Venture capital (VC) is a form of financing that is provided to early-stage companies that have been deemed to have high-growth potential by venture capital firms or funds. Typically, venture capital financing is attractive to smaller, newer companies that do not have access to traditional forms of funding such as issuing stock or applying for a loan through a bank.
Venture capital firms generally provide capital to companies in return for equity shares, which they then sell back to the company for a profit after a specific event, such as an initial public offering (IPO).
While obtaining venture capital financing has many benefits, it has drawbacks as well. As a result, entrepreneurs should fully explore their options and discuss them with a Silicon Valley venture capital lawyer before entering into any binding agreements. Some of the common pros and cons of venture capital financing are discussed below.