Money invested in early-stage companies with high growth potential, typically startups in technology or innovation sectors. Venture capital investors accept high risk in exchange for the possibility of large returns if the company becomes successful. Most venture-backed companies fail, but successful ones can deliver exceptional profits.
A venture capital firm invests $5 million in a software startup that was just founded two years ago. The startup is not yet profitable, but the investors believe it could become a major company. If the startup succeeds and goes public in 10 years, the investors' $5 million stake could be worth hundreds of millions of dollars. However, if the startup fails, they could lose their entire investment.
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