It is often offered to firms that shows significant growth potential and revenue creation, thus generating potential high returns. Entities offering Capital invest in a company until it attains significant position and then exits the same. They acquire a certain percentage of the company's share and based on the shareholding, they may also participate in the managerial decisions.

Venture money is not long-term money. The idea is to invest in a company’s balance sheet and infrastructure until it reaches a sufficient size and credibility so that it can be sold to a corporation or so that the institutional public-equity markets can step in and provide liquidity.

In essence, the venture capitalist buys a stake in an entrepreneur’s idea, nurtures it for a short period of time, and then exits with the help of an investment banker.

A venture capital investment by its nature is risky and takes place in early-stages of companies. The possibility of large losses, even the entire investment, is factored into VC’s business model.