View source for Venture capital

{{short description|Form of private-equity financing}}
{{use mdy dates|date=September 2015}}
{{History of private equity and venture capital}}
{{AI-generated|date=October 2025}}
'''Venture capital''' ('''VC''') is a form of [[private equity]] financing provided by firms or [[funds]] to [[start-up company|startup]], early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in terms of number of employees, annual revenue, scale of operations, etc. Venture capital firms or funds invest in these early-stage companies in exchange for [[Equity (finance)|equity]], or an ownership stake. Venture capitalists take on the risk of [[financing]] start-ups in the hopes that some of the companies they support will become successful. Because [[Startup company|startups]] face high uncertainty,<ref>{{Cite journal|last1=Schmitt|first1=Antje|last2=Rosing|first2=Kathrin|last3=Zhang|first3=Stephen X.|last4=Leatherbee|first4=Michael|date=2017-09-21|title=A Dynamic Model of Entrepreneurial Uncertainty and Business Opportunity Identification: Exploration as a Mediator and Entrepreneurial Self-Efficacy as a Moderator|journal=Entrepreneurship Theory and Practice|volume=42|issue=6|language=en|pages=835–859|doi=10.1177/1042258717721482|s2cid=148840401|issn=1042-2587}}</ref> VC investments have high rates of failure. Start-ups are usually based on an [[innovation|innovative]] technology or [[business model]] and often come from [[high technology]] industries such as [[information technology]] (IT) or [[biotechnology]].

Pre-seed and [[seed money|seed]] rounds are the initial stages of funding for a startup company,<ref>{{Cite web |date=2021-08-27 |title=Stages of Venture Capital {{!}} Silicon Valley Bank |url=https://www.svb.com/startup-insights/vc-relations/stages-of-venture-capital/ |access-date=2024-05-09 |website=www.svb.com |language=en}}</ref> typically occurring early in its development. During a seed round, entrepreneurs seek investment from [[Angel investor|angel investors]], venture capital firms, or other sources to finance the initial operations and development of their business idea. Seed funding is often used to validate the concept, build a prototype, or conduct [[market research]]. This initial capital injection is crucial for startups to kickstart their journey and attract further investment in subsequent funding rounds.

Typical venture capital investments occur after an initial "[[seed funding]]" round. The first round of institutional venture capital to fund growth is called the [[Series A round]]. Venture capitalists provide this financing in the interest of generating a [[Profit (economics)|return]] through an eventual "exit" event, such as the company selling shares to the public for the first time in an [[initial public offering]] (IPO), or disposal of shares happening via a merger, via a sale to another entity such as a financial buyer in the [[private equity secondary market]] or via a sale to a trading company such as a competitor.

In addition to [[angel investing]], [[equity crowdfunding]] and other [[seed funding]] options, venture capital is attractive for new companies with limited operating history that are too small to raise [[capital (economics)|capital]] in the [[financial market|public market]]s and have not reached the point where they are able to secure a [[loan|bank loan]] or complete a [[debt|debt offering]]. In exchange for the high [[Financial risk|risk]] that venture capitalists assume by investing in smaller and early-stage companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the companies' ownership (and consequently value). Companies who have reached a market valuation of over $1 billion are referred to as [[Unicorn (finance)|unicorns]]. As of May 2024, there were a reported total of 1248 unicorn companies.<ref>{{Cite web |title=The Complete List Of Unicorn Companies |url=https://www.cbinsights.com/research-unicorn-companies |access-date=2024-11-15 |website=instapage.cbinsights.com}}</ref> Venture capitalists also often provide strategic advice to the company's executives on its [[business model]] and marketing strategies.

==History==
===Origins of modern venture capital===
{{Main|History of venture capital}}

Before [[World War II]] (1939–1945) venture capital was primarily the domain of wealthy individuals and families. [[J.P. Morgan]], the [[Wallenberg family|Wallenbergs]], the [[Vanderbilt family|Vanderbilts]], the [[Whitney family|Whitneys]], the [[Rockefeller family|Rockefellers]], and the [[Warburg family|Warburgs]] were notable investors in private companies. In 1938, [[Laurance S. Rockefeller]] helped finance the creation of both [[Eastern Air Lines]] and [[Douglas Aircraft]], and the Rockefeller family had vast holdings in a variety of companies. [[Eric M. Warburg]] founded [[E.M. Warburg & Co.]] in 1938, which would ultimately become [[Warburg Pincus]], with investments in both [[leveraged buyouts]] and venture capital. The [[Wallenberg family]] started [[Investor AB]] in 1916 in Sweden and were early investors in several Swedish companies such as [[ABB]], [[Atlas Copco]], and [[Ericsson]] in the first half of the 20th century.

Only after 1945 did "true" venture capital investment firms begin to emerge, notably with the founding of [[American Research and Development Corporation]] (ARDC) and [[J.H. Whitney & Company]] in 1946.<ref>
Wilson, John. ''The New Venturers, Inside the High Stakes World of Venture Capital.''
</ref><ref>
{{Cite book |author = Ante, Spencer E. |title = Creative Capital: Georges Doriot and the Birth of Venture Capital |publisher = Harvard Business School Press |location = Cambridge, MA |year = 2008 |isbn = 978-1-4221-0122-3 |url-access = registration |url = https://archive.org/details/creativecapitalg00ante }}
</ref>

[[Georges Doriot]], the "father of venture capitalism",<ref>{{Cite web|url=https://www.pbs.org/wgbh/theymadeamerica/whomade/doriot_hi.html|archiveurl=https://web.archive.org/web/20121208041220/http://www.pbs.org/wgbh/theymadeamerica/whomade/doriot_hi.html|url-status=dead|title=Who Made America? &#124; Innovators &#124; Georges Doriot|archivedate=December 8, 2012|website=www.pbs.org}}</ref> along with [[Ralph Flanders]] and [[Karl Compton]] (former president of [[MIT]]) founded ARDC in 1946 to encourage private-sector investment in businesses run by soldiers returning from World War II. ARDC became the first institutional private-equity investment firm to raise capital from sources other than wealthy families. Unlike most present-day venture capital firms, ARDC was a publicly traded company. ARDC's most successful investment was its 1957 funding of [[Digital Equipment Corporation]] (DEC), which would later be valued at more than $355 million after its initial public offering in 1968. This represented a return of over 1200 times its investment and an [[internal rate of return|annualized rate of return]] of 101% to ARDC.<ref>Ante, Spencer E.. Creative capital: Georges Doriot and the birth of venture capital. Boston, Harvard Business Press, 2008.</ref>

Former employees of ARDC went on to establish several prominent venture capital firms including [[Greylock Partners]], founded in 1965 by Charlie Waite and Bill Elfers; Morgan, Holland Ventures, the predecessor of Flagship Ventures, founded in 1982 by James Morgan; Fidelity Ventures, now Volition Capital, founded in 1969 by Henry Hoagland; and [[Charles River Ventures]], founded in 1970 by Richard Burnes.<ref>
Kirsner, Scott.  "Venture capital's grandfather." [[The Boston Globe]], April 6, 2008.
</ref> ARDC continued investing until 1971, when Doriot retired. In 1972 Doriot merged ARDC with [[Textron]] after having invested in over 150 companies.<ref>{{cite journal |last1=Gerguri |first1=Shqipe |last2=Ramadani |first2=Veland |last3=Ibraimi |first3=Sadudin |title=Development Measures of Institutional Venture Capital in Transition Economies. The Case of Macedonia. |journal=International Journal of Academic Research in Accounting, Finance and Management Sciences |date=2012 |volume=2 |issue=4 |pages=387–398 |url=https://scholar.googleusercontent.com/scholar?q=cache:9YQmGANQgAAJ:scholar.go |access-date=30 September 2022}}</ref>

[[John Hay Whitney]] (1904–1982) and his partner [[Benno C. Schmidt, Sr.|Benno Schmidt]] (1913–1999) founded J.H. Whitney & Company in 1946. Whitney had been investing since the 1930s, founding [[Pioneer Pictures]] in 1933 and acquiring a 15% interest in [[Technicolor Corporation]] with his cousin [[Cornelius Vanderbilt Whitney]]. Florida Foods Corporation proved Whitney's most famous investment. The company developed an innovative method for delivering nutrition to American soldiers, later known as [[Minute Maid]] orange juice and was sold to [[The Coca-Cola Company]] in 1960. J.H. Whitney & Company continued to make investments in [[leveraged buyout]] transactions and raised $750 million for its sixth [[institutional investor|institutional]] [[private-equity fund]] in 2005.{{Citation needed|date=January 2021}}

=== Early venture capital and the beginning of Silicon Valley ===
{{More citations needed section|date=January 2021}}

One of the first steps toward a professionally managed venture capital industry was the passage of the [[Small Business Investment Act of 1958]]. The 1958 Act officially allowed the U.S. [[Small Business Administration]] (SBA) to license private "Small Business Investment Companies" (SBICs) to help the financing and management of the small entrepreneurial businesses in the United States.<ref>{{cite web |url=http://www.sba.gov/aboutsba/sbaprograms/inv/index.html |title=Small Business Administration |access-date=2012-05-18 |url-status=live |archive-url=https://web.archive.org/web/20101218180213/http://www.sba.gov/aboutsba/sbaprograms/inv/index.html |archive-date=December 18, 2010 |df=mdy-all }} Small Business Administration Investment Division (SBIC)</ref> The Small Business Investment Act of 1958 provided tax breaks that helped contribute to the rise of private-equity firms.<ref>{{cite web |last1=Dilger |first1=Robert J. |title=SBA Small Business Investment CompanyProgram |url=https://fas.org/sgp/crs/misc/R41456.pdf |website=Congressional Research Service |access-date=8 July 2019 |page=1 |date=4 April 2019 |archive-date=February 7, 2020 |archive-url=https://web.archive.org/web/20200207201434/https://fas.org/sgp/crs/misc/R41456.pdf |url-status=live }}</ref>

During the 1950s, putting a venture capital deal together may have required the help of two or three other organizations to complete the transaction. It was a business that was growing very rapidly, and as the business grew, the transactions grew exponentially.<ref>Lea, Charles. "Tape 4- Charles Lea". Interview by Charles Rudnick. ''National Venture Capital Association Venture Capital Oral History Project Funded by Charles W. Newhall III''. September 18, 2008.</ref> [[Arthur Rock]], one of the pioneers of Silicon Valley during his venturing the [[Fairchild Semiconductor]] is often credited with the introduction of the term "venture capitalist" that has since become widely accepted.<ref>{{Cite web |last=School |first=Stanford Law |title=Legal Matters: Arthur Rock on the Early Venture Capital Decisions That Sparked Decades of Innovation |url=https://law.stanford.edu/stanford-lawyer/articles/legal-matters-arthur-rock-on-the-early-venture-capital-decisions-that-sparked-decades-of-innovation/ |access-date=2023-01-28 |website=Stanford Law School |date=January 5, 2023 |language=en |archive-date=January 28, 2023 |archive-url=https://web.archive.org/web/20230128183355/https://law.stanford.edu/stanford-lawyer/articles/legal-matters-arthur-rock-on-the-early-venture-capital-decisions-that-sparked-decades-of-innovation/ |url-status=live }}</ref>

During the 1960s and 1970s, venture capital firms concentrated their investments mainly on launching and growing companies. These companies frequently capitalized on breakthroughs in electronic, medical, or data-processing technologies. As a result, venture capital came to be almost synonymous with financing of technology ventures. An early West Coast venture capital company was Draper and Johnson Investment Company, formed in 1962<ref>{{cite web |url = http://www.draperco.com/history.html |title = www.draperco.com |url-status=dead|archive-url=https://web.archive.org/web/20111002093836/http://www.draperco.com/history.html |archive-date=October 2, 2011 |df=mdy-all }}</ref> by [[William Henry Draper III]] and Franklin P. Johnson, Jr. In 1965, [[Sutter Hill Ventures]] acquired the portfolio of Draper and Johnson as a founding action.<ref>{{cite web |last1=Riddell |first1=Lindsay |title=Longtime venture capitalist focuses on the person at the top |url=https://www.bizjournals.com/sanjose/stories/2007/05/28/focus4.html |website=bizjournals.com |publisher=Silicon Valley Business Journal |access-date=29 March 2023 |language=en |date=May 27, 2007 |archive-date=March 8, 2023 |archive-url=https://web.archive.org/web/20230308124812/https://www.bizjournals.com/sanjose/stories/2007/05/28/focus4.html |url-status=live }}</ref> Bill Draper and Paul Wythes were the founders, and Pitch Johnson formed Asset Management Company at that time.

It was also in the 1960s that the common form of [[private-equity fund]], still in use today, emerged. [[Private-equity firm]]s organized [[limited partnership]]s to hold investments in which the investment professionals served as [[general partner]] and the investors, who were passive [[limited partners]], put up the capital. The compensation structure, still in use today, also emerged with limited partners paying an annual management fee of 1.0–2.5% and a [[carried interest]] typically representing up to 20% of the profits of the partnership.

The growth of the venture capital industry was fueled by the emergence of the independent investment firms on [[Sand Hill Road]], beginning with [[Kleiner Perkins]] and [[Sequoia Capital]] in 1972. Located in [[Menlo Park, California]], Kleiner Perkins, Sequoia and later venture capital firms would have access to the many [[semiconductor]] companies based in the [[Santa Clara Valley]] as well as early [[computer]] firms using their devices and programming and service companies.{{NoteTag|In 1971, a series of articles entitled "Silicon Valley USA" were published in the [[Electronic News]], a weekly trade publication, giving rise to the use of the term [[Silicon Valley]].}} [[Kleiner Perkins]] was the first venture capital firm to open an office on Sand Hill Road in 1972.<ref name="Nicholas_Page_212">{{cite book |last1=Nicholas |first1=Tom |title=VC: An American History |date=2019 |publisher=Harvard University Press |location=Cambridge |isbn=9780674240117 |page=212 |url=https://books.google.com/books?id=vymWDwAAQBAJ&pg=PA212 |access-date=September 27, 2023 |archive-date=October 5, 2023 |archive-url=https://web.archive.org/web/20231005131635/https://books.google.com/books?id=vymWDwAAQBAJ&pg=PA212 |url-status=live }}</ref>

Throughout the 1970s, a group of private-equity firms, focused primarily on venture capital investments, would be founded that would become the model for later leveraged buyout and venture capital investment firms. In 1973, with the number of new venture capital firms increasing, leading venture capitalists formed the National Venture Capital Association (NVCA). The NVCA was to serve as the [[industry trade group]] for the venture capital industry.<ref>{{cite web |url = http://www.nvca.org/ |title = National Venture Capital Association |access-date=2008-07-30 |url-status=live |archive-url = https://web.archive.org/web/20080730052236/http://www.nvca.org/ |archive-date=July 30, 2008 |df=mdy-all }} Official website of the National Venture Capital Association, the largest trade association for the venture capital industry.</ref> Venture capital firms suffered a temporary downturn in 1974, when the stock market crashed and investors were naturally wary of this new kind of investment fund.

