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 Connecticut, venture capital financing is governed by a combination of state statutes and federal securities laws. State statutes may include general business corporation laws that outline the formation, operation, and dissolution of corporations, which are often the type of entities seeking venture capital. Additionally, Connecticut has specific laws that govern securities, found in the Connecticut Uniform Securities Act, which regulate the offer and sale of securities within the state to protect investors and maintain fair and equitable business practices. Federal law, particularly the Securities Act of 1933 and the Securities Exchange Act of 1934, also applies to venture capital transactions, as these laws regulate the offer and sale of securities nationwide. These federal laws require, among other things, proper registration of securities or an applicable exemption from registration, and they mandate disclosures to investors. Venture capital firms must also consider the implications of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups (JOBS) Act, which can affect fundraising and investment practices. When venture capital firms evaluate potential investments in Connecticut, they must comply with these regulations while considering the business aspects such as the strength of the management team, market size, product-market fit, and competitive landscape.