This is when capital (funds) is invested into early-stage, high-potential, and growth start-up companies. The venture capital fund makes money by owning equity in the firm that it has invested in. As this form of investment is typically done by small companies, it is very useful because they will generally find it very difficult to raise funds through other forms such as securing a bank loan. As mentioned in the equity investment section, venture capital investment is a form equity investing and as a result when a company receives venture capital, they will also get a significant portion of the company.
The way that the funding for venture capital works, is that typically, investors in this area are extremely selective when it comes to deciding who to invest in. Which means that the types of companies that will receive funding will be those that are considered to be in growing markets, in areas such as innovative technology, for example renewable energy resources. The type of people that are usually involved in venture capital investors are those that have both managerial technological expertise alongside the capital that will be invested.

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