It was not until 1978 that venture capital experienced its first major fundraising year, as the industry raised approximately $750 million. With the passage of the [[Employee Retirement Income Security Act]] (ERISA) in 1974, corporate pension funds were prohibited from holding certain risky investments including many investments in [[privately held]] companies. In 1978, the [[United States Department of Labor|US Labor Department]] relaxed certain restrictions of the ERISA, under the "[[prudent man rule]]"{{NoteTag|The "prudent man rule" is a [[fiduciary responsibility]] of investment managers under ERISA. Under the original application, each investment was expected to adhere to risk standards on its own merits, limiting the ability of investment managers to make any investments deemed potentially risky.  Under the revised 1978 interpretation, the concept of portfolio diversification of risk, measuring risk at the aggregate portfolio level rather than the investment level to satisfy fiduciary standards would also be accepted.}}, thus allowing corporate pension funds to invest in the asset class and providing a major source of capital available to venture capitalists.

===1980s and VC involvement in large American companies===
The public successes of the venture capital industry in the 1970s and early 1980s (e.g., [[Digital Equipment Corporation]], [[Apple Inc.]], [[Genentech]]) gave rise to a major proliferation of venture capital investment firms. From just a few dozen firms at the start of the decade, there were over 650 firms by the end of the 1980s, each searching for the next major "home run". The number of firms multiplied, and the capital managed by these firms increased from $3 billion to $31 billion over the course of the decade.<ref name=VCVigor>POLLACK, ANDREW.  "[https://query.nytimes.com/gst/fullpage.html?res=950DE0D61E3CF93BA35753C1A96F948260 Venture Capital Loses Its Vigor] {{Webarchive|url=https://web.archive.org/web/20201027152820/https://www.nytimes.com/1989/10/08/business/venture-capital-loses-its-vigor.html |date=October 27, 2020 }}." [[New York Times]], October 8, 1989.</ref>

The growth of the industry was hampered by sharply declining returns, and certain venture firms began posting losses for the first time. In addition to the increased competition among firms, several other factors affected returns. The market for initial public offerings cooled in the mid-1980s before collapsing after the stock market crash in 1987, and foreign corporations, particularly from [[Japan]] and [[Korea]], flooded early-stage companies with capital.<ref name="VCVigor"/>

In response to the changing conditions, corporations that had sponsored in-house venture investment arms, including [[General Electric]] and [[Paine Webber]] either sold off or closed these venture capital units. Additionally, venture capital units within [[Chemical Banking|Chemical Bank]] and [[Continental Illinois National Bank and Trust Company|Continental Illinois National Bank]], among others, began shifting their focus from funding early stage companies toward investments in more mature companies. Even industry founders [[J.H. Whitney & Company]] and [[Warburg Pincus]] began to transition toward [[leveraged buyouts]] and [[growth capital]] investments.<ref name="VCVigor"/><ref>Kurtzman, Joel.  "[https://archive.today/20120715070212/http://query.nytimes.com/gst/fullpage.html?res=940DE0DB1E3EF934A15750C0A96E948260] PROSPECTS; Venture Capital." [[New York Times]], March 27, 1988.</ref><ref>LUECK, THOMAS J.  "[https://archive.today/20120713001915/http://query.nytimes.com/gst/fullpage.html?res=9B0DE4DD113EF935A35751C0A961948260] High Tech's Glamour fades for some venture capitalists." [[New York Times]], February 6, 1987.</ref>

===Venture capital boom and the Internet Bubble===
By the end of the 1980s, venture capital returns were relatively low, particularly in comparison with their emerging [[leveraged buyout]] cousins, due in part to the competition for hot startups, excess supply of IPOs and the inexperience of many venture capital fund managers. Growth in the venture capital industry remained limited throughout the 1980s and the first half of the 1990s, increasing from $3 billion in 1983 to just over $4 billion more than a decade later in 1994.<ref>{{cite web |url=http://reactionwheel.net/2015/01/80s-vc.html |title=Heat Death: Venture Capital in the 1980s |last=Neumann |first=Jerry |date=January 8, 2015 |website=Reaction Wheel |access-date=May 5, 2020 |archive-date=April 28, 2020 |archive-url=https://web.archive.org/web/20200428191726/http://reactionwheel.net/2015/01/80s-vc.html |url-status=live }}</ref>

The advent of the [[World Wide Web]] in the early 1990s reinvigorated venture capital as investors saw companies with huge potential being formed. [[Netscape]] and [[Amazon (company)]] were founded in 1994, and [[Yahoo!]] in 1995. All were funded by venture capital. [[Internet]] IPOs—AOL in 1992; Netcom in 1994; UUNet, Spyglass and Netscape in 1995; Lycos, Excite, Yahoo!, CompuServe, Infoseek, C/NET, and E*Trade in 1996; and Amazon, ONSALE, Go2Net, N2K, NextLink, and SportsLine in 1997—generated enormous returns for their venture capital investors. These returns, and the performance of the companies post-IPO, caused a rush of money into venture capital, increasing the number of venture capital funds raised from about 40 in 1991 to more than 400 in 2000, and the amount of money committed to the sector from $1.5 billion in 1991 to more than $90 billion in 2000.<ref>National Science Foundation, “Science and Engineering Indicators–2002″</ref>

The bursting of the [[dot-com bubble]] in 2000 caused many venture capital firms to fail and financial results in the sector to decline.{{Citation needed|date=January 2021}}

===2001 private equity crash===
[[File:Nasdaq2.png|thumb|The technology-heavy [[NASDAQ Composite]] index peaked at 5,048 in March 2000, reflecting the high point of the dot-com bubble.]]
The [[Nasdaq]] crash and technology slump that started in March 2000 shook virtually the entire venture capital industry as valuations for startup technology companies collapsed. Over the next two years, many venture firms had been forced to write-off large proportions of their investments, and many funds were significantly "[[Under water (loan)|under water]]" (the values of the fund's investments were below the amount of capital invested). Venture capital investors sought to reduce the size of commitments they had made to venture capital funds, and, in numerous instances, investors sought to unload existing commitments for cents on the dollar in the [[private equity secondary market|secondary market]]. By mid-2003, the venture capital industry had shriveled to about half its 2001 capacity. Nevertheless, [[PricewaterhouseCoopers|PricewaterhouseCoopers']] MoneyTree Survey<ref>{{cite web |url = http://www.pwcmoneytree.com/moneytree/index.jsp |title = MoneyTree Survey |publisher = Pwcmoneytree.com |date = February 21, 2007 |access-date = May 18, 2012 |url-status = dead |archive-url = https://web.archive.org/web/20070614161950/http://www.pwcmoneytree.com/moneytree/index.jsp |archive-date = June 14, 2007 |df = mdy-all }}</ref> shows that total venture capital investments held steady at 2003 levels through the second quarter of 2005.{{Citation needed|date=January 2021}}

Although the post-boom years represent just a small fraction of the peak levels of venture investment reached in 2000, they still represent an increase over the levels of investment from 1980 through 1995. As a percentage of GDP, venture investment was 0.058% in 1994, peaked at 1.087% (nearly 19 times the 1994 level) in 2000 and ranged from 0.164% to 0.182% in 2003 and 2004. The revival of an [[Internet]]-driven environment in 2004 through 2007 helped to revive the venture capital environment. However, as a percentage of the overall private-equity market, venture capital has still not reached its mid-1990s level, let alone its peak in 2000.{{Citation needed|date=January 2021}}

Venture capital funds, which were responsible for much of the fundraising volume in 2000 (the height of the [[dot-com bubble]]), raised only $25.1 billion in 2006, a 2% decline from 2005 and a significant decline from its peak.<ref>Dow Jones Private Equity Analyst as referenced in Taub, Stephen.  {{cite web |url=http://www.cfo.com/article.cfm/8537972/c_8519925?f=home_todayinfinance |title=Record Year for Private Equity Fundraising - - CFO.com |access-date=2008-06-08 |url-status=dead |archive-url=https://web.archive.org/web/20110614003624/http://www.cfo.com/article.cfm/8537972/c_8519925?f=home_todayinfinance |archive-date=June 14, 2011 |df=mdy-all }} Record Year for Private Equity Fundraising.  CFO.com, January 11, 2007.</ref> The decline continued till their fortunes started to turn around in 2010 with $21.8 billion invested (not raised).<ref>{{cite web |url=https://venturebeat.com/2011/01/20/vcs-boom-in-2010/ |title=VCs roared back in 2010, investing the most money since 2007 |work=VentureBeat |date=January 21, 2011 |access-date=2021-09-17 |archive-date=September 17, 2021 |archive-url=https://web.archive.org/web/20210917085201/https://venturebeat.com/2011/01/20/vcs-boom-in-2010/ |url-status=live }}</ref> The industry continued to show phenomenal growth and in 2020 hit $80 billion in fresh capital.<ref>{{cite web |url=https://pitchbook.com/news/articles/vc-is-better-than-ever-why-so-few-first-time-funds |title=VC is performing better than ever. Then why are so few first-time funds being raised? |date=May 4, 2021 |access-date=2021-09-17 |archive-date=September 17, 2021 |archive-url=https://web.archive.org/web/20210917085515/https://pitchbook.com/news/articles/vc-is-better-than-ever-why-so-few-first-time-funds |url-status=live }}</ref> Again, in 2022, there was a brief decline in venture capital access, but it has since recovered due to strong networks powering venture investment.<ref>{{cite news |last=Somerville |first=Heather |title=Startups End a Bruising 2022, Stare Down Another Challenging Year |newspaper=The Wall Street Journal |date=January 1, 2023 |url=https://www.wsj.com/articles/startups-end-a-bruising-2022-stare-down-another-challenging-year-11672527313}}
</ref>

==Financing==
{{main|Venture capital financing}}

Obtaining venture capital is substantially different from raising debt or a loan. Lenders have a legal right to interest on a loan and repayment of the capital irrespective of the success or failure of a business. Venture capital is invested in exchange for an equity stake in the business. The return of the venture capitalist as a shareholder depends on the growth and profitability of the business. This return is generally earned when the venture capitalist "exits" by selling its shareholdings when the business is sold to another owner.<ref>{{Cite web |title=Venture Capitalists |url=https://corporatefinanceinstitute.com/resources/capital-markets/venture-capitalists/ |access-date=2023-02-11 |website=Corporate Finance Institute |language=en-US |archive-date=February 11, 2023 |archive-url=https://web.archive.org/web/20230211183834/https://corporatefinanceinstitute.com/resources/capital-markets/venture-capitalists/ |url-status=live }}</ref>

Venture capitalists are typically very selective in deciding what to invest in, with a Stanford survey of venture capitalists revealing that 100 companies were considered for every company receiving financing.<ref>{{Cite news|title=How Do Venture Capitalists Make Decisions?|work=Stanford University Graduate School of Business Research Paper|df=mdy-all|ssrn = 2801385}}</ref> Ventures receiving financing must demonstrate an excellent management team, a large potential market, and most importantly high growth potential, as only such opportunities are likely capable of providing financial returns and a successful exit within the required time frame (typically 8–12 years) that venture capitalists expect.<ref>{{Cite web|url=https://pitchbook.com/news/articles/the-venture-capital-lifecycle|title=The Venture Capital Lifecycle - PitchBook |date=May 14, 2014 }}</ref>

Because investments are [[Market liquidity|illiquid]] and require the extended time frame to harvest, venture capitalists are expected to carry out detailed [[due diligence]] prior to investment. Venture capitalists also are expected to nurture the companies in which they invest, in order to increase the likelihood of reaching an [[Initial public offering|IPO]] stage when [[Valuation (finance)|valuations]] are favourable. Venture capitalists typically assist at four stages in the company's development:<ref>[http://www.banknetindia.com/finance/vcapital.htm Investment philosophy of VCs] {{webarchive|url=https://web.archive.org/web/20080612195436/http://www.banknetindia.com/finance/vcapital.htm |date=June 12, 2008 }}.</ref>
* [[Business idea|Idea generation]];
* [[Startup company|Start-up]];
* [[Ramp-up]]; and
* [[Exit strategy#In business|Exit]]

Because there are no public exchanges listing their securities, private companies meet venture capital firms and other private-equity investors in several ways, including warm referrals from the investors' trusted sources and other business contacts; investor conferences and symposia; and summits where companies pitch directly to investor groups in face-to-face meetings, including a variant known as "Speed Venturing", which is akin to speed-dating for capital, where the investor decides within 10 minutes whether he wants a follow-up meeting. In addition, some new private online networks are emerging to provide additional opportunities for meeting investors.<ref name="news.bbc.co.uk">{{Cite news |date=2010-05-12 |title=Cash-strapped entrepreneurs get creative |url=https://www.bbc.com/news/10100885 |access-date=2025-07-21 |work=BBC News |language=en-GB}}</ref>

This need for high returns makes venture funding an expensive capital source for companies, and most suitable for businesses having large up-front [[capital requirement]]s, which cannot be financed by cheaper alternatives such as debt. That is most commonly the case for intangible assets such as software, and other intellectual property, whose value is unproven. In turn, this explains why venture capital is most prevalent in the fast-growing [[high tech|technology]] and [[life sciences]] or [[biotechnology]] fields.<ref>{{Cite web |title=Q3 2022 venture capital investment trends |url=https://www.ey.com/en_us/growth/venture-capital/q3-2022-venture-capital-investment-trends |access-date=2023-02-11 |website=www.ey.com |language=en-US |archive-date=February 11, 2023 |archive-url=https://web.archive.org/web/20230211183833/https://www.ey.com/en_us/growth/venture-capital/q3-2022-venture-capital-investment-trends |url-status=live }}</ref>

If a company does have the qualities venture capitalists seek including a solid business plan, a good management team, investment and passion from the founders, a good potential to exit the investment before the end of their funding cycle, and target minimum returns in excess of 40% per year, it will find it easier to raise venture capital.{{Citation needed|date=January 2021}}

