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 New York, venture capital financing is governed by a combination of state statutes and federal securities laws. State regulations, primarily under the New York State Department of Law, Securities Division, oversee the registration and anti-fraud provisions concerning the offer and sale of securities within the state. Federally, the Securities and Exchange Commission (SEC) regulates venture capital firms under the Securities Act of 1933 and the Securities Exchange Act of 1934, which require registration of securities and disclosure to potential investors. Additionally, the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts venture capital firms from certain investment adviser regulations, provided they meet specific requirements. Venture capital firms in New York must also comply with the Investment Advisers Act of 1940 if they provide advice about securities. When evaluating potential investments, venture capital firms conduct due diligence to assess factors such as management strength, market size, product-market fit, and competitive landscape. These evaluations are crucial as they seek to mitigate risks and ensure compliance with the applicable laws while aiming for substantial returns on their investments.