During the 1960s and 1970s, venture capital firms focused their investment activity primarily on starting and expanding companies.
More often than not, these companies were exploiting breakthroughs in electronic, medical, or data-processing technology.
Private equity firms organized limited partnerships to hold investments in which the investment professionals served as general partner and the investors, who were passive limited partners, put up the capital.
The compensation structure, still in use today, also emerged with limited partners paying an annual management fee of 1.0–2.5% and a carried interest typically representing up to 20% of the profits of the partnership.
Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake, in the companies they invest in.
Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful.In addition to angel investing, equity crowdfunding and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering.In exchange for the high risk that venture capitalists assume by investing in smaller and early-stage companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the companies' ownership (and consequently value).Former employees of ARDC went on to establish several prominent venture-capital firms including Greylock Partners (founded in 1965 by Charlie Waite and Bill Elfers) and Morgan, Holland Ventures, the predecessor of Flagship Ventures (founded in 1982 by James Morgan).ARDC continued investing until 1971, when Doriot retired.A startup may be defined as a project prospective converted into a process with an adequate assumed risk and investment. The Wallenberg family started Investor AB in 1916 in Sweden and were early investors in several Swedish companies such as ABB, Atlas Copco, Ericsson, etc. (History of venture capital) Before World War II (1939–1945), money orders (originally known as "development capital") remained primarily the domain of wealthy individuals and families. (and former assistant dean of Harvard Business School), founded the graduate business school INSEAD in 1957.With few exceptions, private equity in the first half of the 20th century was the domain of wealthy individuals and families. Only after 1945 did "true" private equity investments begin to emerge, notably with the founding of the first two venture capital firms in 1946: American Research and Development Corporation (ARDC) and J. Along with Ralph Flanders and Karl Compton (former president of MIT), Doriot founded ARDC in 1946 to encourage private-sector investment in businesses run by soldiers returning from World War II.Venture capitalists provide this financing in the interest of generating a return through an eventual "exit" event, such as the company selling shares to the public for the first time in an initial public offering (IPO) or doing a merger and acquisition (also known as a "trade sale") of the company.Alternatively, an exit may come about via the private equity secondary market.The growth of the venture capital industry was fueled by the emergence of the independent investment firms on Sand Hill Road, beginning with Kleiner Perkins and Sequoia Capital in 1972.Located in Menlo Park, CA, Kleiner Perkins, Sequoia and later venture capital firms would have access to the many semiconductor companies based in the Santa Clara Valley as well as early computer firms using their devices and programming and service companies.