===Financing stages===
There are multiple stages of [[venture round|venture]] financing offered in venture capital, that roughly correspond to these stages of a company's development.<ref>''Corporate Finance'', 8th Edition. Ross, Westerfield, Jaffe. McGraw-Hill publishing, 2008.</ref>
* Pre-seed funding: The earliest round of financing needed to prove a new idea, often provided by friends and family, [[angel investor]]s, [[startup accelerator]]s, and sometimes by venture capital funds. [[Equity crowdfunding]] is also emerging as an option for seed funding.<ref>{{Cite web |title=Series A, B, C, D, and E Funding: How It Works |url=https://www.startups.com/library/expert-advice/series-funding-a-b-c-d-e |access-date=2023-02-17 |website=www.startups.com |language=en |archive-date=February 17, 2023 |archive-url=https://web.archive.org/web/20230217043029/https://www.startups.com/library/expert-advice/series-funding-a-b-c-d-e |url-status=live }}</ref>
* Early Stage: Early stage funding includes [[Seed money|Seed]] and [[Series A round|Series A]] financing rounds. Companies use this capital to find [[Product/market fit|product-market fit]].<ref>{{Cite web |last=Westaway |first=Kyle |title=Learn The Five Most Important Terms In A Series A Funding Round |url=https://www.forbes.com/sites/kylewestaway/2023/01/05/learn-the-five-most-important-terms-in-a-series-a-funding-round/ |access-date=2023-02-17 |website=Forbes |language=en |archive-date=February 17, 2023 |archive-url=https://web.archive.org/web/20230217043029/https://www.forbes.com/sites/kylewestaway/2023/01/05/learn-the-five-most-important-terms-in-a-series-a-funding-round/ |url-status=live }}</ref>
* [[Growth capital|Growth Capital]]: Once companies have found [[Product/market fit|product-market fit]], companies will use growth capital to scale the business. These are typically larger financing rounds with have higher valuations because the companies have started to prove traction and de-risk the investment. Growth capital typically includes Series B, Series C, and later rounds. 
* Exit of venture capitalist: VCs can exit through secondary sale or an [[initial public offering]] (IPO) or an acquisition. Early stage VCs may exit in later rounds when new investors (VCs or private-equity investors) buy the shares of existing investors. Sometimes a company very close to an IPO may allow some VCs to exit and instead new investors may come in hoping to profit from the IPO.
* Bridge financing is when a startup seeks funding in between full VC rounds. The objective is to raise a smaller amount of money to "bridge" the gap when current funds are expected to run out prior to planned future funding, intended to meet short-term working capital needs.<ref>{{Cite web|last=Mitchell|first=Cory|date=October 28, 2020|title=Bridge Financing|url=https://www.investopedia.com/terms/b/bridgefinancing.asp|access-date=January 26, 2022|website=Investopedia|archive-date=January 26, 2022|archive-url=https://web.archive.org/web/20220126205058/https://www.investopedia.com/terms/b/bridgefinancing.asp|url-status=live}}</ref>

In early stage and growth stage financings, venture-backed companies may also seek to take [[venture debt]].<ref>{{cite web |url = http://bootlaw.com/2010/06/14/up-up-and-away-should-you-be-thinking-about-venture-debt/ |title = Bootlaw&nbsp;– Essential law for startups and emerging tech businesses&nbsp;– Up, Up and Away. Should You be Thinking About Venture Debt? |publisher = Bootlaw.com |access-date = May 18, 2012 |url-status = dead |archive-url = https://web.archive.org/web/20120420150031/http://bootlaw.com/2010/06/14/up-up-and-away-should-you-be-thinking-about-venture-debt/ |archive-date = April 20, 2012 |df = mdy-all }}</ref>

==Firms and funds==
===Venture capitalist===
A '''venture capitalist''', or sometimes simply called a '''capitalist''', is a person who makes capital investments in companies in exchange for an [[Equity (finance)|equity stake]]. The venture capitalist is often expected to bring managerial and technical expertise, as well as capital, to their investments. A venture capital fund refers to a [[Investment fund|pooled investment]] vehicle (in the United States, often an [[Limited partnership|LP]] or [[Limited liability company|LLC]]) that primarily invests the [[financial capital]] of third-party investors in enterprises that are too risky for the standard [[capital market]]s or [[loan|bank loans]]. These funds are typically managed by a venture capital firm, which often employs individuals with technology backgrounds (scientists, researchers), business training and/or deep industry experience.<ref>{{Cite book |last=Ryan |first=Phillip |url=https://books.google.com/books?id=bjQFO8XUmVgC&q=venture+capitalist+all+you+need+to+know |title=How Venture Capital Works |date=2012-07-01 |publisher=The Rosen Publishing Group, Inc |isbn=978-1-4488-6795-0 |pages=16 |language=en |access-date=September 15, 2022 |archive-date=April 28, 2024 |archive-url=https://web.archive.org/web/20240428100250/https://books.google.com/books?id=bjQFO8XUmVgC&q=venture+capitalist+all+you+need+to+know#v=snippet&q=venture%20capitalist%20all%20you%20need%20to%20know&f=false |url-status=live }}</ref>

A core skill within VCs is the ability to identify novel or disruptive technologies that have the potential to generate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital, thereby differentiating VC from buy-out private equity, which typically invest in companies with proven revenue, and thereby potentially realizing much higher rates of returns. Inherent in realizing abnormally high rates of returns is the risk of losing all of one's investment in a given startup company. As a consequence, most venture capital investments are done in a pool format, where several investors combine their investments into one large fund that invests in many different startup companies. By investing in the pool format, the investors are spreading out their risk to many different investments instead of taking the chance of putting all of their money in one start up firm.

===Structure===
[[File:Venture Capital Fund Diagram.png|Diagram of the structure of a generic venture capital fund|frame]]
Venture capital firms are typically structured as [[partnerships]], the [[general partners]] of which serve as the managers of the firm and will serve as investment advisors to the venture capital funds raised. Venture capital firms in the United States may also be structured as [[limited liability company|limited liability companies]], in which case the firm's managers are known as managing members. Investors in venture capital funds are known as [[limited partner]]s. This constituency comprises both high-net-worth individuals and institutions with large amounts of available capital, such as state and private [[pension fund]]s, university [[financial endowment]]s, foundations, [[insurance]] companies, and [[Collective investment scheme|pooled investment]] vehicles, called [[Fund of funds|funds of funds]].<ref>{{cite web|url=https://www.researchgate.net/publication/280083626|title=The interplay of track record and trustworthiness in venture capital fundraising|author=Andreas Kuckertz|date=December 1, 2015|work=ResearchGate|url-status=live|archive-url=https://web.archive.org/web/20150927114350/http://www.researchgate.net/publication/280083626_The_interplay_of_track_record_and_trustworthiness_in_venture_capital_fundraising|archive-date=September 27, 2015|df=mdy-all}}</ref>

===Types===
Venture capitalist firms differ in their motivations<ref>{{Cite journal |last1=Röhm |first1=Patrick |last2=Köhn |first2=Andreas |last3=Kuckertz |first3=Andreas |last4=Dehnen |first4=Hermann S. |date=May 2018 |title=A world of difference? The impact of corporate venture capitalists' investment motivation on startup valuation |journal=Journal of Business Economics |language=en |volume=88 |issue=3–4 |pages=531–557 |doi=10.1007/s11573-017-0857-5 |issn=0044-2372|doi-access=free }}</ref> and approaches. There are multiple factors, and each firm is different.

Venture capital funds are generally three in types:<ref>{{Cite book |last1=Gravagna |first1=Nicole |url=https://books.google.com/books?id=vQVwAAAAQBAJ&q=types+of+investors+venture+capital+angel+investor |title=Venture Capital For Dummies |last2=Adams |first2=Peter K. |date=2013-08-15 |publisher=John Wiley & Sons |isbn=978-1-118-78470-9 |language=en |access-date=September 15, 2022 |archive-date=April 28, 2024 |archive-url=https://web.archive.org/web/20240428100043/https://books.google.com/books?id=vQVwAAAAQBAJ&q=types+of+investors+venture+capital+angel+investor#v=snippet&q=types%20of%20investors%20venture%20capital%20angel%20investor&f=false |url-status=live }}</ref>

* 1. Angel investors 
* 2. Financial VCs 
* 3. Strategic VCs

Some of the factors that influence VC decisions include:
* Business situation: Some VCs tend to invest in new, disruptive ideas, or fledgling companies. Others prefer investing in established companies that need support to go public or grow.
* Some invest solely in certain industries.
* Some prefer operating locally while others will operate nationwide or even globally.
* VC expectations can often vary. Some may want a quicker public sale of the company or expect fast growth. The amount of help a VC provides can vary from one firm to the next. There are also estimates on how big of an exit a VC will expect for the company (i.e. if the size of the VC fund is $20M, estimate that they will at least want the company to exit for the size of the fund).<ref>{{cite journal|url=https://hbr.org/1986/05/how-much-money-does-your-new-venture-need|title=How Much Money Does Your New Venture Need?|journal=Harvard Business Review|date=May 1986|last1=Stancill|first1=James Mcneill|access-date=February 28, 2021|archive-date=December 9, 2020|archive-url=https://web.archive.org/web/20201209040757/https://hbr.org/1986/05/how-much-money-does-your-new-venture-need|url-status=live}}</ref>

===Roles===
Within the venture capital industry, the general partners and other investment professionals of the venture capital firm are often referred to as "venture capitalists" or "VCs". Typical career backgrounds vary, but, broadly speaking, venture capitalists come from either an operational or a finance background. Venture capitalists with an operational background ([[operating partner]]) tend to be former founders or executives of companies similar to those which the partnership finances or will have served as management consultants. Venture capitalists with finance backgrounds tend to have [[investment banking]] or other [[corporate finance]] experience.

Although the titles are not entirely uniform from firm to firm, other positions at venture capital firms include:

{| class="wikitable"
|-
!Position
!Role
|-
|General Partners or GPs
|They run the Venture Capital firm and make the investment decisions on behalf of the fund. GPs typically put in personal capital up to 1–2% of the VC Fund size to show their commitment to the LPs.
|-
|Venture partners
|Venture partners are not employees of the firm but are expected to source potential investment opportunities ("bring in deals") and typically are compensated only for those deals with which they are involved.
|-
|Principal
|This is a mid-level investment professional position, and often considered a "partner-track" position. Principals will have been promoted from a senior associate position or who have commensurate experience in another field, such as [[investment banking]], [[management consulting]], or a market of particular interest to the strategy of the venture capital firm.
|-
|Associate
|This is typically the most junior apprentice position within a venture capital firm. After a few successful years, an associate may move up to the "senior associate" position and potentially principal and beyond. Associates will often have worked for 1–2 years in another field, such as [[investment banking]] or [[management consulting]].
|-
|Analyst
|In some cases, a venture capital firm may offer an analyst role for fresh graduates who have no prior relevant experience. 
|-
|Entrepreneur-in-residence
|Entrepreneurs-in-residence (EIRs) are experts in a particular industry sector (e.g., biotechnology or social media) and perform [[due diligence]] on potential deals. EIRs are hired by venture capital firms temporarily (6 to 18 months) and are expected to develop and pitch startup ideas to their host firm, although neither party is bound to work with each other. Some EIRs move on to executive positions within a portfolio company.
|-
|Platform Team
|Responsible for providing support and resources to portfolio companies beyond financial investment. This team focuses on offering strategic guidance, operational expertise, and access to networks to help portfolio companies scale and succeed. Platform teams may assist with talent acquisition, marketing and branding, product development, [[business networking]], and strategic partnerships.
|}

===Structure of the funds===
The average maturity of most [[private-equity fund|venture capital funds]] ranges from 10 years to 12 years, with the possibility of a few years of extensions to allow for private companies still seeking liquidity. The investing cycle for most funds is generally three to five years, after which the focus is managing and making follow-on investments in an existing portfolio.<ref>{{Cite web |last1=Huang |first1=Kelvin |last2=Malley |first2=Bridget |date=2022-02-14 |title=Sequoia Breaks Free From The 10-Year Cycle - ValueWalk |url=https://www.valuewalk.com/sequoia-breaks-free-from-the-10-year-cycle/,%20https://www.valuewalk.com/sequoia-breaks-free-from-the-10-year-cycle/ |access-date=2022-04-09 |website=www.valuewalk.com |language=en-US }}{{Dead link|date=August 2024 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> This model was pioneered by successful funds in [[Silicon Valley]] through the 1980s to invest in technological trends broadly but only during their period of ascendance, and to cut exposure to management and marketing risks of any individual firm or its product.

In such a fund, the investors have a fixed commitment to the fund that is initially unfunded and subsequently "called down" by the venture capital fund over time as the fund makes its investments. There are substantial penalties for a limited partner (or investor) that fails to participate in a [[capital call]].<ref>{{Cite web |date=2010-11-08 |title=How VC Funds Work: Capital Commitments and Closings |url=https://www.theventurealley.com/2010/11/raising-a-fund-capital-commitments-and-closings/ |access-date=2022-04-09 |website=The Venture Alley |language=en-US |archive-date=March 31, 2022 |archive-url=https://web.archive.org/web/20220331130735/https://www.theventurealley.com/2010/11/raising-a-fund-capital-commitments-and-closings/ |url-status=live }}</ref>

It can take anywhere from a month to several years for venture capitalists to raise money from limited partners for their fund. At the time when all of the money has been raised, the fund is said to be closed and the 10-year lifetime begins. Some funds have partial closes when one half (or some other amount) of the fund has been raised. The [[vintage year]] generally refers to the year in which the fund was closed and may serve as a means to stratify VC funds for comparison.

