A venture capital fund is a form of investment in which third party investors, such as investment banks and individuals, pool their money in order to invest in projects. Such projects are often high-risk projects and the business promoting the project may be unable to acquire traditional bank funding or unwilling to pay the interest rate associated with high-risk loans.
Venture capital funds may vary in structure, but generally speaking they have a 10-year fixed life. Investors commit to the fund and the fund will make a capital call, also known as a draw-down, in order to acquire the money necessary for the business. Investors who fail to participate in a capital call are penalized.