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Venture capital

A venture capital company is a partnership that invests its own capital, and that of third party investors, in enterprises that are typically too risky for ordinary bank loans. A typical investment term might be three to five years.

Venture capital partners (also known as "VCs") are usually former chief executives at firms similar to those which the partnership funds. The failure rate can be high; anywhere from 20 to 90% of the enterprises funded fail to return the invested capital. In good times, the firms that do succeed may offer returns of 300 to 1000%.

The late 1990s were a boom time for the globally-renowned VC firms on Sand Hill Road in the San Francisco, California, USA area. The NASDAQ crash and technology slump that started in March 2000, and the resulting losses on overvalued, non-performing startups, has shaken VC firms deeply. In 2003, many VCs are focussed on writing off companies they funded just a few years ago.

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