From an investor's point of view, funds can be: (1) [[private-equity fund|traditional]]—where all the investors invest with equal terms; or (2) [[asymmetric fund|asymmetric]]—where different investors have different terms. Typically asymmetry is seen in cases where investors have opposing interests, such as the need to not have unrelated business taxable income in the case of public tax-exempt investors.<ref>{{Cite web |last=Testa, Hurwitz & Thibeault, LLP |date=2004 |title=Investments in LLCs |url=https://www.vcexperts.com/buzz_articles/241 |access-date=April 9, 2022 |archive-date=January 21, 2022 |archive-url=https://web.archive.org/web/20220121232838/https://www.vcexperts.com/buzz_articles/241 |url-status=live }}</ref>

=== Investment decision process ===
The decision process to fund a company is elusive. One study report in the ''[[Harvard Business Review]]''<ref name=":0">{{Cite news|last1=Gompers|first1=Paul|last2=Gornall|first2=Will|last3=Kaplan|first3=Steven N.|last4=Strebulaev|first4=Ilya A.|date=2021-03-01|title=How Venture Capitalists Make Decisions|work=Harvard Business Review|url=https://hbr.org/2021/03/how-venture-capitalists-make-decisions|access-date=2022-01-27|issn=0017-8012|archive-date=January 28, 2022|archive-url=https://web.archive.org/web/20220128003040/https://hbr.org/2021/03/how-venture-capitalists-make-decisions|url-status=live}}</ref> states that VCs rarely use standard financial analytics.<ref name=":0"/> First, VCs engage in a process known as "generating deal flow," where they reach out to their network to source potential investments.<ref name=":0" /> The study also reported that few VCs use any type of financial analytics when they assess deals; VCs are primarily concerned about the cash returned from the deal as a multiple of the cash invested.<ref name=":0" /> According to 95% of the VC firms surveyed, VCs cite the founder or founding team as the most important factor in their investment decision.<ref name=":0" /> Other factors are also considered, including intellectual property rights and the state of the economy.<ref>{{Cite journal|last1=Vazirani|first1=Ashish|last2=Bhattacharjee|first2=Titas|date=2021-06-29|title=Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalist's Decision|url=https://journals.sagepub.com/doi/abs/10.1177/09713557211025654|journal=The Journal of Entrepreneurship|volume=30|issue=2|pages=306–335|doi=10.1177/09713557211025654|s2cid=237343269|issn=0971-3557|access-date=January 28, 2022|archive-date=January 28, 2022|archive-url=https://web.archive.org/web/20220128003040/https://journals.sagepub.com/doi/abs/10.1177/09713557211025654|url-status=live|url-access=subscription}}</ref> Some argue that the most important thing a VC looks for in a company is high-growth.<ref>{{Cite web|last=Michelson|first=Joan|title=Female Founders Raised More VC Funding In 2021, But It's Complicated|url=https://www.forbes.com/sites/joanmichelson2/2021/12/26/female-founders-raised-more-vc-funding-in-2021-but-its-complicated/|access-date=2022-01-28|website=Forbes|language=en|archive-date=January 28, 2022|archive-url=https://web.archive.org/web/20220128003040/https://www.forbes.com/sites/joanmichelson2/2021/12/26/female-founders-raised-more-vc-funding-in-2021-but-its-complicated/|url-status=live}}</ref>

The funding decision process has spawned bias in the form of a large disparity between the funding received by men and minority groups, such as women and people of color.<ref name="sciencedirect.com">{{Cite journal|last1=Malmström|first1=Malin|last2=Voitkane|first2=Aija|last3=Johansson|first3=Jeaneth|last4=Wincent|first4=Joakim|date=2020-06-01|title=What do they think and what do they say? Gender bias, entrepreneurial attitude in writing and venture capitalists' funding decisions|url=https://www.sciencedirect.com/science/article/pii/S2352673419301295|journal=Journal of Business Venturing Insights|language=en|volume=13|article-number=e00154|doi=10.1016/j.jbvi.2019.e00154|s2cid=213981792|issn=2352-6734|access-date=January 28, 2022|archive-date=October 5, 2023|archive-url=https://web.archive.org/web/20231005131635/https://www.sciencedirect.com/science/article/pii/S2352673419301295|url-status=live|url-access=subscription}}</ref><ref name=":1">{{Cite news|title=Female Founders Raised Just 2% of Venture Capital Money in 2021|url=https://www.bloomberg.com/news/articles/2022-01-11/women-founders-raised-just-2-of-venture-capital-money-last-year|access-date=2022-01-28|newspaper=Bloomberg.com|date=January 11, 2022|archive-date=March 3, 2022|archive-url=https://web.archive.org/web/20220303200258/https://www.bloomberg.com/news/articles/2022-01-11/women-founders-raised-just-2-of-venture-capital-money-last-year|url-status=live}}</ref><ref>{{Cite journal|last=Geiger|first=Mark|date=2020-06-01|title=A meta-analysis of the gender gap(s) in venture funding: Funder- and entrepreneur-driven perspectives|url=https://www.sciencedirect.com/science/article/pii/S2352673420300238|journal=Journal of Business Venturing Insights|language=en|volume=13|article-number=e00167|doi=10.1016/j.jbvi.2020.e00167|s2cid=219474844|issn=2352-6734|access-date=January 28, 2022|archive-date=October 5, 2023|archive-url=https://web.archive.org/web/20231005131635/https://www.sciencedirect.com/science/article/pii/S2352673420300238|url-status=live|url-access=subscription}}</ref> In 2021, female founders only received 2% of VC funding in the United States.<ref>{{Cite web|title=2021 All In: Female Founders in the US VC Ecosystem {{!}} PitchBook|url=https://pitchbook.com/news/reports/2021-all-in-female-founders-in-the-us-vc-ecosystem|access-date=2022-01-28|website=pitchbook.com|language=en|archive-date=January 28, 2022|archive-url=https://web.archive.org/web/20220128003043/https://pitchbook.com/news/reports/2021-all-in-female-founders-in-the-us-vc-ecosystem|url-status=live}}</ref><ref name=":1" /> Some research studies have found that VCs evaluate women differently and are less likely to fund female founders.<ref name="sciencedirect.com"/>

===Compensation===
{{Main|Carried interest}}
Venture capitalists are compensated through a combination of management fees and [[carried interest]] (often referred to as a "two and 20" arrangement):

{| class="wikitable"
|-
!Payment
!Implementation
|-
|Management fees
|Quarterly payments made by the limited partners to the fund's manager to pay for the firm's investment operations.<ref name=calpersdictionary>[http://www.calpers.ca.gov/index.jsp?bc=/investments/assets/equities/aim/pe-glossary.xml Private equity industry dictionary] {{webarchive|url=https://web.archive.org/web/20080505124540/http://www.calpers.ca.gov/index.jsp?bc=%2Finvestments%2Fassets%2Fequities%2Faim%2Fpe-glossary.xml |date=May 5, 2008 }}. [[CalPERS]] Alternative Investment Program</ref> In a typical venture capital fund, the general partners receive an annual management fee between 2% and 2.5% of the committed capital.<ref>{{Cite web |last=Silber |first=Jordan |date=2020-01-02 |title=Primer: Management Fees in Venture Capital Funds |url=https://thefundlawyer.cooley.com/primer-management-fees-in-venture-capital-funds/ |access-date=2022-04-09 |website=TheFundLawyer |language=en-US |archive-date=January 24, 2022 |archive-url=https://web.archive.org/web/20220124105455/https://thefundlawyer.cooley.com/primer-management-fees-in-venture-capital-funds/ |url-status=live }}</ref>
|-
|Carried interest
|A share of the profits of the fund, typically 20%, paid to the fund's general partner as a performance incentive. The remaining 80% of the profits are allocated to the general partner and limited partners in proportion to their contributed capital.<ref>{{Cite web |title=Venture Capital: Financial and Tax Considerations |url=http://archives.cpajournal.com/2003/0803/dept/d086003.htm |access-date=2022-04-09 |website=archives.cpajournal.com |archive-date=August 10, 2022 |archive-url=https://web.archive.org/web/20220810134752/http://archives.cpajournal.com/2003/0803/dept/d086003.htm |url-status=live }}</ref> Strong limited partner interest in top-tier venture firms has led to a general trend toward terms more favorable to the general partner, and certain groups are able to command a carried interest of 25 to 30% for their funds.<ref>{{Cite web |last=Silber |first=Jordan |date=2019-12-16 |title=Primer: Carried Interest in Venture Capital Funds |url=https://thefundlawyer.cooley.com/primer-carried-interest-in-venture-capital-funds/ |access-date=2022-04-09 |website=TheFundLawyer |language=en-US |archive-date=April 9, 2022 |archive-url=https://web.archive.org/web/20220409080245/https://thefundlawyer.cooley.com/primer-carried-interest-in-venture-capital-funds/ |url-status=live }}</ref>
|}

Because a fund may run out of capital prior to the end of its life, larger venture capital firms usually have several overlapping funds at the same time; doing so lets the larger firm keep specialists in all stages of the development of firms almost constantly engaged. Smaller firms tend to thrive or fail with their initial industry contacts; by the time the fund cashes out, an entirely new generation of technologies and people is ascending, whom the general partners may not know well, and so it is prudent to reassess and shift industries or personnel rather than attempt to simply invest more in the industry or people the partners already know.{{Citation needed|date=January 2021}}

===Alternatives===
{{More citations needed section|date=January 2021}}
Because of the strict requirements venture capitalists have for potential investments, many entrepreneurs seek [[seed funding]] from [[angel investors]], who may be more willing to invest in highly speculative opportunities, or may have a prior relationship with the entrepreneur. 

Additionally, entrepreneurs may seek alternative financing, such as [[revenue-based financing]], to avoid giving up equity ownership in the business. For entrepreneurs seeking more than just funding, startup studios can be an appealing alternative to venture capitalists, as they provide operational support and an experienced team.<ref>{{Cite web |last=Kronenberger |first=Craig |date=2021-02-23 |title=How the Startup Studio Business Model Is Changing the Startup Economy as We Know It |url=https://medium.com/startup-studio-insider/how-the-startup-studio-business-model-is-changing-the-startup-economy-as-we-know-it-4a121a670007 |url-status=live |archive-url=https://web.archive.org/web/20210428001951/https://medium.com/startup-studio-insider/how-the-startup-studio-business-model-is-changing-the-startup-economy-as-we-know-it-4a121a670007 |archive-date=April 28, 2021 |access-date=2021-03-16 |website=Medium |language=en}}</ref>

A growing number of companies are also turning to **venture debt** as an alternative, particularly in technology and life sciences sectors, where it provides working capital without significant equity dilution.<ref>{{Cite web |last=EY |date=2023-02-11 |title=Q3 2022 venture capital investment trends |url=https://www.ey.com/en_us/growth/venture-capital/q3-2022-venture-capital-investment-trends |access-date=2025-09-25 |website=EY |language=en-US}}</ref>

Furthermore, many venture capital firms will only seriously evaluate an investment in a [[start-up company]] otherwise unknown to them if the company can prove at least some of its claims about the technology and/or market potential for its product or services. To achieve this, or even just to avoid the dilutive effects of receiving funding before such claims are proven, many start-ups seek to self-finance [[sweat equity]] until they reach a point where they can credibly approach outside capital providers such as venture capitalists or [[angel investors]]. This practice is called "[[bootstrapping (business)|bootstrapping]]".

[[Equity crowdfunding]] is emerging as an alternative to traditional venture capital. Traditional [[crowdfunding]] is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of ordinary people for small donations. While such an approach has long precedents in the sphere of charity, it is receiving renewed attention from entrepreneurs, now that social media and online communities make it possible to reach out to a group of potentially interested supporters at very low cost. Some [[equity crowdfunding]] models are also being applied specifically for startup funding, such as those listed at [[Comparison of crowd funding services]]. One of the reasons to look for alternatives to venture capital is the problem of the traditional VC model. The traditional VCs are shifting their focus to later-stage investments, and [[return on investment]] of many VC funds have been low or negative.<ref name="news.bbc.co.uk"/><ref>{{cite web |url = https://techcrunch.com/2010/02/15/grow-vc-launches-aiming-to-become-the-kiva-for-tech-startups/ |title = Grow VC launches, aiming to become the Kiva for tech startups |publisher = Eu.techcrunch.com |date = February 15, 2010 |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120530064252/http://techcrunch.com/2010/02/15/grow-vc-launches-aiming-to-become-the-kiva-for-tech-startups/ |archive-date = May 30, 2012 |df = mdy-all }}</ref>

In Europe and India, [[Media for equity]] is a partial alternative to venture capital funding. Media for equity investors are able to supply start-ups with often significant advertising campaigns in return for equity. In Europe, an investment advisory firm offers young ventures the option to exchange equity for services investment; their aim is to guide ventures through the development stage to arrive at a significant funding, mergers and acquisition, or other exit strategy.<ref>{{cite web|url=http://www.sollertis-strategy.com/index.html|title=Sollertis Strategy - Adventure Capitalist and Consulting Organisation|url-status=dead|archive-url=https://web.archive.org/web/20141229162850/http://www.sollertis-strategy.com/index.html|archive-date=December 29, 2014|df=mdy-all|access-date=December 29, 2014}}</ref>

In industries where assets can be [[Securitization|securitized]] effectively because they reliably generate future revenue streams or have a good potential for resale in case of [[foreclosure]], businesses may more cheaply be able to raise debt to finance their growth. Good examples would include asset-intensive extractive industries such as mining, or manufacturing industries. Offshore funding is provided via specialist venture capital trusts, which seek to use securitization in structuring hybrid multi-market transactions via an SPV ([[special purpose vehicle]]): a corporate entity that is designed solely for the purpose of the financing.

In addition to traditional venture capital and angel networks, groups have emerged, which allow groups of small investors or entrepreneurs themselves to compete in a privatized business plan competition where the group itself serves as the investor through a democratic process.<ref>{{cite web |url = http://growvc.com |title = Grow Venture Community |publisher = Growvc.com |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20100209014634/http://www.growvc.com/ |archive-date = February 9, 2010 |df = mdy-all }}</ref>

Law firms are also increasingly acting as an intermediary between clients seeking venture capital and the firms providing it.<ref>{{cite web |last = Austin |first = Scott |url = https://www.wsj.com/articles/SB10001424052748703453804575479650072184066 |title = "Law Firms Offer Discounts, Play Matchmaker," The Wall Street Journal, Sept. 9, 2010 |publisher = Online.wsj.com |date = September 9, 2010 |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20150115040929/http://www.wsj.com/articles/SB10001424052748703453804575479650072184066 |archive-date = January 15, 2015 |df = mdy-all }}</ref>

Other forms include venture resources that seek to provide non-monetary support to launch a new venture.

