Venture Capital

What Does Venture Capital Mean?

Venture capital refers to money that is invested in early-stage businesses and start-ups. It plays a vital role in supporting innovation, particularly in the technology sector. If a tech startup is pitching a product or service that is not well understood, it can be difficult for the company to get loans from traditional lending institutions. These startups have to turn to investors to get access to the required capital, usually in exchange for giving the investors an equity stake in the company.


Techopedia Explains Venture Capital

The technology sector is extremely competitive. As a result, many start-ups never realize their full potential due to a number of factors, and many more simply fail. This makes investing in start-ups a high-risk, high-reward proposition. Risk is something that most banks want no part of, so venture capitalists step in to fill this gap in return for a share of the proceeds if the company succeeds. Some venture capitalists go beyond merely giving money, and offer their expertise and experience as well. This help can sometimes prove more valuable to a tech startup, as an experienced hand in managing a company can help turn promising ideas into salable products.


Related Terms

Latest IT Business Alignment Terms

Related Reading

Margaret Rouse

Margaret Rouse is an award-winning technical writer and teacher known for her ability to explain complex technical subjects to a non-technical, business audience. Over the past twenty years her explanations have appeared on TechTarget websites and she's been cited as an authority in articles by the New York Times, Time Magazine, USA Today, ZDNet, PC Magazine and Discovery Magazine.Margaret's idea of a fun day is helping IT and business professionals learn to speak each other’s highly specialized languages. If you have a suggestion for a new definition or how to improve a technical explanation, please email Margaret or contact her…