What are the pitfalls of venture capital in Sharia terms

Guest Post: The Role of Venture Capital and Startup Investing in Islamic Finance

The essence of Islamic finance is that money should constantly be invested and working in the real economy to generate benefits for mankind. Money is not a commodity to be traded for profits. Rather profits are meant to be earned by active involvement and participation in the business risks.
Venture capital most clearly encapsulates this mandate. An entrepreneur with the skillset and drive to start a novel business venture is financed by an investor who believes in the entrepreneur’s vision and they share the risk – the investor putting his hard earned capital at risk, and the entrepreneur his time, effort and opportunity cost of pursuing a different career.