fund as a whole performs.

The amount of money invested in venture capital fluctuates substantially from year to year: as one example,

venture capital firms invested more than $48.3 billion in 2014, according to the National Venture Capital

Association. All early-stage investors realize that the majority of small startup businesses will never hit it big;

many of them will go out of business within a few months or years. They also know that getting in on the

ground floor of a few huge successes like a Netflix or an Amazon.com can make up for multiple failures.

Therefore, early-stage investors are willing to take large risks in order to position themselves to gain

substantial returns on their investment.
410 17 • Financial Markets

Profits as a Source of Financial Capital

If firms are earning profits (their revenues are greater than costs), they can choose to reinvest some of these
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