A venture capital fund is capital raised from investors and invested in technology companies with profit potential, managed by a venture capital firm. Venture capital experts are extremely meticulous when selecting projects. According to U.S. data, for every 1,000 business plans reviewed, a venture capital firm will invest in only 7 of them.
　A venture capital firm is an investment company that specializes in managing venture funds and effectively deploying the capital it oversees into high-tech enterprises with strong profit potential. In Hong Kong, it’s commonly referred to as “innovation capital,” while in Taiwan, it’s often called “entrepreneurial capital.”
　　Although venture capital funds may invest in mature, large corporations, their primary focus is on small enterprises that are just beginning to scale up. Drawing on their extensive expertise and management experience, venture capital specialists carefully select from among numerous technology projects. After undergoing a thorough due-diligence process, once a company is chosen, the venture capital firm will inject capital, becoming a shareholder and also serving as a strategic advisor to the company’s management.
　　Venture capital firms often send representatives—individuals who champion their own interests and possess extensive management experience—to the companies they invest in. On the one hand, this helps these companies address real-world management challenges; on the other hand, it ensures that the investors’ interests are protected. The funds managed by venture capital firms typically come from investors in North America, Europe, or Southeast Asia. Since most of the companies they invest in are early-stage tech firms, the risks involved are relatively high, which is why venture capital investments are often perceived as risky ventures. The management teams of venture capital firms are composed of experts, some of whom have previously served as top executives at major tech companies, others as investment bankers, lawyers, or accountants, and still others as scientists or engineers. These individuals not only have specialized knowledge of the tech industry but have also demonstrated proven track records in the past.
　　According to U.S. statistics, for every thousand business plans reviewed by venture capitalists, only seven projects are selected. Therefore, not every project applying for funding will secure financing, and even among those that do receive funding, not every one will deliver substantial returns to investors.
　　Investment scale
　　The investment sizes of venture capital firms vary considerably. Taking the United States as an example, projects with investments under one million U.S. dollars account for 10% of the total venture capital funding; projects ranging from one to three million dollars account for 46%; and projects exceeding three million dollars account for 44%. A 1998 survey of 250 U.S. venture capital firms revealed that seed-stage investments made by venture capital firms actually represent a relatively small proportion. There are two main reasons for this phenomenon: First, companies in the seed stage have just been established and have yet to produce any tangible results, making the risk extremely high. On average, more than 80 out of every 100 new enterprises fail within the first year. As a result, venture capital firms prefer to invest later, even if it means paying a higher price, rather than taking on such substantial risks for a mere bargain. Second, although large-scale investments and small-scale investments differ significantly in terms of amount, they require roughly the same amount of time and effort. Thus, rather than investing in small-scale ventures that yield only modest returns, it’s often more advantageous to go for larger-scale investments that can bring in greater rewards.
 Funding Sources
　　Venture capital funding primarily comes from both individual and institutional investors. Taking the United States as an example, institutional investors mainly include pension savings funds and surplus cash from large corporations. These institutional investors manage enormous sums of money—some even reaching several trillion dollars—and tend to adopt a relatively cautious investment approach, typically favoring low-risk, more traditional bonds and stocks. However, driven by the need for diversification, institutional investors also allocate a small portion of their funds to higher-risk, high-tech companies. Although this proportion is modest, given the sheer size of the total funds managed by institutional investors, even a small percentage represents a substantial amount of capital. In addition to institutional investors, individuals are also major contributors to venture capital. Such individual investors are often those who have a strong interest in technology or who seek to invest in high-tech enterprises in order to build their wealth.