Venture Capital (VC)

Definition

Venture capital is institutional investment in high-growth private companies, structured as funds raised from limited partners and deployed by general partners for equity stakes.

How it comes up in fundraising

VC economics run on power laws: a few outsized winners must pay for the rest, which shapes what gets funded and at what expected scale.

Frequently asked questions

Is venture capital right for every startup?

No; VC fits businesses aiming at very large outcomes on compressed timelines. Strong companies with moderate ceilings are better served by revenue, debt, or angels.

How do venture funds make money?

Management fees (commonly 2 percent) plus carried interest (commonly 20 percent of profits) on successful exits.

Round Funded resources

Related terms

General Partner (GP)Limited Partner (LP)Carried Interest

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