Difference between revisions of "Defining Venture Capital (Blog Post)"
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enture Capital, as defined by Investopedia(1), is "financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential". It acknowledges that "risk is typically high for investors," and that venture capital is an "essential source of money." Finally, Investopedia qualifies VC by reminding the reader that in exchange for the funds, venture capitalists usually get a say in startup company decisions. Despite this clear cut and well articluated efinition, some myths still prevail. Here are 5 myths about venture capital:
Myth #1 Venture capital is incredibly risky. You may be thinking, but the phrase "risk is typically high for investors" is part of the definition, and you would be right. However, research from the NBER(2) shows that rather than venture capital "almost always failing," only one in ten investments does not return any money. On the contrary its rather successful, with one in four investments having a rate of return above 50%.
Myth #2
(1) http://www.investopedia.com/terms/v/venturecapital.asp#ixzz4D651qAAt (2) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1363883
