Venture capital represents an central part of the lifecycle of a new business. Before a company can start earning revenue, it needs enough start-up capital to hire employees, rent facilities, and begin designing a product. This funding is provided by VCs in exchange for a share of the new company's equity.

Investors in a VC fund will earn a return when a portfolio company exits, either through an IPO, merger, or acquisition. Venture capital ( VC) is a type of equity financing that gives entrepreneurial or other small companies the ability to raise funding before they have begun operations or started earning revenues or profits.