What type of investment is made in new or emerging companies perceived to have great profit potential?

Venture capital refers to a type of funding that is specifically directed toward new or emerging companies that have high growth potential. Investors provide this capital in exchange for equity in the business, hoping to achieve substantial returns on their investments as the company grows. This type of investment is essential for startups, as it allows them to access the resources needed to develop their products, expand operations, and build their market presence.

Venture capitalists often conduct thorough analyses of the companies they consider investing in, looking for innovative ideas and strong management teams. By investing in ventures at an early stage, these investors play a critical role in bringing new technologies and services to market.

This contrasts with other options where seed capital usually refers to the very initial funding to help start a business, angel financing typically involves individual investors providing funds, and equity investment is a broader term that encompasses various forms of investing where ownership shares are purchased.