A venture capital (VC) firm is a type of private equity firm that provides financing to startup companies and small businesses that are believed to have long-term growth potential. VC firms raise money from limited partners (LPs) to invest in promising startups or even larger venture funds. The funding VCs provide gives nascent businesses the chance to flourish and helps to bring ideas to life. VC deals generally involve the creation of large ownership chunks of a company, which are sold to a few investors through independent limited partnerships. VC firms typically control a pool of funds collected from wealthy individuals, insurance companies, pension funds, and other institutional investors. Although all of the partners have partial ownership of the fund, the VC firm decides how the monies will be invested. VC firms usually take only a minority stake, 50% or less, when investing in companies, also known as portfolio companies, because they become part of the firm’s portfolio of investments. In return for funding, a VC firm takes an ownership stake that’s typically less than 50% in the startup company. VC investors are likely to demand a large share of company equity, and they may start making demands of the companys management as well. VC firms can be a critical source of funding, but there are other paths to achieve success.