==Role in employment==
Every year, there are nearly 2 million businesses created in the US, but only 600–800 get venture capital funding.<ref>{{cite web|title=Venture Impact: The Economic Importance of Venture-Backed Companies to the U.S. Economy|url=http://www.nvca.org/index.php?option=com_content&view=article&id=255&Itemid=103|url-status=live|archive-url=https://web.archive.org/web/20140630170428/http://www.nvca.org/index.php?option=com_content&view=article&id=255&Itemid=103|archive-date=June 30, 2014|access-date=May 18, 2012|publisher=National Venture Capital Association|df=mdy-all}}</ref> According to the National Venture Capital Association, 11% of private sector jobs come from venture-backed companies and venture-backed revenue accounts for 21% of US GDP.<ref>{{cite book |url = http://www.nvca.org/index.php?option=com_content&view=article&id=255&Itemid=103 |publisher = [[IHS Global Insight]] |title = Venture Impact |edition = 5 |page = 2 |isbn = 978-0-9785015-7-0 |year = 2009 |url-status = live |archive-url = https://web.archive.org/web/20140630170428/http://www.nvca.org/index.php?option=com_content&view=article&id=255&Itemid=103 |archive-date = June 30, 2014 |df = mdy-all }}</ref>

==Gender disparities==
In 2020, female-founded companies raised 2.8% of capital investment from venture capital, the highest amount recorded.<ref>{{Cite news|last1=Bittner|first1=Ashley|last2=Lau|first2=Brigette|date=2021-02-25|title=Women-Led Startups Received Just 2.3% of VC Funding in 2020|work=Harvard Business Review|url=https://hbr.org/2021/02/women-led-startups-received-just-2-3-of-vc-funding-in-2020|access-date=2021-10-26|issn=0017-8012|archive-date=October 26, 2021|archive-url=https://web.archive.org/web/20211026085152/https://hbr.org/2021/02/women-led-startups-received-just-2-3-of-vc-funding-in-2020|url-status=live}}</ref><ref>{{Cite web|title=US VC investment in female founders hits all-time high|url=https://techcrunch.com/2019/12/09/us-vc-investment-in-female-founders-hits-all-time-high/|access-date=2021-10-26|website=TechCrunch|date=December 9, 2019 |language=en-US}}</ref> [[Babson College]]'s Diana Report found that the number of women [[partner (business rank)|partner]]s in VC firms decreased from 10% in 1999 to 6% in 2014. The report also found that 97% of VC-funded businesses had male [[chief executive]]s, and that businesses with all-male teams were more than four times as likely to receive VC funding compared to teams with at least one woman.<ref name="diana-report">{{cite web|url=http://www.babson.edu/Academics/centers/blank-center/global-research/diana/Documents/diana-project-executive-summary-2014.pdf|title=Diana Report|first=Candida|last=Brush|publisher=Women Entrepreneurs 2014|year=2014|access-date=2016-01-14|url-status=dead|archive-url=https://web.archive.org/web/20160122183718/http://www.babson.edu/Academics/centers/blank-center/global-research/diana/Documents/diana-project-executive-summary-2014.pdf|archive-date=January 22, 2016|df=mdy-all}}</ref> 

Currently, about 3% of all venture capital is going to woman-led companies. More than 75% of VC firms in the US did not have any female venture capitalists at the time they were surveyed.<ref name="gompers">{{cite magazine|url=https://www.wired.com/2015/03/gender-problem-venture-capital-really-really-bad/|title=The gender problem in venture capital is really, really bad|first=Davey|last=Alba|author-link=Davey Alba|magazine=Wired|date=2015-03-20|access-date=2016-01-15|url-status=live|archive-url=https://web.archive.org/web/20160210092058/http://www.wired.com/2015/03/gender-problem-venture-capital-really-really-bad/|archive-date=February 10, 2016|df=mdy-all}}</ref> It was found that a greater fraction of VC firms had never had a woman represent them on the board of one of their [[Investment portfolio|portfolio companies]]. For comparison, a UC Davis study focusing on large public companies in California found 49.5% with at least one female [[board of directors|board seat]].<ref name="Ellis2006">{{cite web |last=Ellis |first=Katrina |year=2006 |title=UC Davis Study of California Women Business Leaders |url=http://gsm.ucdavis.edu/sites/main/files/file-attachments/ucdaviswomenstudyfull.pdf |publisher=UC Regents |access-date=March 25, 2015 |url-status=live |archive-url=https://web.archive.org/web/20150402165726/http://gsm.ucdavis.edu/sites/main/files/file-attachments/ucdaviswomenstudyfull.pdf |archive-date=April 2, 2015 |df=mdy-all }}</ref> 

==Geographical differences==
Venture capital, as an industry, originated in the United States, and American firms have traditionally been the largest participants in venture deals with the bulk of venture capital being deployed in American companies. However, increasingly, non-US venture investment is growing, and the number and size of non-US venture capitalists have been expanding.<ref>{{Cite web |last1=Leonard |first1=Alice |last2=Roongta |first2=Rishi |last3=Gomatam |first3=Arun |date=2025-08-08 |title=Global Venture Capital Outlook: The Latest Trends |url=https://www.bain.com/insights/global-venture-capital-outlook-latest-trends-snap-chart/ |access-date=2025-08-21 |website=Bain |language=en}}</ref><ref>{{Cite web |last=Cuantico |date=2025-03-05 |title=Latin America Venture Capital Report 2025 |url=https://cuanticovc.com/latin-america-venture-capital-report-2025/ |access-date=2025-08-21 |website=Cuantico VC |language=en-US}}</ref><ref>{{Cite web |last1=Sheth |first1=Arpan |last2=Krishnan |first2=Sriwatsan |last3=Addepalli |first3=Prabhav Kashyap |last4=Muralidhar |first4=Aditya |last5=Arya |first5=Prerna |date=2025-03-13 |title=India Venture Capital Report 2025 |url=https://www.bain.com/insights/india-venture-capital-report-2025/ |access-date=2025-08-21 |website=Bain |language=en}}</ref>

Venture capital has been used as a tool for [[economic development]] in a variety of developing regions. In many of these regions, with less developed financial sectors, venture capital plays a role in facilitating [[access to finance]] for [[small and medium enterprises]] (SMEs), which in most cases would not qualify for receiving bank loans.{{Citation needed|date=January 2021}}

In the year of 2008, while VC funding were still majorly dominated by U.S. money ($28.8 billion invested in over 2550 deals in 2008), compared to international fund investments ($13.4 billion invested elsewhere), there has been an average 5% growth in the venture capital deals outside the US, mainly in [[China]] and [[Europe]].<ref name="venturebeat.com">{{cite news |url = https://venturebeat.com/2009/02/18/international-venture-funding-rose-15-percent-in-2008/ |title = International venture funding rose 5 percent in 2008 |work = VentureBeat |date = February 18, 2009 |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120714021930/http://venturebeat.com/2009/02/18/international-venture-funding-rose-15-percent-in-2008/ |archive-date = July 14, 2012 |df = mdy-all }}</ref> Geographical differences can be significant. For instance, in the UK, 4% of British investment goes to venture capital, compared to about 33% in the U.S.<ref>{{cite web |url = http://www.briskfox.com/open/years/2009_q1/do_v_c44780.php |title = Mandelson, Peter. "There is no Google, or Amazon, or Microsoft or Apple in the UK, Mandelson tells BVCA." BriskFox Financial News, March 11, 2009 |publisher = Briskfox.com |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120120235413/http://www.briskfox.com/open/years/2009_q1/do_v_c44780.php |archive-date = January 20, 2012 |df = mdy-all }}</ref>

VC funding has been shown to be positively related to a country's [[individualistic culture]].<ref>{{cite journal |last1=Gantenbein |first1=Pascal |last2=Kind |first2=Axel |last3=Volonte|first3=Christophe |title=Individualism and Venture Capital: A Cross-Country Study |journal=Management International Review |volume=59 |issue=5 |pages=741–777 |date=2019 |doi=10.1007/s11575-019-00394-7 |doi-access=free }}</ref> According to economist Jeffrey Funk, however, more than 90% of US startups valued over $1 billion lost money between 2019–2020 and return on investment from VC barely exceed return from public stock markets over the last 25 years.<ref>{{Cite web|date=2021-02-20|title=The Crisis of Venture Capital: Fixing America's Broken Start-Up System|url=https://americanaffairsjournal.org/2021/02/the-crisis-of-venture-capital-fixing-americas-broken-start-up-system/|access-date=2021-06-16|website=American Affairs Journal|language=en-US|archive-date=June 17, 2021|archive-url=https://web.archive.org/web/20210617090959/https://americanaffairsjournal.org/2021/02/the-crisis-of-venture-capital-fixing-americas-broken-start-up-system/|url-status=live}}</ref>

===United States===
{{See also|Economic dynamism#Anerican dynamism|l1=American dynamism}}
[[File:US VC funding.png|thumb|Quarterly U.S. Venture Capital Investments, 1995–2017|alt=Quarterly U.S. venture capital investments between 1995 and 2017]]
[[File:Venture capital by area history.png|thumb|Venture capital investment by area|alt=Venture capital by area]]
[[File:Venture capital by state.png|thumb|Venture capital by state, 2016|alt=Venture capital by state as of 2016]]
In the [[United States]], venture capital investing reached $209.4 billion in 2022, the second-highest investment year in history.<ref>{{Cite web |title=Q4 2022 venture capital investment trends |url=https://www.ey.com/en_us/growth/venture-capital/q4-2022-venture-capital-investment-trends |access-date=2023-02-11 |website=www.ey.com |language=en-US |archive-date=February 11, 2023 |archive-url=https://web.archive.org/web/20230211183835/https://www.ey.com/en_us/growth/venture-capital/q4-2022-venture-capital-investment-trends |url-status=live }}</ref>

Venture capitalists invested some $29.1 billion in 3,752 deals in the U.S. through the fourth quarter of 2011, according to a report by the National Venture Capital Association. The same numbers for all of 2010 were $23.4 billion in 3,496 deals.<ref name="nvca.org">{{cite web |url = http://www.nvca.org/index.php?option=com_content&view=article&id=344&Itemid=103 |title = Recent Stats & Studies |publisher = Nvca.org |date = March 31, 2012 |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120505074841/http://www.nvca.org/index.php?option=com_content&view=article&id=344&Itemid=103 |archive-date = May 5, 2012 |df = mdy-all }}</ref>

According to a report by Dow Jones VentureSource, venture capital funding fell to $6.4 billion in the US in the first quarter of 2013, an 11.8% drop from the first quarter of 2012, and a 20.8% decline from 2011. Venture firms have added $4.2 billion into their funds this year, down from $6.3 billion in the first quarter of 2013, but up from $2.6 billion in the fourth quarter of 2012.<ref>{{cite web |last = Hamilton |first = Walter |url = http://www.latimes.com/business/money/la-fi-mo-venturecapital-funding-drops-sharply-in-southern-california-20130417,0,4996566.story |title = Venture-capital funding drops sharply in Southern California |work = Los Angeles Times |date = April 18, 2013 |access-date = June 14, 2013 |url-status = live |archive-url = https://web.archive.org/web/20130616153844/http://www.latimes.com/business/money/la-fi-mo-venturecapital-funding-drops-sharply-in-southern-california-20130417,0,4996566.story |archive-date = June 16, 2013 |df = mdy-all }}</ref>

===Canada===
Canadian technology companies have attracted interest from the global venture capital community partially as a result of generous tax incentive through the [[Scientific Research and Experimental Development Tax Credit Program|Scientific Research and Experimental Development]] (SR&ED) investment tax credit program.{{Citation needed|date=November 2010}} The basic incentive available to any Canadian corporation performing R&D is a refundable tax credit that is equal to 20% of "qualifying" R&D expenditures (labour, material, R&D contracts, and R&D equipment). An enhanced 35% refundable tax credit of available to certain (i.e. small) Canadian-controlled private corporations (CCPCs). Because the CCPC rules require a minimum of 50% Canadian ownership in the company performing R&D, foreign investors who would like to benefit from the larger 35% tax credit must accept minority position in the company, which might not be desirable. The SR&ED program does not restrict the export of any technology or intellectual property that may have been developed with the benefit of SR&ED tax incentives.<ref>{{Cite web |last=Agency |first=Canada Revenue |date=2023-04-13 |title=Scientific Research and Experimental Development (SR&ED) tax incentives |url=https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program.html |access-date=2025-08-03 |website=www.canada.ca}}</ref>

Canada also has a fairly unusual form of venture capital generation in its [[Labour-sponsored venture capital corporation|labour-sponsored venture capital corporations (LSVCC)]]. These funds, also known as Retail Venture Capital or Labour Sponsored Investment Funds (LSIF), are generally sponsored by labor unions and offer [[tax break]]s from government to encourage retail investors to purchase the funds. Generally, these Retail Venture Capital funds only invest in companies where the majority of employees are in Canada. However, innovative structures have been developed to permit LSVCCs to direct in Canadian subsidiaries of corporations incorporated in jurisdictions outside of Canada.{{Citation needed|date=January 2021}} In 2022, the [[Information and Communications Technology (ICT)]] sector closed around 50% of Canada's venture capital deals, 16% were in the [[List of life sciences|Life Sciences]].<ref>{{Cite web |last=Mandel |first=Charles |date=2023-02-22 |title=Despite market conditions, 2022 second-highest year on record for Canadian venture capital |url=https://betakit.com/despite-market-conditions-2022-second-highest-year-on-record-for-canadian-venture-capital/ |access-date=2023-12-31 |website=Betakit |archive-date=December 31, 2023 |archive-url=https://web.archive.org/web/20231231150740/https://betakit.com/despite-market-conditions-2022-second-highest-year-on-record-for-canadian-venture-capital/ |url-status=live }}</ref>

===Mexico===
The Venture Capital industry in [[Mexico]] is a fast-growing sector in the country that, with the support of institutions and private funds, is estimated to reach US$100 billion invested by 2018.<ref>{{cite web |author1=Anónimo |date=August 16, 2012 |title=Se afianza en México industria de "venture capital" &#124; EL EMPRESARIO |url=http://elempresario.mx/actualidad/se-afianza-mexico-industria-venture-capital |url-status=live |archive-url=https://web.archive.org/web/20130512065109/http://elempresario.mx/actualidad/se-afianza-mexico-industria-venture-capital |archive-date=May 12, 2013 |access-date=June 14, 2013 |publisher=Elempresario.mx |language=es |df=mdy-all}}</ref>{{Needs update|date=March 2025}}

