targeting their investments to certain types of businesses only, the venture capital firm can learn the ropes of a particular industry, and thus be better prepared to decide which new or expanding businesses are the best investments. And venture capital firms do not just provide start-up financing. They can also provide expansion financing for promising businesses. This is less common, however, since the growing, successful business is more able to get a bank loan.

When individual investors entrust their money to a venture capital firm, the firm puts the money in a fund. This fund is then invested in several companies, with the expectation that the companies will be able to repay the money in around three to seven years. This money is repaid either when the company takes their business public and starts selling stocks and bonds, or when the company is acquired by another company. The money is then paid back to the venture capital firm, with interest. Sometimes, the money is repaid through shares of stock in the company. Once all of the money in a particular fund is returned, the money, with the interest earned, is then sent back to the investors. Of course, the firm takes a portion of the money as their fee.

Venture capital firms are excellent places for start-up businesses who are not able to get funding for their growth through another source. The key is finding a venture capital firm that chooses to invest in your type of business. If you do, and they like what they see in your business plan, you likely have found the money that you need.