Venture capital company
Venture capital companies are specialised in assessing young companies - typically innovative enterprises in growth industries where there is an element of uncertainty. Before providing capital, the venture capital firm evaluates the company's business plan, sales prospects and the market potential of its products, as well as the management skills of the prospective entrepreneurs.
Venture capitalists usually cover the capital requirements of the companies they support by establishing a venture capital fund. Private investors, pension funds and other investors who wish to allocate some of their assets to high-risk investments acquire shares in the fund, leaving the selection of the portfolio companies to the venture capital firm.
Venture capital firms usually participate in young companies for five to eight years, at which point they realise their profits on the investment through an exit.