What is venture capital?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
Venture capital is money invested in a start-up or early-stage private company in exchange for a share of ownership. Investors usually seek businesses with potential for high growth and profits and may contribute management or industry experience. The ownership share and decision-making rights depend on the deal.
Venture capital is usually equity finance rather than a loan. Money received from investors in exchange for ordinary shares is usually recorded in the company's equity as share capital, rather than as income or a liability. How a particular deal is recorded, especially one with conditions attached, is a question for your accountant.
Raising venture capital puts the books under close scrutiny. Reconciled accounts, current financial statements and projections built from real figures let investors see where the business stands, and gaps or unexplained balances in the records are hard to account for in the middle of a pitch.
In Australia
business.gov.au's glossary describes venture capital as investment in a private start-up. Its funding guide classes it as equity finance and describes investors providing funds to businesses with potential for high growth and profits, along with management or industry know-how. The guide gives 3 to 9 months as a timeframe for raising venture capital.
Its guide to pitching for venture capital says investors will want to understand the business, its industry and its customers, and stresses knowing your numbers: short and long-term financial projections that are ambitious but achievable, backed by a record of revenue and sales.
It also points Australian start-ups to government sources and private sector funds, including lists of registered Venture Capital Limited Partnerships and Early Stage Venture Capital Limited Partnerships.
Common mistakes
- Recording money received from investors as sales income.
- Recording an investor's money as equity or as a loan without checking what the signed agreement says it is.
- Building projections for investors from estimates the books cannot back up.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Choose your funding
business.gov.au, Australian Government. Current at 16 October 2026, released 18 February 2026. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Pitch for venture capital
business.gov.au, Australian Government. Current at 16 October 2026, released 18 January 2024. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.