Purpose – The purpose of this paper is to focus on the possibilities and limitations of venture capital formation in Bosnia and Herzegovina and Macedonia where there has been a lack of success and benefits of small- and medium-sized enterprises (SMEs) from this type of financing. Design/methodology/approach – The paper provides a rationale for specific methodological choices and justifies its choice. Both quantitative and qualitative methods were employed. The methods section (research design) explains the entry criteria for the study population, specific imaging techniques and methods of data analysis. Findings – Venture capital invest in companies in the beginning to achieve an above average return on investment. Unfortunately, there are no officially registered venture capital funds in Bosnia and Herzegovina. For the venture capital funds to operate, it is necessary to adopt regulations governing this area, to create a favorable tax system and introduce a cash basis for VAT calculation for SMEs. The majority of respondents in the research believe that in the establishment of venture capital funds would provide one of the greatest supports by the governments of these countries, analyzing the economic situation in these countries, it is apparent that there is an under-developed legal and tax system, which does not support SMEs. In order to attract foreign and domestic investors, and form venture capital funds, it is necessary to create a favorable business environment. Originality/value – The paper contains novel information and insight into VC funds in two transition economies of Bosnia and Herzegovina and Macedonia.