What is Venture Capital?

Venture Capital, explained

Venture capital (VC) firms raise money from limited partners, such as pension funds, university endowments, and wealthy individuals, and invest it in young companies with the potential to grow very large. Funding typically happens in stages, such as seed, Series A, Series B, and later rounds, with each round usually at a higher valuation if the company is progressing.

VC follows a power law: most investments fail or return little, while a few big successes generate most of the returns. This pushes VCs to favor startups targeting very large markets and rapid growth. Beyond money, VCs often provide board guidance, hiring help, and networks. Founders should consider that VC funding brings expectations of fast growth and an eventual exit.