Venture capital is a source of funding provided to enterprises that appear to have a potential for professional achievement. It is a sought after commodity, particularly for start-up companies whose intrinsic worth has been displayed in both their technical and business capabilities.

Venture Capital Firms, otherwise called VCs, develop portfolios that consist of a combination of young companies, combined into one venture fund. The goal of Venture Capital Firms is to exchange equity for ownership of stock in a young company. As in any form of investment, the higher the risk, the greater the expected return.

Be aware that any technical and business knowledge that is acquired by a Venture Capitalist will be used within the arena of their other investments. Venture Capitalists are known to be knowledgeable in their field and possess long-range vision and perspective. Co-investments with other professional capital firms are also common. In general, the goals of Venture Capitalists are accomplished by:

• Setting stringent policies for risk reduction inclusive of categories such as requirement procedures, age of the company, scope of the proposal, and evaluation procedures
• Managing equity security purchases
• Accumulating ownership in various aspiring businesses
• Acquisition of technical and business know-how
• Development of new products/services
• Contributing value-added knowledge to all companies within their investment portfolio
• Undertaking high risks and expecting high financial returns on investments
• Keen understanding of the Industry with a long-term perspective
• Primary focus on the future of the companies in which they have invested
• Building the businesses in which they have invested
• Seeking top performance in capital gains (up to 700-1,000% of investment) with rapid investment results (generally 5 to 7 years)
• Ultimate profit is realized by selling their interest in the business

Professionals manage all Venture Capital Firms. They consist of financial money from various private and public sources, inclusive of:

• Corporations
• Foundations
• Individuals of significant wealth
• Foreign investors
• Endowment founds
• Pension funds

Greater than 50% of venture capital and private equity is obtained from private pension funds and public institutions. The remainder is funded with money from individuals, banks, endowments, insurance companies, and foundations.

Frequently new start-ups and young companies aggressively pursue venture capital. Venture capitalists offer seed money (before development), early stage investing (first couple of stages of development) or later stage expansion. Venture capital firms may interact in the later stages of a company, prior to an Initial Public Offering (IPO), merger, or acquisition. Venture capitalists also seek situations related to acquisition, turnaround of the business, and resulting recapitalization.

Venture capital firms invest in diverse industries. In part they include:

• High technology (primary field of investment)
• Industrial products
• Construction
• Business services

Primarily, venture capital firms acquire capital gains in the following ways:

• Initial Public Offering of stock for the company in which they invested
• Merger with another company who has publicly traded stock
• Stock buy-back (by the company in which they have invested)