Venture Capital
TLDR
Institutional investment in high-growth private companies, structured as a limited-partnership fund.
Definition
Venture capital is a form of private investment where a fund, structured as a limited partnership, invests in companies with the potential to grow into very large businesses. The fund raises capital from institutional Limited Partners (pension funds, endowments, family offices, sovereign funds), deploys it over 3-5 years, and returns capital plus gains to LPs over a 10-year fund life.
VC is distinct from Angel Investing (personal capital, no committee) and from private equity (majority control, mature companies). VCs hold minority stakes in companies at Startup Stage and Scale-Up Stage.
Why it matters
Venture capital is the funding engine that allows a small company to invest ahead of revenue. Without it, a scale-up would either need to be profitable from early days or grow much more slowly. The Belgian ecosystem has a limited but growing VC layer, with dedicated funds in Fintech, AI & Machine Learning, BioTech & Life Sciences, and deep tech, often alongside cross-border funds from Amsterdam, London, and Paris.
The wiki tracks investors as separate entities; the concept page here complements those with the mechanics of how VC funds work.
Mechanism
A VC fund charges 2% annual management fees and 20% carried interest on gains. The fund's job is to produce a multiple of invested capital (typically 3x net) over ten years. This math forces a power-law outcome: one or two large winners must cover many failures.
The structural consequence is that VC money is expensive capital. Companies that take VC money commit to a growth trajectory compatible with the fund math, whether or not that trajectory matches their product.
Related
- Parent: Company Building
- Sibling: Angel Investing - the earlier-stage variant
- Sibling: Scale-Up Stage - the primary stage VCs invest in
- Related: Unicorn