The sources of capital which are available to startups are limited. Entrepreneurs usually lack the capital required to realize their ideas and must therefore seek outside financing. Capitalists, on the other hand (mutual funds, pension funds, trusts, etc.) lack the time and know-how required to make direct investments in new companies. Traditional sources of finance, such as bank loans or raising capital from the public, are not accessible to new companies. It was the meeting-point between the need to raise capital and the desire to achieve high returns from investing in private companies which led to the creation of venture capital funds. They serve both as an investment-management vehicle for the persons who invest in them (see the section on venture capital funds and their investors), and as financiers and added-value providers for the companies in which they invest (see the section on venture capital funds and their portfolios). The term venture capital fund refers mainly to an entity which raises capital for investments in private companies on an equity basis and which is managed professionally by a management company. This chapter describes their background, history, characteristics, and main methods of operation.