What Is a Venture Capitalist?
Venture Capitalist Definition
A Venture Capitalist is a private investor that provides early capital to new companies that exhibit a strong potential for growth and success.
This is typically in exchange for a significant equity stake.
Venture Capitalists can provide funding for startups or small businesses in need of capital that do not have access to equities markets because the companies are too new.
The projects they invest in are usually high risk / high reward ventures.
As such they are unappealing investments to most investors, especially those who are risk averse, but prime targets for venture capitalists who are willing to accept a greater risk for a potentially greater payout.
What Does a Venture Capitalist Do?
These funds will often be overseen by a committee tasked with identifying companies with emerging growth potential, making investment decisions, and deploying investor capital.
Common Misconception About Venture Capitalists
Contrary to popular opinion, venture capitalists do not commonly fund startups from the onset.
Rather, they look for companies that are at the point of preparing to commercialize their idea, when they have the highest potential for growth.
When evaluating a company, venture capitalists look for strong management, a significant potential market, and unique products or services that have a competitive edge.
What is a Venture Capitalist FAQs
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.