Venture Capital (VC) firms are professionally managed funds that have millions sometimes billions to invest in suitable business opportunities. Because of this they are not interested in small investments and are solely focused on large deals and will expect a large chunk of your business in return for their money. They will almost certainly part control your business and will expect to be intimately involved in how it's run.

Generally venture capital companies will only invest in areas where they have expertise and therefore their knowledge can be a very useful asset.

Venture capital is not even an option open to most small and medium sized businesses. For those seeking to raise funds by selling equity in their business individual investors or business angel syndicates are much more appropriate. Whatever you decide, make sure you understand the full implications of taking on external investment in exchange for equity in your business.

Ideal for:
Larger businesses with a big idea, large potential market or imminent rapid growth where they need access to serious money and expertise to exploit the opportunity properly.

Return expectations:
Like other professional investors your business will not be the venture capitalists only interest. It is likely that they will have a portfolio of investments and of that portfolio they will assume that a proportion of them will fail or not meet their return expectations. As a result they will seek to own as much as possible for their investment on the assumption that if one or two pay off they will pay off big.

As a result you will be paying for the spreading of risk. A venture capital firm perhaps even more than individual investors and syndicates will be looking for return above all else. Obviously they would not consider you unless they believed there was a good chance you could make your business a success and so their interest is positive. If you already have the expertise and are only really seeking funding then finding alternative ways to raise the money may be better. If you need additional contacts and knowledge then venture capital investment could be the perfect solution.

A venture capital firm will often have a strong track record in business improvement and turnaround, often based on cost reduction.