Money provided by investors to privately held companies with perceived long-term growth potential. Professionally managed venture capital firms generally are limited partnerships funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves.

Venture Capital is the process by which investors fund early stage, more risk oriented business endeavors. A venture capital funding arrangement will typically entail relinquishing some level of ownership and control of the business. Offsetting the high risk the investor takes is the promise of high return on the investment.

Money and resources made available to startup firms and small businesses with exceptional growth potential. Most venture capital money comes from an organized group of wealthy investors. Risk capital invested by VC firms in privately held companies, through the underwriting of newly issued stock and/or convertible bonds. It is capital committed to an unproven venture. The initial, start-up money is referred to as "seed money" and entails the greatest risk. If the project gets off the ground it may require additional financing at additional "rounds" or the "mezzanine level" before the company is finally brought to the market and the venture capitalist can enjoy handsome rewards.

This is a type of equity investment usually best suited for rapidly growing companies that require a lot of capital or start-up companies with a strong business plan. A typical venture capital investment usually requires sale of 25% to 55% of the company to the investor. Risk investment in unlisted companies with high growth potential. Venture capital can be broadly subdivided into seed or start-up capital, second round finance for young companies (used to expand the range of products) and development finance for established companies (used to develop an alternative product or expand through acquisition).