Venture capital is a form of financing for startup companies that have a potential to grow. Investors pick companies they think would grow in the long term and invest in them. The capital given to these companies is called venture capital and the investor providing the money is known as venture capitalist.
Investing in a new company is risky and has the possibility of the investment not coming to fruition. Thus, venture capitalists are generally wealthy set of people who have lots of capital to spare. The investors may be compensated by having decision making authority over the company, apart from the returns offered to them.
The term “venture” added in the front refers to the risky nature of the investment as it involves startup companies that do not have an established name yet.