Venture capitalists are long term investors who take a very active role in their portfolio companies. The initial investment is just the beginning of a long relationship between the venture capitalist and entrepreneur. Venture capitalists provide great value by providing capital and management expertise. Venture capitalists often are invaluable in building strong management teams, managing rapid growth and facilitating strategic partnerships. Most companies that venture capitalists invest in are private enterprises.
Venture capitalists invest in high risk enterprises.
However, venture capitalists manage that risk through portfolio risk management. The venture capitalist anticipates that a few of those investments will provide an extremely healthy return - however a few of the investments might not provide any return and some will produce an average return. Historical data shows that an average return from a venture capital fund produces a higher return than other asset classes. The concept the greater the risk, the greater the reward prevails in the venture capital industry. Most venture capitalists have a fiduciary responsibility to their investors.