Venture-Backed
A company that has raised money from venture capital firms in exchange for equity.
Definition
A venture-backed company has sold shares to professional investors (venture capital firms) who provide capital in exchange for ownership stakes. These companies are expected to grow rapidly and eventually provide a return to investors through an IPO or acquisition. Being venture-backed means the company has external shareholders with specific rights and expectations.
Why it matters
If your company is venture-backed, your equity is subject to investor preferences and liquidation rights. The investors at the table influence major decisions, including when and how you might see a return on your stock options.
Example
Acme Corp raised a $20M Series A from Sequoia. Sequoia now owns 20% of the company. Acme is 'venture-backed' and must eventually deliver a return to Sequoia, either via IPO, acquisition, or secondary sale.