In the world of private equity, the venture capital fund represents one of the most common organizational structures. In general, venture capital funds operate by purchasing minority stakes in startup companies, most of which conduct business in high-growth sectors such as health care technology and consumer technology. Unlike private equity firms, which make their investments based on cash flow considerations, venture capital funds identify companies with raw technical talent and help them commercialize their technologies.
Venture capital funds may also invest in late-stage companies, which have typically proven their feasibility and require additional funding to scale their operations. In addition to teaching portfolio companies how to expand operations such as finance and marketing, venture capital funds connect companies with top technical and managerial talent.