Venture capital is a form of private equity, a type of financing that is offered to small, emerging, early-stage companies that are believed to have high growth potential. Such firms demonstrate high growth (in terms of annual revenue or number of employee, or both). Venture capitalists invest in early-stage firms in exchange for equity in the firms they invest in.
The typical venture capital investment takes place after a first “seed funding” round. The initial round of institutional venture capital to fund development is known as the Series A round. A venture capitalist provides this fund in the interest of generating a return after a company sells shares to the Public.
Since venture capitalist assume high risk by investing in early-stage and smaller companies, they get significant control over firm’s decisions, in addition to a portion of the firm’s ownership. Apart from financing these early-stage companies, venture capitalists offer strategic advice to the company’s executives on its marketing strategies and business model.