Venture capital financing

Venture capital financing is a type of financing by venture capital. It is private equity capital provided as seed funding to early-stage, high-potential, growth companies (startup companies) or more often it is after the seed funding round as a growth funding round (also referred to as series A round). It is provided in the interest of generating a return on investment through an eventual realization event such as an IPO or trade sale of the company.

To start a new startup company or to bring a new product to the market, the venture needs to attract funding. There are several categories of financing possibilities. Smaller ventures sometimes rely on family funding, loans from friends, personal bank loans or crowd funding.

For more ambitious projects, some companies need more than what mentioned above, some ventures have access to rare funding resources called angel investors. These are private investors who are using their own capital to finance a venture's need. The Harvard report by William R. Kerr, Josh Lerner, and Antoinette Schoar tables evidence that angel-funded startup companies are less likely to fail than companies that rely on other forms of initial financing. Apart from these investors, there are also venture capitalist firms (VC firms) who are specialized in financing new ventures against a lucrative return.

More ambitious projects that need more substantial funding may turn to angel investors - private investors who use their own capital to finance a ventures’ need, or Venture Capital (VC) companies that specialize in financing new ventures. VC firms may also provide expertise the venture is lacking, such as legal or marketing knowledge. This is particularly the case in the Corporate venture capital context where a startup can benefit from a corporation, for instance by capitalizing on the corporations brand name.

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