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What is International Venture Capital?

Jim B.
By Jim B.
Updated May 17, 2024
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International venture capital refers to the process by which individuals or groups invest in private companies from all over the world that are just starting up their operations. This process is often undertaken by professionally managed companies that collect investments from multiple sources and locate companies from all over the world needing capital to grow their burgeoning business. In return for their investment, venture capitalists often receive equity in the company and can benefit greatly if the company rises in the market. There is great risk involved in international venture capital as well, as little information can be collected on many young companies.

Venture capital is often a necessary step for young businesses to take to secure the capital they need to compete with larger players in the market. With the increasing globalization of business, many of these novice companies now hail from parts of the world that investors might not initially consider. Taking advantage of international venture capital opportunities can be extremely profitable for investors in all locations.

The process of international venture capital is often undertaken by professionally managed fund managers who specialize in the practice. Such funds collect capital from multiple investors who are generally required to make a minimum investment to participate. Fund managers with experience in the process then locate international start-up companies and invest the funds they have at their disposal in these private companies. Most funds generally spread the capital within to multiple companies, thereby lessening the risk for investors.

Ideally, the investor who takes part in international venture capital will profit as the company that receives his investment rises in the business world. This can occur when the company is resold at some future date, which can secure the investor an appreciated return on his equity in the company. In some cases, a start-up company may improve its fortunes to the point where it goes public via an initial public offering on the stock market, which will earn the venture capitalist a premium on his shares. Depending on the amount of equity they receive, venture capitalists may even have some influence on the future direction of the company.

Of course, such start-up companies often have little or no track record when they seek out international venture capital, which means that they are risky for the investor. Considering that the companies can be located in far-flung corners of the globe, gathering the information necessary to make an informed decision can be difficult. Even experienced venture capital fund managers can't promise the success of these nascent companies. If, however, the investor manages to get in on the ground floor of a company bound for bigger and better things, the reward can easily offset the risk.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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