Venture capital is associated with some of the most innovative and high-growth companies in the economy. Scores of startups commercializing transformational technologies have been backed by venture capital.
The majority of venture capital investors (General Partners- GPs) raise money from, and invest on behalf of, “limited partners”—institutions such as pension funds, sovereign wealth funds and university endowments that allocate some of their capital to the broader private equity assets class to which venture capital belongs.Companies use the capital invested into their businesses in many ways, including to build out their teams, expand their offerings, or reach a profitability milestone. VC is part of a larger, more complex part of the financial landscape known as the private Markets.
To raise the money needed to invest in companies, venture capital firms open a venture fund and ask for commitments from limited partners. This process allows them to form a pool of money, which is then invested into promising private companies. The investments they make are typically in exchange for minority equity—which is a 50% or less stake in the company.
