First, venture capital.
Venture capital is called venture capital because there are many uncertainties in venture capital, which bring great risks to investment and its return. Generally speaking, venture capital is invested in high-tech start-ups. The founders of these enterprises have excellent technical expertise, but lack company management experience. Another point is whether a new technology can be transformed into an actual product and accepted by the market in a short time, which is also uncertain. There are other uncertainties that lead people to think that this kind of investment is risky, but it is undeniable that venture capital has a high rate of return.
Perhaps the most familiar but least known investment risk is market risk. In a highly liquid market, for example, in stock exchanges around the world, the price of stocks depends on the relationship between supply and demand. Suppose that if the demand for a specific stock or bond rises, the price will rise accordingly, because every buyer is willing to pay more for the stock.
Venture capitalists are both investors and operators. Venture capitalists generally have a strong technical background and professional management knowledge. This kind of knowledge background helps them to understand the business model of high-tech enterprises and help entrepreneurs improve the operation and management of enterprises.
Second, the mode of operation.
Venture capital generally operates in the form of venture capital fund. The legal structure of venture capital fund is in the form of limited partnership, and venture capital companies, as general partners, manage the investment operation of the fund and get corresponding remuneration. In the United States, limited partnership venture capital funds can get tax incentives, and the government also encourages the development of venture capital in this way.