Venture capital (VC) is a form of funding that supports startups and businesses with high growth potential. VC firms raise money from limited partners to invest in promising startups or larger venture funds. In exchange for funding, founders offer investors a percentage of ownership and, in some cases, a board seat. VC funding is different from traditional bank loans as it is not expected to be paid back on a fixed schedule. VCs take a long-term view and hope for significant returns when the company is acquired or goes public. VC funding fills the void left by capital markets and traditional bank debt, providing startups with the chance to flourish and commercialize their innovations. While VC funding has risks and potential drawbacks, such as dilution of ownership and control, it offers benefits such as expansion capability, mentoring, networks and connections, and no repayment obligations if the startup fails. VC funding is not the only option, and startups can explore alternatives like commercial loans, venture debt, licensing deals, and founder funding. Deciding whether to seek VC funding depends on the nature and needs of the business.
What is Venture Capital? By Vanessa Kuhlor
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