Investors will put money to work in areas and fields they understand. The term venture capital has been criticized because entrepreneurs have felt that VC investors don't really take risks.

Afterall the entrepreneur has chosen to put her livelihood on the line, shouldn't the investor take some risk as well?

It becomes a game of relative expectations. An investor can put money into a tbill or stock, and can then sell the instrument if things go wrong. That is not the case with a private company. The secondary market for illiquid shares is essentially nonexistent.

Any investor who is interested in the company will put money directly into the business. That way the cash will be used to grow the investment and not bail someone out. So the investment is locked up with the business, not the entrepreneur.

And if the business goes belly up, the money is lost.

The investor is taking a risk just by entering into a private company investment. All the money is at risk and there is rarely any salvage value. It is possible, but unlikely to happen.

The more both sides understand about the other, the fewer failed expectations should exist.