Venture capital (VC) is the term used for investments in small businesses. Venture capital worthy businesses are viewed as having significant growth potential. Venture capital is provided as equity debt provided by private investors (the venture capitalists) or specialized financial institutions (development finance houses or venture capital firms). Also called risk capital.
The venture capital firm will become a significant, integral part of the decision-making of the business. VC investment will usually include:
- Holding one or more board seats;
- Replacing the CEO, CFO, or other key leaders in the business;
- Monitoring of financial reports and use of funds decisions; and
- Tracking milestones and budgets.