Venture Capital

Venture capital (VC) is a form of private equity where specialized firms invest pooled capital from limited partners (pension funds, endowments, wealthy individuals) into high-growth startups. VC firms typically invest at specific stages (seed, Series A, growth) and expect returns of 3-10x on their overall fund, knowing that most investments will fail and a few "home runs" will drive returns.

The VC model has specific implications for founders. VCs need large exits (typically $100M+) to generate fund-level returns, which means they push for aggressive growth and large outcomes. A $20M exit might be life-changing for a founder but is insignificant for a $500M fund. This alignment gap can create tension: founders may prefer a comfortable, profitable business while VCs push for risky growth strategies.

VC funding comes with governance: board seats, protective provisions, information rights, and approval requirements for major decisions. Founders trade control for capital and strategic support. The best VC relationships are genuine partnerships where the investor adds value through network, expertise, and pattern recognition. The worst are adversarial dynamics where investors and founders have misaligned incentives.