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 Tennessee, venture capital financing is governed by a combination of state statutes and federal securities laws. State statutes regulate the formation and operation of venture capital firms within the state, including compliance with the Tennessee Securities Act of 1980, which requires registration of securities offerings and adherence to anti-fraud provisions. Additionally, venture capital firms must comply with federal laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934, which mandate the registration of securities and periodic reporting for public investors. The Dodd-Frank Wall Street Reform and Consumer Protection Act also imposes regulations on venture capital firms, particularly those that are considered to be private fund advisers. When venture capital firms evaluate potential investments in Tennessee, they must also consider the state's business environment, including the availability of local talent, the regulatory landscape, and the presence of other investors and potential partners. It is advisable for startups seeking venture capital in Tennessee to consult with an attorney to ensure compliance with all relevant laws and to effectively navigate the investment process.