=== Australia and New Zealand ===
In Australia and New Zealand, there have been 3 waves of VC, starting with Bill Ferris who founded IVC in 1970. are more than one hundred active VC funds, syndicates, or angel investors making VC-style investments. The 2nd wave was led by Starfish & Southern Cross VC, with the latter producing the leading VC of the 3rd wave, Blackbird.<ref>{{Cite book |last1=Marshall |first1=Dr Larry |url=https://ebooks.publish.csiro.au/content/invention-innovation |title=Invention to Innovation |last2=Daroczy |first2=Jenna |date=2023 |publisher=CSIRO Publishing |isbn=978-1-4863-1638-0 |language=en |doi=10.1071/9781486316380}}</ref> There was a boom in 2018, and today there are more than one hundred active VC funds, syndicates, or angel investors making VC-style investments. There have been few [[Nasdaq|Nasdaq IPOs]] of Australian VC backed startups, with only Looksmart<ref>{{Cite web |date=1999-06-16 |title=LookSmart takes the big leap |url=https://www.afr.com/politics/looksmart-takes-the-big-leap-19990616-jl8br |access-date=2024-06-03 |website=Australian Financial Review |language=en}}</ref> from [[Bill Ferris]]'s fund, and Quantenna<ref>{{Cite web |last=Jones |first=Donovan |date=2016-10-02 |title=Quantenna Communications: This $100 Million IPO Is A Video And IoE Play (NASDAQ:QTNA-DEFUNCT-569984) {{!}} Seeking Alpha |url=https://seekingalpha.com/article/4009594-quantenna-communications-this-100-million-ipo-is-video-and-ioe-play |access-date=2024-06-03 |website=seekingalpha.com |language=en}}</ref> from [[Larry R. Marshall|Larry Marshall]]'s Southern Cross VC, but Blackbird is expected to IPO [[Canva]] soon.<ref>{{Cite web | url=https://www.afr.com/technology/canva-co-founder-says-ipo-more-appealing-as-valuations-rise-20250905-p5msnm | title=Canva co-founder says IPO 'more appealing' as valuations rise | date=September 5, 2025 | access-date=October 22, 2025 | archive-url=https://web.archive.org/web/20250915041745/https://www.afr.com/technology/canva-co-founder-says-ipo-more-appealing-as-valuations-rise-20250905-p5msnm | archive-date=September 15, 2025 | url-status=live }}</ref>

The State of Startup Funding report found that in 2021, over AUD $10 billion AUD was invested into Australian and New Zealand startups across 682 deals. This represents a 3x increase from the $3.1 billion that was invested in 2020.<ref>{{cite web | url=https://www.smh.com.au/technology/10-billion-flows-to-australian-start-ups-in-banner-year-20220228-p5a0bb.html | title=$10 billion flows to Australian start-ups in banner year | date=February 28, 2022 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621020657/https://www.smh.com.au/technology/10-billion-flows-to-australian-start-ups-in-banner-year-20220228-p5a0bb.html | url-status=live }}</ref>

Some notable Australian and New Zealand startup success stories include graphic design company [[Canva]],<ref>{{cite web | url=https://www.forbes.com/sites/alexkonrad/2021/09/14/canva-raises-at-40-billion-valuation-and-founders-pledge-away-their-wealth/ | title=Canva Raises at $40 Billion Valuation — itItsounders Are Pledging Away Most of Their Wealth | website=[[Forbes]] | access-date=June 21, 2022 | archive-date=September 20, 2021 | archive-url=https://web.archive.org/web/20210920005230/https://www.forbes.com/sites/alexkonrad/2021/09/14/canva-raises-at-40-billion-valuation-and-founders-pledge-away-their-wealth/ | url-status=live }}</ref> financial services provider [[Airwallex]], New Zealand payments provider Vend (acquired by Lightspeed), rent-to-buy company [[OwnHome]],<ref>{{cite web | url=https://www.afr.com/technology/cba-backs-live-now-buy-later-start-up-that-will-ditch-home-deposits-20220203-p59tix | title=CBA backs 'live now, buy later' start-up that will ditch home deposits | date=February 3, 2022 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621023705/https://www.afr.com/technology/cba-backs-live-now-buy-later-start-up-that-will-ditch-home-deposits-20220203-p59tix | url-status=live }}</ref> and direct-to-consumer propositions such as [[Eucalyptus (company)|Eucalyptus]] (a house of direct-to-consumer telehealth brands), and [[Lyka (company)|Lyka]] (a pet wellness company).<ref>{{cite web | url=https://www.afr.com/street-talk/hungry-investors-buy-into-pet-food-start-up-lyka-20210705-p5870h | title=Hungry investors buy into pet food start-up Lyka | date=July 5, 2021 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621023209/https://www.afr.com/street-talk/hungry-investors-buy-into-pet-food-start-up-lyka-20210705-p5870h | url-status=live }}</ref>

In 2022, the largest Australian funds are [[Blackbird Ventures]], [[Square Peg Capital]], and [[Airtree Ventures]]. These three funds have more than $1 billion AUD under management across multiple funds. These funds have funding from institutional capital, including AustralianSuper and Hostplus, family offices, and sophisticated individual high-net-wealth investors.<ref>{{cite web | url=https://www.afr.com/street-talk/blackbird-targets-1b-vc-fund-square-peg-airtree-also-ready-to-raise-20211125-p59c6s | title=Blackbird targets $1b VC fund; Square Peg, AirTree also ready to raise | date=November 25, 2021 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621020657/https://www.afr.com/street-talk/blackbird-targets-1b-vc-fund-square-peg-airtree-also-ready-to-raise-20211125-p59c6s | url-status=live }}</ref>

Outside of the "Big 3", other notable institutional funds include [[AfterWork Ventures]],<ref>{{cite web | url=https://www.afr.com/technology/start-up-zoom-club-turns-into-10m-vc-fund-20210810-p58hme | title=Start-up Zoom club turns into $10m VC fund | date=August 16, 2021 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621020657/https://www.afr.com/technology/start-up-zoom-club-turns-into-10m-vc-fund-20210810-p58hme | url-status=live }}</ref> Artesian, Folklore Ventures, Equity Venture Partners, Our Innovation Fund, Investible, Main Sequence Ventures (the VC arm of the CSIRO), OneVentures, Proto Axiom, and Tenacious Ventures.

As the number of capital providers in the Australian and New Zealand ecosystem has grown, funds have started to specialise and innovate to differentiate themselves. For example, Tenacious Ventures is a $35 million specialised agritech fund,<ref>{{cite web | url=https://www.afr.com/technology/tenacious-ventures-closes-35m-agritech-fund-20210527-p57vrk | title=Tenacious Ventures closes $35m agritech fund | date=May 31, 2021 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621023210/https://www.afr.com/technology/tenacious-ventures-closes-35m-agritech-fund-20210527-p57vrk | url-status=live }}</ref> while AfterWork Ventures is a 'community-powered fund' that has coalesced a group of 120 experienced operators from across Australia's startups and tech companies. Its community is invested in its fund, and lean into assist with sourcing and evaluating deal opportunities, as well as supporting companies post-investment.<ref>{{cite web | url=https://www.afr.com/technology/meet-the-young-professionals-diving-into-vc-via-zoom-20210226-p5764a | title=Meet the young professionals diving into VC via Zoom | date=March 15, 2021 | access-date=June 21, 2022 | archive-date=June 21, 2022 | archive-url=https://web.archive.org/web/20220621023704/https://www.afr.com/technology/meet-the-young-professionals-diving-into-vc-via-zoom-20210226-p5764a | url-status=live }}</ref>

Several Australian corporates have corporate VC arms, including NAB Ventures, Reinventure (associated with Westpac), IAG Firemark Ventures, and Telstra Ventures.

===Europe===
Venture capital in Europe has grown significantly in recent years, investing €96 billion in nearly 27,000 companies between 2013 and 2023.<ref>{{Cite web |title=Venture Capital: Fuelling European Innovation Report (Press Release) {{!}} Invest Europe |url=https://www.investeurope.eu/news/newsroom/vcs-invested-96-billion-in-almost-27-000-european-companies-over-last-10-years-new-invest-europe-report-shows/ |access-date=2025-09-29 |website=www.investeurope.eu}}</ref> Venture capital investment in 2023 totalled €12.9 billion, with 4,764 companies receiving funding – 99% of which were SMEs.<ref>{{Cite web |date=2025-05-12 |title=Investimento da indústria de capital de risco na Europa cresceu 24% em 2024 com aposta nas TIC, biotecnologia e saúde - Jornal PT50 - Banca e Finanças para Profissionais |url=https://jornalpt50.pt/noticia/investimento-da-industria-de-capital-de-risco-na-europa-cresceu-24-em-2024-com-aposta-nas-tic-biotecnologia-e-saude/ |access-date=2025-09-29 |website=Jornal PT50 - Banca e Finanças para Profissionais - PT50 é um jornal digital com informação sobre o setor bancário e financeiro para profissionais. A nossa orientação editorial pauta-se pelo rigor, responsabilidade e relevância.}}</ref> In 2024, European private capital reached €1.25 trillion in assets under management, marking a 2.6x growth over the previous decade.<ref>{{Cite web |date=2025-07-24 |title=Invest Europe: European private capital hits €1.25T in 2024, growing 2.6x over the decade |url=https://tech.eu/2025/07/24/invest-europe-european-private-capital-hits-eur125t-in-2024-growing-26x-over-the-decade/ |access-date=2025-09-29 |website=Tech.eu |language=en-GB}}</ref> 

European venture capital has also delivered strong financial performance. Over the past ten years, VC funds achieved a net IRR of 23.07%, outperforming US VC funds and public market benchmarks such as MSCI Europe.<ref>{{Cite web |title=European VCs outperform US VCs over 10 and 15 year horizons |url=https://sifted.eu/articles/european-vc-irr-2024/ |access-date=2025-09-29 |website=Sifted}}</ref> This performance has attracted long-term investors including pension funds, family offices, and corporate investment divisions.<ref>{{Cite web |title=Europe's start-up ecosystem is evolving, with big investment returns now possible - Euractiv |url=https://www.euractiv.com/section/economy-jobs/news/europes-start-up-ecosystem-is-evolving-with-big-investment-returns-now-possible/ |archive-url=http://web.archive.org/web/20241222033350/https://www.euractiv.com/section/economy-jobs/news/europes-start-up-ecosystem-is-evolving-with-big-investment-returns-now-possible/ |archive-date=2024-12-22 |access-date=2025-09-29 |website=www.euractiv.com |language=en-GB}}</ref>

VC-backed companies in Europe employed more than 988,000 jobs at 13,524 mainly SMEs at the end of 2023, highlighting the sector’s role in job creation and economic development.<ref>{{Cite web |title=Private Equity at Work report - Job creation and employment across Europe {{!}} Invest Europe |url=https://www.investeurope.eu/research/private-equity-at-work/ |access-date=2025-09-29 |website=www.investeurope.eu}}</ref>

However, despite its growth, venture capital investment in the Europe lags significantly behind the US and China, with the EU capturing only 5% of global venture capital compared to 52% in the US and 40% in China.<ref name=":211">{{Cite web |title=The scale-up gap: Financial market constraints holding back innovative firms in the European Union |url=https://www.eib.org/the-scale-up-gap |access-date=2024-07-30 |website=European Investment Bank |language=en}}</ref><ref>{{Cite web |last=Times |first=The Brussels |title=EU is lagging behind US and China in investments in artificial intelligence, says audit report |url=https://www.brusselstimes.com/1068691/eu-is-lagging-behind-us-and-china-in-investments-in-artificial-intelligence-says-audit-report |access-date=2024-07-30 |website=www.brusselstimes.com |language=en}}</ref> The financing gap for EU scale-ups is significant, with companies raising 50% less capital than those in [[Silicon Valley]]. This disparity exists across industries and is unaffected by the business cycle or year of establishment.<ref name=":211" /><ref>{{Cite web |last=Smith |first=Craig S. |title=Europe's Venture Capital Scene Is Narrowing The Gap With The US Despite Global Investment Slowdown |url=https://www.forbes.com/sites/craigsmith/2023/02/14/europes-venture-capital-scene-is-narrowing-the-gap-with-the-us-despite-global-investment-slowdown/ |access-date=2024-07-30 |website=Forbes |language=en}}</ref>

Comparing the EU market to the United States, in 2020 venture capital funding was seven times lower, the EU having fewer unicorns. This hampers the EU's transformation into a green and [[digital economy]].<ref name=":133">{{Cite web |last=Bank |first=European Investment |date=2023-02-28 |title=Innovation overview 2023 |url=https://www.eib.org/en/publications/innovation-overview-2023 |language=EN |access-date=March 15, 2023 |archive-date=September 23, 2023 |archive-url=https://web.archive.org/web/20230923155323/https://www02.eib.org/en/publications/innovation-overview-2023 |url-status=live }}</ref><ref>{{Cite journal |last1=Quas |first1=Anita |last2=Mason |first2=Colin |last3=Compañó |first3=Ramón |last4=Testa |first4=Giuseppina |last5=Gavigan |first5=James P. |date=2022-10-01 |title=The scale-up finance gap in the EU: Causes, consequences, and policy solutions |journal=European Management Journal |language=en |volume=40 |issue=5 |pages=645–652 |doi=10.1016/j.emj.2022.08.003 |pmid=36465062 |pmc=9707731 |issn=0263-2373}}</ref><ref>{{Cite web |title=The EU in 2021 - General Report on the Activities of the European Union |url=https://op.europa.eu/webpub/com/general-report-2021/en/ |access-date=2023-03-15 |website=op.europa.eu |language=en-GB |archive-date=March 15, 2023 |archive-url=https://web.archive.org/web/20230315145939/https://op.europa.eu/webpub/com/general-report-2021/en/ |url-status=live }}</ref> As of 2024, tighter financial conditions have harmed venture capital funding in the European Union, which remains undeveloped in comparison to the United States.<ref>{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/20240004-investment-report-2023-key-findings |title=EIB Investment Report 2023/2024 - Key Findings |date=2024-02-07 |publisher=European Investment Bank |isbn=978-92-861-5741-7 |language=EN |access-date=February 28, 2024 |archive-date=February 28, 2024 |archive-url=https://web.archive.org/web/20240228092223/https://www.eib.org/en/publications/20240004-investment-report-2023-key-findings |url-status=live }}</ref>

The [[European Green Deal]] has fostered policies that contributed to a 30% rise in venture capital specifically for greentech companies in the EU from 2021 to 2023, despite a downturn in other sectors during the same period.<ref name=":211" /><ref>{{Cite web |title=Policy Update: The EU Green Deal's Legacy |url=https://www.cleantechforeurope.com/policy/policy-update-the-eu-green-deals-legacy |access-date=2024-08-31 |website=www.cleantechforeurope.com}}</ref>

