Venture capitalists are investment banks, wealthy individuals, or others who put money into an early-stage company with the expectation that it will earn a high return on investment in the future. They’ll typically assume an ownership share in the company in return, and may seek a seat on the board of directors or otherwise take an active role in business operations.
Entrepreneurs seeking venture capital must submit a proposal, including a detailed business plan. Multiple venture capitalists can invest in your company, although this will dilute your equity share in the business. Venture capitalists usually seek to exit the company and cash out their equity within a few years, often through a sale or acquisition.
Venture capitalists tend to be focused on certain industries, namely those with strong growth potential or a high risk/high return tradeoff. Before submitting a proposal, you’ll need to make sure that the investor’s interests align with what your company offers. In addition, venture capitalists only finance a fraction of the requests they receive.