Entrepreneurship Class Note: Overview of Venture Capital and Start-up Financing

Venture capital is a type of capital that is particularly suitable to the financing of innovation: the financing of enterprises that are attempting to do something new and untested. While not limited to this use, the prominent examples of venture-financed firms of the 1980s and 90s - Compaq, Netscape Communications, Apple Computer, Network General, Cisco Systems, Yahoo!, eBay - underscores the association of venture capital with the creation of new technologies. This teaching note defines venture capital and discusses the interplay between venture capital finance and the formation of entrepreneurial ventures. Particular attention is paid to what entrepreneurs can expect to encounter in the process of seeking venture capital for their ventures.