Venture Capital

Venture capital funds(VCFs) are investment instruments through which individuals can park their money in newly-formed start-ups as well as small and medium-sized companies. These are types of investment funds that primarily target firms that have the potential to deliver high returns.

Nonetheless, investing in these companies also involves considerable risk.

VCFs are somewhat similar to mutual funds — these constitute a pool of money collected from several investors. Here investors can refer to individuals with high net worth, companies, or even other funds. Instead of an asset management company, a VCF is managed by a venture capital firm.

How Does a Venture Capital Fund Work?

VCFs are some of the ways to avail financing for entrepreneurs and small business owners.

However, a VCF will only invest in firms that project significant growth potential and the ability to generate high ROI in the long run. As investments are made in new ventures, the risk associated is also comparatively high.