Venture capital is funding provided to small businesses or startups by individuals or institutions, who are known as investors. Entrepreneurs who lack the income or assets to qualify for business loans often seek venture capital to launch their businesses.
The risks are as great as the potential rewards for investors. New businesses lack experience, which causes them to fail quickly. Yet, such businesses often open their doors to market innovative products and services that have the potential to become solid revenue generators.
Investors who extend venture capital to small businesses and startups do so in exchange for partial ownership of the companies, which they retain until the new companies merge with more established companies or go public.
The term “adventure capital” refers to venture capital used to fund humanitarian and development projects.