{"id":5547,"date":"2021-08-18T14:18:21","date_gmt":"2021-08-18T19:18:21","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/venture-capital-definition.html"},"modified":"2026-06-18T01:50:00","modified_gmt":"2026-06-18T06:50:00","slug":"venture-capital-definition","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/venture-capital-definition.html","title":{"rendered":"What Is Venture Capital?"},"content":{"rendered":"\n
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What Is Venture Capital?<\/h1>\n\n
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\n By Catherine Hodder, Esq.<\/a> | Legally reviewed by Tim Kelly, J.D.<\/a>\n | Last updated\n
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Venture capital is a private equity investment by VC firms or wealthy individuals to fund startups and early stage companies with high-growth potential. In exchange for equity financing, the investors receive a part of company ownership.<\/p>\n\n <\/div>\n\n\n\n

Suppose you have a startup<\/span> business and cannot get a bank loan<\/span> or line of credit from lenders<\/span>. In that case, you may want to consider venture capital<\/span> funding<\/span>.<\/p>\n

Made famous from television shows such as “Shark Tank” or “Silicon Valley,” venture capital<\/span> funding<\/span> has been around for decades.<\/p>\n

Startups<\/span> and early-stage<\/span> companies are risky investments, and many fail. Therefore, it is difficult for these companies to secure small business<\/span> loans<\/span>. Additionally, new companies start small. They cannot raise capital funds by selling shares of stock or initiating a public offering.<\/p>\n

However, another option to raise money for your business is from a venture capital<\/span> investment.<\/p>\n

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What is Venture Capital<\/span>?<\/h2>\n

Venture capital<\/span> is an equity investment made in a startup<\/span> company<\/span>. The investor provides capital (money) in exchange for a part of the company ownership (equity). The investment provides seed capital<\/span> for startup<\/span> funding<\/span> or for the growth of an existing company.<\/p>\n

Understanding Venture Capital<\/span><\/h2>\n

Types of Venture Capital<\/span> Investors<\/h3>\n

There are two types of venture capital<\/span> investors: venture capital<\/span> firms<\/span> and angel investors<\/span>.<\/p>\n