If you’ve been in the startup world for more than five minutes, you’ve heard the term “venture capital.” Maybe you even know founders who have raised VC money themselves. But you might be wondering: How does venture capital work?

What is venture capital?

Venture capital is financing that’s invested in startups and small businesses that are usually high risk, but also have the potential for exponential growth.

The goal of a venture capital investment is a very high return for the venture capital firm, usually in the form of an acquisition of the startup or an IPO.

How does venture capital work?

A venture capital firm is usually run by a handful of partners who have raised a large sum of money from a group of limited partners (LPs) to invest ...