Leading early-stage venture capital investors in Europe included [[Mark Tluszcz]] of Mangrove Capital Partners and [[Danny Rimer]] of [[Index Ventures]], both of whom were named on ''Forbes'' Magazine's Midas List of the world's top dealmakers in technology venture capital in 2007.<ref>{{cite web |author=Erika Brown and Claire Cain Miller |date=February 2, 2007 |title=Technology's Top Dealmakers |url=https://www.forbes.com/global/2007/0212/074.html/ |url-status=live |archive-url=https://web.archive.org/web/20170807030559/https://www.forbes.com/global/2007/0212/074.html |archive-date=August 7, 2017 |work=Forbes |df=mdy-all}}</ref>

===Nordic countries===
Recent years have seen a revival of the Nordic venture scene with more than €3 billion raised by VC funds in the Nordic region over the last five years. Over the past five years, a total of €2.7 billion has been invested into Nordic startups. Known Nordic early-stage venture capital funds include NorthZone (Sweden), Maki.vc (Finland) and ByFounders (Copenhagen).<ref>{{Cite web|title=Nordics.vc|url=https://nordics.vc/|access-date=2021-02-19|website=nordics.vc|archive-date=January 28, 2021|archive-url=https://web.archive.org/web/20210128085351/https://nordics.vc/|url-status=live}}</ref>

===Switzerland===
Many Swiss start-ups are university spin-offs, in particular from its federal institutes of technology in [[École Polytechnique Fédérale de Lausanne|Lausanne]] and [[ETH Zurich|Zurich]].<ref name="investiere.ch">{{cite web |last1=Wagner |first1=Steffen |date=June 20, 2011 |title=Bright sparks! A portrait of entrepreneurial Switzerland |url=https://www.investiere.ch/sites/default/files/u954/SwissBusiness_ausgabe%20_6-2011_p40-41.pdf |url-status=live |archive-url=https://web.archive.org/web/20130502202011/https://www.investiere.ch/sites/default/files/u954/SwissBusiness_ausgabe%20_6-2011_p40-41.pdf |archive-date=May 2, 2013 |access-date=April 24, 2013 |publisher=Swiss Business |df=mdy-all}}</ref>
According to a study by the [[London School of Economics]] analysing 130 [[ETH Zurich]] [[University spin-off|spin-offs]] over 10 years, about 90% of these start-ups survived the first five critical years, resulting in an [[Rate of return|average annual IRR]] of more than 43%.<ref name="ethz.ch">{{cite web |last1=Oskarsson |first1=Ingvi |last2=Schläpfer |first2=Alexander |date=September 2008 |title=The performance of Spin-off companies at the Swiss Federal Institute of Technology Zurich |url=http://www.youblisher.com/p/4244-ETH-Transfer/ |url-status=live |archive-url=https://web.archive.org/web/20140202153728/http://www.youblisher.com/p/4244-ETH-Transfer/ |archive-date=February 2, 2014 |access-date=January 29, 2014 |publisher=ETH transfer |format=PDF |df=mdy-all}}</ref>
Switzerland's most active early-stage investors are The [[Zurich Cantonal Bank]], investiere.ch, Swiss Founders Fund, as well as a number of [[angel investor]] clubs.<ref name="Startupticker.ch">{{cite news |date=March 21, 2014 |title=Most active Early Stage Investors in 2013 |newspaper=Startupticker.ch |url=http://www.startupticker.ch/en/news/march-2014/most-active-early-stage-investors-in-2013 |url-status=live |access-date=June 19, 2015 |archive-url=https://web.archive.org/web/20150619133823/http://www.startupticker.ch/en/news/march-2014/most-active-early-stage-investors-in-2013 |archive-date=June 19, 2015 |df=mdy-all}}</ref> In 2022, half of the total amount of [[Swiss Franc|CHF]] 4 billion investments went to the [[Information and communications technology|ICT]] and [[Fintech]] sectors, whereas 21% was invested in [[Clean technology|Cleantech]].<ref name="SVCR23">{{Cite news |title=Swiss Venture Capital Report 2023 |work=startupticker.ch |publisher=JNB Journalistenbüro |url=https://www.startupticker.ch/assets/files/SVC%20Report%202023_web.pdf |access-date=2023-03-01 |archive-date=February 28, 2023 |archive-url=https://web.archive.org/web/20230228163515/https://www.startupticker.ch/assets/files/SVC%20Report%202023_web.pdf |url-status=live }}</ref>

===Poland===
{{Main|Venture capital in Poland}}
As of March 2019, there are 130 active VC firms in [[Poland]] which have invested locally in over 750 companies, an average of 9 companies per portfolio. Since 2016, new legal institutions have been established for entities implementing investments in enterprises in the seed or startup phase. In 2018, venture capital funds invested {{Euro|178M}} in Polish startups (0.033% of GDP). As of March 2019, total assets managed by VC companies operating in Poland are estimated at {{Euro|2.6B}}. The total value of investments of the Polish VC market is worth {{Euro|209.2M}}.<ref>{{Cite book|url=https://vc.startuppoland.org/|title=The Golden Book of Venture Capital in Poland 2019|last1=Krysztofiak-Szopa|first1=Julia|last2=Wisłowska|first2=Monika|publisher=Startup Poland|year=2019|isbn=978-83-948788-6-3|location=Warsaw|access-date=June 14, 2019|archive-date=January 23, 2020|archive-url=https://web.archive.org/web/20200123053446/https://www.vc.startuppoland.org/|url-status=live}}</ref>

===Bulgaria===
The Bulgarian venture capital industry has been growing rapidly in the past decade. As of the beginning of 2021, there are 18 VC and growth equity firms on the local market, with the total funding available for technology startups exceeding €200M. According to BVCA – Bulgarian Private Equity and Venture Capital Association, 59 transactions of total value of €29.4 million took place in 2020.<ref>{{Cite web |date=April 5, 2021 |title=Romanian – Bulgarian Venture Comparison Report 2020 |url=https://bvca.bg/en/romanian-bulgarian-venture-comparison-report-2020/ |access-date=April 9, 2021 |website=BVCA |archive-date=April 14, 2021 |archive-url=https://web.archive.org/web/20210414181403/https://bvca.bg/en/romanian-bulgarian-venture-comparison-report-2020/ |url-status=live }}</ref> Most of the venture capital investments in Bulgaria are concentrated in the seed and Series A stages. Sofia-based LAUNCHub Ventures recently launched one of the biggest funds in the region, with a target size of €70 million.<ref>{{Cite news |title=LAUNCHub Ventures heading towards a $85M fund for South Eastern European startups |work=TechCrunch |url=https://techcrunch.com/2021/01/12/launchub-ventures-heading-towards-a-85m-fund-for-south-eastern-european-startups/ |access-date=April 9, 2021 |archive-date=April 14, 2021 |archive-url=https://web.archive.org/web/20210414181439/https://techcrunch.com/2021/01/12/launchub-ventures-heading-towards-a-85m-fund-for-south-eastern-european-startups/ |url-status=live }}</ref>

===Asia===
[[South Korea]] has been undergoing an investment boom over the last ten years, peaking at US$10 billion in 2021. The Korean government and mega-corporations such as Kakao, Smilegate, SK, and Lotte has been behind much of the funding, backing both venture firms and accelerators, but new venture capitalists are in dire straits as they announce a 40% cut in financing in 2024.<ref>{{Cite web |last=Coos |first=Andrada |date=2023-01-27 |title=An Insider's Look at the Venture Capital Landscape in South Korea |url=https://www.verve.vc/blog/an-insiders-look-at-the-venture-capital-landscape-in-south-korea/ |access-date=2023-11-03 |website=verve.vc |language=en-US |archive-date=November 3, 2023 |archive-url=https://web.archive.org/web/20231103053243/https://www.verve.vc/blog/an-insiders-look-at-the-venture-capital-landscape-in-south-korea/ |url-status=live }}</ref>

[[India]] is catching up with the West in the field of venture capital and a number of venture capital funds have a presence in the country (IVCA). In 2006, the total amount of private equity and venture capital in India reached $7.5&nbsp;billion across 299 deals.<ref>{{cite web |url = http://www.indiavca.org/IVCA%20Presentation_October2007.pdf |title = Venture Capital & Private Equity in India (October 2007) |access-date = May 18, 2012 |url-status = dead |archive-url = https://web.archive.org/web/20120111030028/http://indiavca.org/IVCA%20Presentation_October2007.pdf |archive-date = January 11, 2012 |df = mdy-all }}</ref> In the Indian market, venture capital consists of investing in equity, quasi-equity, or conditional loans in order to promote unlisted, high-risk, or high-tech firms driven by technically or professionally qualified entrepreneurs. It is also used to refer to investors "providing seed", "start-up and first-stage financing",<ref>{{cite web |title = Venture Capital And Private Equity in India |url = http://www.indiavca.org/IVCA%20Presentation_October2007.pdf |url-status = dead |archive-url = https://web.archive.org/web/20120111030028/http://indiavca.org/IVCA%20Presentation_October2007.pdf |archive-date = January 11, 2012 |df = mdy-all }}</ref> or financing companies that have demonstrated extraordinary business potential. Venture capital refers to capital investment; equity and debt; both of which carry indubitable risk. The anticipated risk is very high. The venture capital industry follows the concept of "high risk, high return", innovative entrepreneurship, knowledge-based ideas and human capital intensive enterprises have become common as venture capitalists invest in risky finance to encourage innovation.<ref>{{cite web |title = Venture Capital:An Impetus to Indian Economy |url = http://www.indiajuris.com/halsbury.pdf |url-status = live |archive-url = https://web.archive.org/web/20111124235327/http://www.indiajuris.com/halsbury.pdf |archive-date = November 24, 2011 |df = mdy-all }}</ref> A large portion of funding from startups in India arise from Foreign Venture Capital Funds such as Sequoia, Accel, Tiger Global, SoftBank, etc.<ref>{{Cite journal |last1=Sahu |first1=Ritankar |last2=Nath |first2=Ananya |last3=Banerjee |first3=Priyadarshi |date=2009 |title=Trends in Private Equity and Venture Capital Investments with Special Focus on the Booming India Growth Story |url=https://www.neliti.com/publications/28821/ |journal=Journal of International Commercial Law and Technology |language=en |volume=4 |issue=2 |pages=128–142 |issn=1901-8401 |access-date=April 23, 2023 |archive-date=April 28, 2024 |archive-url=https://web.archive.org/web/20240428100137/https://www.neliti.com/publications/28821/trends-in-private-equity-and-venture-capital-investments-with-special-focus-on-t |url-status=live }}</ref>

[[China]] is also starting to develop a venture capital industry ([[China Venture Capital Association|CVCA]]).

[[Vietnam]] is experiencing its first foreign venture capitals, including IDG Venture Vietnam ($100&nbsp;million) and DFJ Vinacapital ($35&nbsp;million).<ref>{{cite web |url = http://idgvv.com.vn/en/press/media/lets-open-the-100-million-dollar-door |title = Let's Open the 100&nbsp;Million Dollar Door &#124; IDG Ventures Vietnam&nbsp;– Official Website |publisher = IDG Venture Vietnam |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120322053729/http://idgvv.com.vn/en/press/media/lets-open-the-100-million-dollar-door |archive-date = March 22, 2012 |df = mdy-all }}</ref>

[[Singapore]] is widely recognized and featured as one of the hottest places to both start up and invest, mainly due to its healthy ecosystem, its strategic location and connectedness to foreign markets.<ref>{{cite web|last1=Henry |first1=Zoë |url=http://www.inc.com/zoe-henry/what-you-need-to-know-about-starting-up-in-singapore.html|title=4 Reasons Why Singapore Is a Global Hot Spot for Entrepreneurship|date=October 15, 2015|website=inc.com|access-date=May 6, 2018|archive-date=June 16, 2019|archive-url=https://web.archive.org/web/20190616114007/https://www.inc.com/zoe-henry/what-you-need-to-know-about-starting-up-in-singapore.html|url-status=live}}</ref> With 100 deals valued at US$3.5 billion, Singapore saw a record value of PE and VC investments in 2016. The number of PE and VC investments increased substantially over the last 5 years: In 2015, Singapore recorded 81 investments with an aggregate value of US$2.2 billion while in 2014 and 2013, PE and VC deal values came to US$2.4 billion and US$0.9 billion respectively. With 53 percent, tech investments account for the majority of deal volume.

Moreover, Singapore is home to two of South-East Asia's largest unicorns. [[Garena]] is reportedly the highest-valued unicorn in the region with a US$3.5 billion price tag, while [[Grab (application)|Grab]] is the highest-funded, having raised a total of US$1.43 billion since its incorporation in 2012.<ref>{{cite web|url=http://www.businesstimes.com.sg/technology/tech-behind-record-pe-vc-deals-in-2016|title=Tech behind record PE, VC deals in 2016|first=Jacquelyn|last=Cheok|website=businesstimes.com.sg|date=December 13, 2016 |access-date=May 6, 2018|url-status=live|archive-url=https://web.archive.org/web/20171012165055/http://www.businesstimes.com.sg/technology/tech-behind-record-pe-vc-deals-in-2016|archive-date=October 12, 2017|df=mdy-all}}</ref>

Start-ups and small businesses in Singapore receive support from policymakers and the local government fosters the role VCs play to support entrepreneurship in Singapore and the region. For instance, in 2016, Singapore's [[Prime Minister's Office (Singapore)#National Research Foundation|National Research Foundation (NRF)]] has given out grants up to around $30 million to four large local enterprises for investments in startups in the city-state. This first of its kind partnership NRF has entered into is designed to encourage these enterprises to source for new technologies and innovative business models.<ref>{{cite web|url=http://www.dealstreetasia.com/stories/41135-41135/|title=Singapore's NRF awards $30m to CapitaLand, DeClout, Wilmar, YCH to invest in local startups - DealStreetAsia|website=www.dealstreetasia.com|access-date=May 6, 2018|url-status=live|archive-url=https://web.archive.org/web/20160813150352/http://www.dealstreetasia.com/stories/41135-41135/|archive-date=August 13, 2016|df=mdy-all}}</ref>

Currently, the rules governing VC firms are being reviewed by the [[Monetary Authority of Singapore]] (MAS) to make it easier to set up funds and increase funding opportunities for start-ups. This mainly includes simplifying and shortening the authorization process for new venture capital managers and to study whether existing incentives that have attracted traditional asset managers here will be suitable for the VC sector. A public consultation on the proposals was held in January 2017 with changes expected to be introduced by July.<ref>{{cite news |url=http://www.straitstimes.com/business/banking/simplify-rules-to-boost-venture-capital-activity-mas-review |title=MAS to simplify rules to attract more VC funds into Singapore |newspaper=The Straits Times |date=November 11, 2016 |access-date=2017-02-12 |url-status=live |archive-url=https://web.archive.org/web/20170213002355/http://www.straitstimes.com/business/banking/simplify-rules-to-boost-venture-capital-activity-mas-review |archive-date=February 13, 2017 |df=mdy-all |last1=Boon |first1=Rachael }}</ref>

In recent years, Singapore's focus in venture capital investments has geared more towards more early stage, deep tech startups,<ref>{{Cite web |last=Chiang |first=Sheila |date=2022-12-30 |title=Singapore's venture capital scene looks set for a 'pretty decent' 2023, investment firm says |url=https://www.cnbc.com/2022/12/30/singapores-vc-scene-looks-set-for-a-pretty-decent-2023-sginnovate.html |access-date=2023-10-11 |website=CNBC |language=en |archive-date=October 18, 2023 |archive-url=https://web.archive.org/web/20231018002139/https://www.cnbc.com/2022/12/30/singapores-vc-scene-looks-set-for-a-pretty-decent-2023-sginnovate.html |url-status=live }}</ref> with the government launching SGInnovate in 2016<ref>{{Cite web |date=2016-12-06 |title=Taking Deep Tech to the World |url=https://www.tech.gov.sg/media/technews/taking-deep-tech-to-the-world |access-date=2023-10-11 |website=www.tech.gov.sg |language=en |archive-date=October 18, 2023 |archive-url=https://web.archive.org/web/20231018002141/https://www.tech.gov.sg/media/technews/taking-deep-tech-to-the-world |url-status=live }}</ref> to support the development of deep tech startups. Deep tech startups aim to address significant scientific problems. Singapore's tech startup scene has grown in recent years, and the city-state ranked seventh in the latest Global Innovation Index 2022. For the first nine months of 2022, investments up to Series B rounds amounted to $5.5 billion Singapore dollars ($4 billion), an increase of 14% by volume and 45% by value, according to data from government agency Enterprise Singapore.

