Venture capitalists got a lot of press during the great Internet bubble a few years back. They're still around, and investors should have an understanding of what their role is in many companies' histories.
Venture capital firms generally invest money in young start-up companies that need cash to grow. The venture capitalists pool large sums of money, review many businesses every year, and select the most promising ones. In exchange for the funds they provide, venture capitalists receive a percentage of the company and often become involved in its management. They hope for the company to go public or be acquired in a few years so that they can cash out at a premium.
Silicon Valley, in the San Francisco Bay Area, is home to many very large venture capital firms that got big by funding tiny high-tech start-ups that became the giants we all know today. Examples of their early investments include Apple Computer (NASDAQ:AAPL), Intel (NASDAQ:INTC), Sun Microsystems (NASDAQ:SUNW), Adobe (NASDAQ:ADBE), and Cisco Systems (NASDAQ:CSCO). Many founders of high-tech companies who once got help from venture capitalists have themselves gone on to do the same thing on a smaller scale to help today's start-up companies. They're referred to as "angels."
The following Fool articles also talk about venture capitalists:
- David Gardner: The Best Way to Predict the Future
- Alyce Lomax: Don't Be Left Behind
- Tim Beyers: In Defense of the iEmpire
You can learn more about investing in our highly regarded how-to guides and online seminars. (We stand behind them with money-back guarantees.)
To learn more about investing Foolishly, visit our Fool's School and our Investing Basics area. You can also learn all about brokerages and find one that's right for you by visiting out our Broker Center. (Did you know that some well-regarded brokerages are offering commissions as low as $5?)
