You should also be aware that most venture capitalists are interested only in businesses that can grow to be large. So, if you're a small grocery store, a neighborhood sushi bar, or a corner lemonade stand, don't waste your time seeking venture capital — unless you plan to create a lemonade or raw-fish empire.