Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies that can't raise funds through other means. In exchange for this financing, VCs receive a share of a company's equity, and the founders of the firm typically stay on and continue to manage the company. The incentive conflict is between the managers, who are the and venture capitalists, who are the VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company's board. Management ownership serves to the alignment of the incentives of managers with the incentives of owners.