Venture capital is a type of private equity capital typically provided by professional, outside investors to new, growth businesses. Generally made as cash in exchange for shares in the invested company, venture capital investments are usually high risk, but offer the potential for above-average returns. A venture capitalist (VC) is a person who makes such investments. A venture capital fund is a pooled investment vehicle (often a limited partnership) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans.
U.S. venture capitalists in 2007 poured $29.4 billion into 3,800 U.S.-based start-ups in the highest annual total investment in six years, according to a new report.
Venture capital can be used as a tool for economic development, putting money into business start-ups and smaller companies looking to expand. Venture capital plays a key role in facilitating access to finance for newly established and growing small and medium enterprises (SMEs).
Some Interesting Facts About Venture Capital -
- The top ten states for VC investment in 2007 were: California, Massachusetts, Texas, Washington, New York, Pennsylvania, Maryland, Florida, New Jersey, North Carolina.
- In the last 35 years, venture capitalists invested more than $441 billion in over 57,000 companies in the United States.
- More than 1,400 seed and early stage companies received venture capital investment in 2007.
- The Biotechnology Sector received the most venture capital seed money in 2007.
- There are fewer than 800 venture capital firms in the United States.
- In 2007, U.S. venture capitalists invested $1.4 billion in China and $1.0 billion in India.
- 55 new venture capital funds were raised in 2007.