Venture capital (VC) is a type of private equity, a form of financing that is provided to small, early-stage, emerging firms that are deemed to have high growth potential, or which have shown high growth (in terms of number of employees, annual revenue, or both). Venture capital funds invest in these early-stage companies in exchange for equity–an ownership stake–in the companies they invest in.
The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as Information technology (IT), social media or biotechnology. The typical venture capital investment occurs after an initial “seed funding” round. The first round of institutional venture capital to fund this is called a Series A round. In addition to angel investing, equity crowdfunding and other seed funding options, venture capital is attractive.