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Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.Venture capital generally comes from well-off investors, investment banks and any other financial institutions.
One important difference between venture capital and other private equity deals, however, is that venture capital tends to focus on emerging companies seeking substantial funds for the first time, while private equity tends to fund larger, more established companies that are seeking an equity infusion or a chance for company founders to transfer some of their ownership stakes.
Venture capital is a subset of private equity (PE).
The dot com boom also brought the industry into sharp focus as venture capitalists chased quick returns from highly-valued Internet companies.
According to some estimates, funding levels during that period peaked at $119.6 billion.
He started the American Research and Development Corporation (ARDC) in 1946 and raised a $3.5 million fund to invest in companies that commercialized technologies developed during WWII.
ARDC's first investment was in a company that had ambitions to use x-ray technology for cancer treatment.
However, they tend to be entrepreneurs themselves, or executives recently retired from the business empires they've built.
Self-made investors providing venture capital typically share several key characteristics.
In a venture capital deal, large ownership chunks of a company are created and sold to a few investors through independent limited partnerships that are established by venture capital firms.
Sometimes these partnerships consist of a pool of several similar enterprises.