What is venture capital?

Venture capital (VC) is a type of financing used to support small, early-stage companies. By providing funds, a venture capitalist, makes an investment in the future of the business and aims to profit from the high potential growth of the company. Venture capitalists often place restrictions on firms that receive funding and ask businesses to accept a merger after growth reaches a certain point, to focus on a particular type of product, or to expand to a specific region. VC investments have a high rate of failure, due in part to the uncertainty over whether or not an innovative idea or business model will work, so venture capitalists often have strict guidelines for companies that apply for funding.