| Venture Capital is money given to private companies that are perceived to have excellent growth prospects. In exchange for the funds the Venture Capital firm typically receives a large percentage of ownership in the target company and possibly positions on the company's board of directors. As part of the financial agreement they may also be given significant influence over the management policies of the company. The source of funds for a Venture Capital usually comes from wealthy private investors and various institutional investors. Venture Capital funds are known to make much of their profits by taking the companies in their portfolio public in an event known as a Initial Public Offering or IPO.
For some companies venture Venture Capital is a troublesome risk due to the loss of control that can accompany a poorly structured or predatory investment agreement. For others it can be a savior, adding missing financial and corporate stewardship, or by allowing the company to grow quickly before being consumed by an overly competitive market.
Venture capitalists achieved an unheard level of notoriety during the late 1990's as the "dot.com" gold rush boosted their portfolio values to astronomical heights. They were one of the engines that drove the Internet economy bubble to unsustainable heights, before the crash that occurred in the early 2000's. Currently, as of 2006, they are having a resurgence of spending due to the Web services phenomena known as Web 2.0. Whether or not this will be a repeat of the "dot.com" phenomena remains to be seen. As of this writing there is a heavy influx of cash into fledgling Web 2.0 companies. |