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 Massachusetts, venture capital financing is a significant aspect of the startup ecosystem, providing essential funding to new and early-stage companies with strong growth prospects. While there is no specific state statute in Massachusetts that exclusively governs venture capital financing, such transactions are subject to general state laws regarding securities and business entities, as well as federal securities regulations. These laws ensure that both investors and companies engage in fair practices and that investors are provided with necessary information about the companies they invest in. The Massachusetts Securities Division oversees the enforcement of securities laws within the state. Additionally, venture capital firms must comply with federal regulations, such as those enforced by the Securities and Exchange Commission (SEC), including regulations related to accredited investors and the registration of securities offerings. When venture capital firms evaluate potential investments, they consider factors such as the management team's strength, market size, product-market fit, and competitive landscape, which are critical in determining the potential return on investment.