Venture capital financing (also known as venture capital funding or VC funding) is a form of financing for new or early-stage companies with high growth potential. Venture capital financing is offered by venture capital firms, which are professional investment firms that receive investment money from state pension funds, university endowment funds, and wealthy individuals. Venture capital firms seek multiple returns on their initial investment in a startup company. When evaluating companies to invest in, venture capital firms consider many factors, including (1) the strength of the management team; (2) the size of the market the company is in (total addressable market or TAM); (3) whether the company has proven there is demand in the market for its product or service (product-market fit); and (4) how easy or difficult it will be for other companies to compete with the company seeking venture capital financing.

In California, venture capital financing is a significant aspect of the startup ecosystem, particularly in regions such as Silicon Valley. Venture capital firms in California operate under both state and federal regulations. At the state level, the California Corporations Code provides the legal framework for venture capital investments, including the formation of venture capital funds, securities offerings, and investor qualifications. Additionally, the California Department of Business Oversight (DBO) oversees the enforcement of these regulations. Federally, the U.S. Securities and Exchange Commission (SEC) regulates venture capital firms under the Investment Advisers Act of 1940, and these firms must comply with SEC rules regarding registration, disclosure, and fiduciary responsibilities. The Dodd-Frank Wall Street Reform and Consumer Protection Act also exempts certain venture capital fund advisers from SEC registration requirements, provided they meet specific criteria. When venture capital firms evaluate potential investments in California, they consider factors such as the management team's strength, market size, product-market fit, and competitive landscape, as these elements are critical in determining the potential for a high return on investment.