What is Venture capital?
Also known as: risk capital
Funds invested, in exchange for a stake (shares or equity interests), in new companies that do not yet have a track record or stable income but have high potential for rapid growth. Many such companies may fail, so the investor puts money into several projects and hopes that the strong growth of one or two will cover the remaining losses. A venture investor usually provides not only money but also advice and connections, and the exit comes by selling the stake when the company is sold or goes public on a stock exchange. The difference from a bank loan: there is no obligation to repay or pay interest; the investor bears the risk together with the owner.