Venture Capital Financing, a significant financial innovation of the twentieth century, is a mechanism to institutionalise innovative entrepreneurship.

Venture Capital helps enterprises, which may not fall within the norms of conventional financing. Banks and financial institutions normally have stipulations regarding minimum contribution by the promoters to the capital of the project, adequate collateral for securing their participation in financing etc.   In the case especially of high technology ventures and those promoted by new entrepreneurs, the intellectual capital by way of the project idea/concept and the relevant track record are often the major contributions from the promoters. At this stage, the venture capitalist steps in with his contribution by way of equity / equity related instruments besides other value added & need-based services such strategic management support etc. After the enterprise settles down with profitable operations & normally with capability to raise funds from conventional sources, the venture capitalist exits by selling out his shareholding.

In other words, Venture Capital Financing denotes the investment in high-risk ventures willing to share in the risk of the project, with the expectation of commensurate levels of returns.