===Middle East and North Africa===
The Middle East and North Africa (MENA) venture capital industry is an early stage of development but growing. According to ''[https://magnitt.com/research/49638/h1-2019-mena-venture-investment-report H1 2019 MENA Venture Investment Report]'' by MAGNiTT, 238 startup investment deals have taken place in the region in the first half of 2019, totaling in $471 million in investments. Compared to 2018's H1 report, this represents an increase of 66% in total funding and 28% in number of deals.

According to the report, the [[United Arab Emirates|UAE]] is the most active ecosystem in the region with 26% of the deals made in H1, followed by [[Egypt]] at 21%, and [[Lebanon]] at 13%. In terms of deals by sector, fintech remains the most active industry with 17% of the deals made, followed by e-commerce at 12%, and delivery and transport at 8%.

The report also notes that a total of 130 institutions invested in MENA-based startups in H1 2019, 30% of which were headquartered outside the MENA, demonstrating international appetite for investments in the region. 15 startup exits have been recorded in H1 2019, with [[Careem]]'s $3.1 billion acquisition by [[Uber]] being the first unicorn exit in the region.<ref>{{Cite web|url=https://gulfnews.com/business/banking/careem-proves-unicorns-grow-in-deserts-too-1.62947464|title=Careem proves unicorns grow in deserts too|website=gulfnews.com|date=March 27, 2019|language=en|access-date=2019-12-25|archive-date=December 25, 2019|archive-url=https://web.archive.org/web/20191225032511/https://gulfnews.com/business/banking/careem-proves-unicorns-grow-in-deserts-too-1.62947464|url-status=live}}</ref> Other notable exits include Souq.com exit to [[Amazon (company)|Amazon]] in 2017 for $650 million.<ref>{{Cite web|url=https://techcrunch.com/2017/03/23/amazon-to-acquire-souq-a-middle-east-clone-once-valued-at-1b-for-650m/|title=Amazon to acquire Souq, a Middle East clone once valued at $1B, for $650M|website=TechCrunch|date=March 23, 2017 |language=en-US|access-date=2019-12-25}}</ref>

===Israel===
{{See also|Venture capital in Israel|Yozma}}

In Israel, high-tech entrepreneurship and venture capital have flourished well beyond the country's relative size. As it has very little natural resources and, historically has been forced to build its economy on knowledge-based industries, its VC industry has rapidly developed, and nowadays has about 70 active venture capital funds, of which 14 international VCs with Israeli offices, and additional 220 international funds which actively invest in Israel. In addition, as of 2010, Israel led the world in venture capital invested per capita. Israel attracted $170 per person compared to $75 in the US.<ref>[https://www.economist.com/business/2012/01/21/what-next-for-the-start-up-nation What next for the start-up nation?] , [[The Economist]], January 21, 2012</ref> About two thirds of the funds invested were from foreign sources, and the rest domestic. In 2013, [[Wix.com]] joined 62 other Israeli firms on the Nasdaq.<ref>[https://www.forbes.com/sites/katieroof/2013/10/23/israels-wix-reveals-ipo-plans/ Israel's Wix Reveals IPO Plans] {{webarchive|url=https://web.archive.org/web/20170729210408/https://www.forbes.com/sites/katieroof/2013/10/23/israels-wix-reveals-ipo-plans/|date=July 29, 2017}}, [[Forbes]], October 23, 2013</ref>

===Sub-Saharan Africa===
{{see also|Economy of Africa#Entrepreneurship}}
The Southern African venture capital industry is developing. The South African Government and Revenue Service is following the international trend of using tax-efficient vehicles to propel economic growth and job creation through venture capital. Section 12 J of the ''Income Tax Act'' was updated to include venture capital. Companies are allowed to use a tax-efficient structure similar to VCTs in the UK. Despite the above structure, it is commented that government needs to adjust its regulation around [[intellectual property]], exchange control and other legislation to ensure that venture capital succeeds.{{Citation needed|date=January 2021}}

Currently, there are not many venture capital funds in operation and it is a small community; however, the number of venture funds are steadily increasing with new incentives slowly coming in from government. Funds are difficult to come by and due to the limited funding, companies are more likely to receive funding if they can demonstrate initial sales or traction and the potential for significant growth. The majority of the venture capital in Sub-Saharan Africa is centered on South Africa and Kenya.{{Citation needed|date=January 2021}}

Entrepreneurship is a key to growth. Governments will need to ensure business friendly regulatory environments in order to help foster innovation. In 2019, venture capital startup funding grew to 1.3 billion dollars, increasing rapidly. The causes are as of yet unclear, but education is cited as being a possible factor.<ref>The Economist, "The African century", March 28th 2020.</ref>

==Confidential information==
Unlike [[public company|public companies]], information regarding an entrepreneur's business is typically [[confidential]] and proprietary. As part of the [[due diligence]] process, most venture capitalists will require significant detail with respect to a company's [[business plan]]. Entrepreneurs must remain vigilant about sharing information with venture capitalists that are investors in their competitors. Most venture capitalists treat information confidentially, but as a matter of business practice, they do not typically enter into [[Non Disclosure Agreement]]s because of the potential liability issues those agreements entail. Entrepreneurs are typically well advised to protect truly proprietary [[intellectual property]].{{Citation needed|date=January 2021}} Startups commonly use a [[data room]] to securely share this information with potential investors during the due diligence process.

[[Limited partners]] of venture capital firms typically have access only to limited amounts of information with respect to the individual portfolio companies in which they are invested and are typically bound by confidentiality provisions in the fund's [[limited partnership|limited partnership agreement]].{{Citation needed|date=January 2021}}

==Governmental regulations==
There are several strict guidelines regulating those that deal in venture capital. Namely, they are not allowed to advertise or solicit business in any form as per the [[U.S. Securities and Exchange Commission]] guidelines.<ref>{{cite web |url = https://www.sec.gov/info/smallbus/secg/general-solicitation-small-entity-compliance-guide.htm |title = Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A Offerings |publisher = [[U.S. Securities and Exchange Commission]] |access-date = August 20, 2014 |url-status = live |archive-url = https://web.archive.org/web/20140925115247/http://www.sec.gov/info/smallbus/secg/general-solicitation-small-entity-compliance-guide.htm |archive-date = September 25, 2014 |df = mdy-all }}</ref>

==In popular culture==
{{More citations needed section|date=January 2021}}

===In books===
* [[Mark Coggins]]' novel ''Vulture Capital'' (2002) features a venture capitalist protagonist who investigates the disappearance of the chief scientist in a biotech firm in which he has invested. Coggins also worked in the industry and was co-founder of a dot-com startup.<ref>{{cite web |last = Liedtke |first = Michael |url = http://dir.salon.com/story/tech/books/2002/09/18/valley/ |title = Salon.com, "How Greedy Was My Valley?" |publisher = Dir.salon.com |access-date = May 18, 2012 |url-status = dead |archive-url = https://web.archive.org/web/20100531055253/http://dir.salon.com/story/tech/books/2002/09/18/valley |archive-date = May 31, 2010 |df = mdy-all }}</ref>
* Drawing on his experience as reporter covering technology for the ''[[New York Times]]'', [[Matt Richtel]] produced the novel ''Hooked'' (2007), in which the actions of the main character's deceased girlfriend, a Silicon Valley venture capitalist, play a key role in the plot.<ref>{{cite news |last = Richtel |first = Matt |url = https://www.npr.org/templates/story/story.php?storyId=11482038 |title = National Public Radio, "Love, Loss and Digital-Age Deception in Hooke" |newspaper = Npr.org |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120712141838/http://www.npr.org/templates/story/story.php?storyId=11482038 |archive-date = July 12, 2012 |df = mdy-all }}</ref>
* Great, detailed work on VC method of funding.<ref>{{cite web|url=http://www.hbs.edu/faculty/Pages/item.aspx?num=6515|title=A Method For Valuing High-Risk, Long-Term Investments: The "Venture Capital Method"|first1=William A.|last1=Sahlman|first2=Daniel R.|last2=Scherlis|date=July 24, 1987|access-date=May 6, 2018|via=www.hbs.edu|url-status=live|archive-url=https://web.archive.org/web/20180331125715/https://www.hbs.edu/faculty/Pages/item.aspx?num=6515|archive-date=March 31, 2018|df=mdy-all}}</ref>

===In comics===
* In the ''[[Dilbert]]'' comic strip, a character named "Vijay, the World's Most Desperate Venture Capitalist" frequently makes appearances, offering bags of cash to anyone with even a hint of potential. In one strip, he offers two small children with good math grades money based on the fact that if they marry and produce an engineer baby he can invest in the infant's first idea. The children respond that they are already looking for [[mezzanine fund]]ing.
* Robert von Goeben and Kathryn Siegler produced a comic strip called ''The VC'' between 1997 and 2000 that parodied the industry, often by showing humorous exchanges between venture capitalists and entrepreneurs.<ref>{{cite web |url = http://www.thevc.com/ |title = The VC Comic Strip |publisher = Thevc.com |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120411134028/http://www.thevc.com/ |archive-date = April 11, 2012 |df = mdy-all }}</ref> Von Goeben was a partner in Redleaf Venture Management when he began writing the strip.<ref>{{cite web |url = http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/1999/12/20/BU62805.DTL |title = Comic Book Pokes Fun at Venture Capitalists |work = [[San Francisco Chronicle]] |date = December 20, 1999 |access-date = May 18, 2012 |url-status = live |archive-url = https://web.archive.org/web/20120612095025/http://www.sfgate.com/cgi-bin/article.cgi?file=%2Fchronicle%2Farchive%2F1999%2F12%2F20%2FBU62805.DTL |archive-date = June 12, 2012 |df = mdy-all }}</ref>

===In film===
* In ''[[Wedding Crashers]]'' (2005), Jeremy Grey ([[Vince Vaughn]]) and John Beckwith ([[Owen Wilson]]) are bachelors who create appearances to play at different weddings of complete strangers, and a large part of the movie follows them posing as venture capitalists from New Hampshire.
* The documentary ''[[Something Ventured]]'' (2011) chronicled the recent history of American technology venture capitalists.

===In television===
* In the TV series ''[[Dragons' Den]]'', various startup companies pitch their business plans to a panel of venture capitalists.
* In the ABC reality television show ''[[Shark Tank]]'', venture capitalists ("Sharks") hear entrepreneurs' pitches and select which ones they will invest in.
* The short-lived Bravo [[reality TV]] show ''[[Start-Ups: Silicon Valley]]'' had participation from venture capitalists in [[Silicon Valley]].
* The sitcom ''[[Silicon Valley (TV series)|Silicon Valley]]'' parodies startup companies and venture capital culture.
* The AMC Drama ''[[Halt and Catch Fire (TV series)|Halt and Catch Fire]]'' features the use of venture capital firms for the startup companies during the PC revolution of the 1980s and rise of the world-wide-web in the early 1990s.

==See also==
{{div col|colwidth=20em}}
* [[Angel investor]]
* [[Corporate venture capital]]
* [[Deep tech]]
* [[Enterprise Capital Fund]]—a type of venture capital fund in the UK
* [[Equity crowdfunding]]
* [[History of private equity and venture capital]]
* [[Initial public offering]] (IPO)
* [[Joint venture]]
** [[International joint venture]]
* [[List of venture capital firms]]
* [[Mergers and acquisitions]]
* [[Platform cooperative]]
* [[Private equity secondary market]]
* [[Private equity]]
* [[Revenue-based financing]]
* [[Seed funding]]
* [[Social venture capital]]
* [[Sweat equity]]
* [[Venture capital financing]]
* [[Venture capitalist]]
* [[Vulture capitalist]]
* [[Women in venture capital]]{{div col end}}

==Notes==
{{NoteFoot}}

==References==
{{Reflist}}

==Further reading==
* [[Charles Duhigg|Duhigg, Charles]], "The Enablers: Venture capitalists used to exert discipline on startups. Now they often encourage recklessness", ''[[The New Yorker]]'', 30 November 2020, pp. 38–47.
* Lerner, Josh, and Ramana Nanda. 2020. "[https://www.aeaweb.org/articles?id=10.1257/jep.34.3.237 Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn]." Journal of Economic Perspectives, 34 (3): 237–61.
* [https://qubit.capital/blog/understand-venture-capital-stages Stages of Venture Capital Investment: From Seed to IPO] – Qubit Capital (overview of the key stages of venture financing, from early funding to exit).

{{Private equity and venture capital}}
{{Types of capital}}

{{Authority control}}

[[Category:Venture capital| ]]
[[Category:Corporate finance]]
[[Category:Entrepreneurship]]
[[Category:Equity securities]]
[[Category:Private equity]]