Venture Capital . . .

is money invested in a business at high risk to the investor, usually when the company is unable to secure needed funds from traditional lending sources, such as  commercial banks or factors. Usually, the status of the company is such that the investor will be unable to withdraw his money in the near future. Venture capital can be invested through the purchase of stock (equity), by making a loan (debt), or through a combination of the two. Often, venture capital investments come bundled with management assistance and oversight by the investor, known as value added services.

Venture capital investors require a very high rate of return and thus only invest in companies with good prospects for rapid growth. Companies most likely to obtain venture capital are those that promise to appreciate quickly and which envision a public offering or company sale in five years or less. Turnarounds and leveraged buyouts are also good prospects for venture capital.

See: Adventure Capitalists, Angels, BDCs (Business Development Corporations), CDCs (Community Development Corporations), Corporate Venture Capital, Emerging Growth Companies, LBO (Leveraged Buyout), P/E, Pools, Pricing, ROI (Return on Investment), SBICs (Small Business Investment Companies), Specialty Funds, Turnarounds, Value Added, Vulture Capitalists.