What is "venture capital"?

Venture capital is money that investors put into young, unproven companies in exchange for an ownership stake, betting that a small number of huge successes will more than cover the many failures. Because early-stage startups have no track record and high failure rates, venture capitalists spread bets across many companies, knowing most will underperform or collapse while a rare breakout, like an early Google or Amazon, can return many times the original investment.

A government savings bond is essentially the opposite: a safe, low-return, government-backed loan with a guaranteed payout, nothing like the high-risk, high-reward nature of venture funding. A monthly bank loan simply requires fixed repayments regardless of how the business performs, whereas venture capital investors only profit if the company itself succeeds.

Venture capitalists typically expect the majority of their portfolio companies to fail entirely, and structure their funds so that just one or two spectacular winners out of dozens of bets can make the whole fund profitable.