Venture capital
Equity investment in private, high-growth companies — typically at early or expansion stage. Venture capital funds take minority stakes and support management teams over 5 to 10 years with the expectation of a significant liquidity event.
In practice
A venture fund typically invests in 20 to 30 startups knowing that 50 percent will fail, 30 percent will produce modest returns, and 1 to 2 will generate 80 percent of the total fund return. This model requires funded companies to pursue aggressive growth: investors are not looking for solid small businesses, they are looking for companies capable of multiplying their value 10 to 20 times in seven years. Venture capital is not suitable for every project, and the resulting pressure can destroy companies that could have prospered at a steadier pace.