Where does venture capital money come from?

Q. Where do venture capital firms get the money that they invest in startup companies?

Adam answers:

Venture capital money may come from wealthy individuals, companies, and other institutions such as pension funds, university endowment funds, insurance companies, or other organizations looking for big returns and/or diversification within their investment portfolios.

The money in a venture capital fund is pooled and invested in startup companies by the managers of the venture capital fund — these people are known as venture capitalists or “VCs” for short. Venture capital firms will start a new fund by raising a certain amount of money from the groups mentioned above, then invest it, usually with an end date that establishes when that particular fund will cease to exist and its profits will be returned to its investors.