A private equity fund which focuses making investments in companies in the very early stages of their lives and in innovative companies with potential for high growth. Furthermore, venture capital funds may target companies with nascent technologies such as solar power technologies. Venture capital funds provide the necessary capital and knowledge to the companies they invest. Examples of knowledge include financial, technical, and strategic advice, etc.

Characteristically, innovative and start-up companies are not easy to valuate because they have no established track record and a great proportion of intangible assets (typically knowledge-based assets). Venture capital funds seek to acquire a minority stake in their target companies, but with significant rights (e.g. veto rights) that safeguard their invested capital. These funds usually invest in different stages of business development, each stage having unique characteristics in a company’s scale of evolution. The main goal of venture capital funds is growth (which translates into capital gains) since their portfolio of start-up and growing companies don’t have operating cash flows that could otherwise be used to service debt or pay dividends.