How a Venture Capital Firm Works

A venture capital firm is usually run by a handful of partners who have raised a large sum of money from a group of limited partners (LPs) to invest on their behalf. The LPs are typically large institutions, like a State Teachers Retirement System or a university who are using the services of the VC to help generate big returns on their money.

The partners then have a window of 7 – 10 years with which to make those investments, and more importantly, generate a big return. Creating a big return in such a shor...