venture capital

A source of funding for early-stage, risk-oriented business endeavors. A venture capital funding arrangement will typically require that the entrepreneur relinquish some level of ownership and control of the business. VC firms offset a high risk of failure for the promise of an even higher return on their investment. The investment is usually in the form of stock or something that can be converted into stock at a later date. As the business matures, an initial public offering (IPO) may take place, or the business may be merged, sold, or additionally funded. These events are intended to enable the company to buy out the venture capitalists. If the business does not mature, major amounts of money could be lost.