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What is venture capital?

Last Updated: December 15, 2011

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Venture capital is funding provided, often unsecured by assets, to early stage (e.g., new) private companies with the potential for rapid growth. Individuals providing this type of funding are generally looking for a higher rate of return, a share in the company (20% to 50% or more is not uncommon), and involvement in management of the business. Some take an ownership position. Venture capital investors usually take a somewhat longer term view of the time necessary to allow companies to become profitable. That window is typically three to five years. As the owner, you need to be aware that venture capitalists require exit plans which require the owner to arrange alternative financing.

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