What is Venture Capital Venture capital is money provided by professionals who invest alongside management in young, fast-growing companies that have the potential to develop into significant economic contributors (NVCA). Venture capital is an important source of equity capital for start-ups. These portfolio companies receiving venture capital are considered to have excellent growth prospects. Start-ups usually do not have access to capital markets because they are private. Venture capitalists represent a solution to finance high-risk, but potentially high-return companies. Investors usually have a say in the management of the company, can serve on the board of directors, and expect to receive returns 5-10 times their investment up to $50 million (Burk).History of Venture CapitalIt matters start with the history of venture capital to see how it has grown and to show its ups and downs. It was thought to have been developed in the years following World War II, but can actually be traced back to the Babylonian Codex (Gompers) collaborations. These Babylonian partnerships used gold or silver to finance caravans. The terms were 12 years and 100% profits (Heise). Much later, in 1946, the first venture capital firm was founded. Karl Compton, the president of MIT, together with Georges Doriot, professor of Harvard Business School, formed American Research and Development (ARD). Local business leaders are also involved in the project. Many new technologies and other MIT innovations were developed during the war. About half of ARD's profits came from its investment in the Digital Equipment Company in 1957. It had invested only $70,000 but its value had grown to $355 million. A decade later, many more venture capital firms were formed. They were all structured as publicly traded closed-end funds, as were ARDs. Closed-end funds are mutual funds whose shares must be sold to other investors, instead of being redeemed by the issuing company. In 1958, the first venture capital limited partnership, Draper, Gaither and Anderson, was formed. Others soon followed suit, but the limited partnership remained a minority during the 1960s and 1970s. The rest were closed-end funds or small business investment companies. During these years, total annual venture funds were small and never more than half the paper. They are very optimistic about the future of venture capital financing. They say this is due to more and more investors investing in venture capital, as well as the increase in IPOs (Raffa). Works Cited Bartlett, Joseph. Fundamentals of venture capital. Rowman Publishers, 1999.Burk, James and Richard Lehman. Financing your small business. Sphinx Publishing, 2004.Camp, Justin. Risk Capital Due Diligence. Wiley Inc, 2002.Gompers, Paul and Joshua Lerner. Venture capital cycle. Cambridge: The MIT Press, 2000.Heise, John. "The History of the Bronze Age in Mesopotamia." 1996.http://mahan.wonkwang.ac.kr/lecture/ancient/meso/sron/bronze_age.htmlNational Venture Capital Association. 2005. http://nvca.org/Raffa, David. “Pipe Dreams and Other Opportunities in the Future of Venture Capital.” 2004. www.catalyst-law.com/document/237Sherman, Andrew. Capital raising. 2nd ed. Amacon, 2005 Timmons, Jeffrey, et al. How to raise capital. McGraw-Hill Companies, 2004. Venture Capital Journal. Thomson Financial, 2005.http://www.venturecapitaljournal.net/vcj/topnews.html