The second option is for the VC to buy the business and run it himself, here again, covering his investment with recoverable assets.
In Romney's case with Bain Financial not all loans or aquisitions can be made profitable so the business will eventually be forced to shut down. Jobs will be lost, creditors will be left holding the bag, but Bain will at least be able to recover some of its investment. the good news? About 70% of Bain's investments were successful saving jobs and investor capital.
Now let's look at the biggest VC of all. Barack Obama. The primary difference here is he bails out businesses with taxpayer money instead of private funds. Examples? General Motors, Chrysler, Solyndra (and a few other "green" start-ups) and the loan to Brazil to help them with offshore drilling. How'd that work out for Obama and the taxpayers?
General Motors: 1100 local dealerships were closed, bond holders lost all their investments, the taxpayers are still owed money. The only ones who benefited were the unions. Obama virtually gave them ownership while the aforementioned lost out.
Solyndra: All employees lost their jobs, the taxpayers lost $500M+, and the Solyndra mansion is a laughing stock with a big "For Sale" sign on it. The only ones who benefited were Obama with huge campaign contributions and the Obama supporters (bundlers) who owned the company. (They walked away with millions).
Brazil: Obama loaned them upwards of $2B to facilitate their offshore drilling operations. (The biggest stockholder is George Soros). Who benefited? Obvious Brazil offshore drilling, Soros, and Obama's campaign war chest. Oh yeah, not only did the $2B come from US taxpayers, Obama further promised Brazil that the US would be their biggest customer. So we pay for the drilling and then pay again for the oil? Sweet deal if you can get it.
This is a very, very simplified explanation of venture capitalism, but it gives you something to think about.