venture capital

Venture capital (VC) is a form of private equity financing where professional investment firms—managed by general partners—pool money from institutional investors (like pension funds and endowments) to invest in early-stage startups with high growth potential. In exchange for this capital, VC firms receive equity (ownership) in the company and often take an active role in its management, typically by securing a seat on the board of directors to provide strategic guidance. Because these investments are made in unproven businesses, the risk of failure is high; however, VCs aim for "outsized returns" through an eventual exit, such as the startup being acquired by a larger corporation or going public via an Initial Public Offering (IPO).