Venture capital is a type of financing provided to early-stage companies with high growth potential. Investors, known as venture capitalists, provide funds in exchange for equity, or ownership stakes, in the business. This funding helps startups develop their products, expand their operations, and reach new markets. Venture capital is crucial for innovation, as it supports entrepreneurs who may not have access to traditional bank loans. The goal of venture capitalists is to generate significant returns on their investments when the company grows and either goes public or is acquired by another firm.