Venture Capital Program (Equity Financing)
Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that for reasons of size, assets, and stage of development cannot seek capital from more traditional sources, such as public markets and banks. Venture capital investments are generally made as cash in exchange for shares and an active role in the invested company.
Venture capital differs from traditional financing sources in that venture capital typically:
Focuses on young, high-growth companies;
Invests equity capital, rather than debt;
Takes higher risks in exchange for potential higher returns;
Has a longer investment horizon than traditional financing;
Actively monitors portfolio companies via board participation, strategic marketing, governance, and capital structure.
SBA provides venture capital through the Small Business Investment Company (SBIC) Program, a unique public-private investment partnership. SBA itself does not make direct investments. It works with SBICs, which are privately owned and managed investment firms licensed by SBA to provide financing to small businesses with private capital they raise and with funds borrowed at favorable rates through SBA.