Venture Capital is private capital that is invested in high-growth companies in exchange for equity. Private capital includes the capital of high net worth individuals and institutional investors such as pensions, endowments and other highly capitalized organizations. While broadly speaking the term venture capital includes angel investors, casually the phrase venture capital is only applied to institutions who are primarily investing the capital of a third-party.

VCs generally make investments with the objective of generating significant returns that are realized when the company’s stock is liquidated through an exit, such as an acquisition of the company or an IPO. There are some exceptions to this, however, as 1) venture groups within corporations often invest with the objective of generating both returns and creating strategic value for their parent company and 2) socially responsible venture firms seek to bundle returns with social benefit.

Venture capital funds are managed by one or more individuals that invest on behalf of the investors mentioned above. These managers identify and select investment opportunities, negotiate the deal terms, often join the boards of directors of their portfolio companies and generally assist the portfolio companies through their development.