Venture capital is money invested in startups that are too risky for banks but too small for public markets. VC firms raise funds from institutional investors and wealthy individuals, then invest in early-stage companies with high growth potential. In return, they get equity (ownership) — typically 15-30% of the company.
Funding stages: Seed ($500K-$2M) for proof of concept; Series A ($2-15M) for product-market fit; Series B-C ($15-100M+) for scaling. Top VC firms: Sequoia Capital, Andreessen Horowitz (a16z), Accel, and SoftBank Vision Fund. Early VC bets on Google, Facebook, and Uber turned millions into billions.
The VC model operates on the "power law" — 90% of returns come from just 10% of investments. Most startups fail, but one massive winner (like Sequoia's $60M investment in WhatsApp that returned $3 billion) covers all losses. Global VC investment was $285 billion in 2024, with the US, China, and India as the top three markets.