Venture Capital
Venture capital typically refers money provided by investors to finance new businesses. An investor predicts that an emerging company has a high-growth potential and provides initial funding for the company. Generally, investors offer cash in exchange for shares in the company. Like other traditional stock investments, the performance of the company effects the gains or losses for the investor. If the company does poorly, the investor’s shares lose value. If the company does well on the other hand, the investor is rewarded with a valuable share that he can retain or cash out for more money than the initial investment. This is the goal of venture capitalists: to predict a company’s success and provide necessary capital for the company’s expansion, and then net a high return when the company succeeds. There is a shared interest between venture capitalists and the small businesses. Businesses hoping to grow but lacking the necessary money look to venture capital as a way of funding growth. Venture capital is classified as a private equity investment.
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