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Glossary · from the DESK dictionary

Venture Capital

A form of private equity that invests capital in young, high-growth, often still unprofitable startups.

In plain words

Money for startups, usually in exchange for equity, betting that a few huge successes will offset many failures.

In more detail

Venture capital finances young companies with high growth potential in exchange for equity. The return distribution is extremely skewed: in a typical portfolio a single holding generates most of the return while the majority fails or underperforms. That distribution determines the entire approach to portfolio construction.

Example

A fund holds 30 investments. Eighteen fail, nine return capital and one returns forty times — that one alone carries two thirds of the fund's result.

What it means for traders

A key funding source for innovation and entrepreneurship, especially in the technology sector.

Common pitfalls

Very high failure risk for individual investments — most startups fail completely.

Related terms

Angel Investor · Anti-Dilution Provision · Board Observer · Bootstrapping · Crossover Fund · Crowdfunding · Early-Stage Financing · Entrepreneur · Equity Crowdfunding · Funding Round · High Burn Rate · Hockey Stick Growth · Venture Capital Company · Private Equity · Small Business Investment Company (SBIC) · Venture Capital Method · Venture Debt · Y Combinator

From the DESK dictionary. For information only, not investment advice.

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DESK is a research tool and not investment advice. Page generated: 2026-10-12.