Venture capital is a type of financing in which investors invest their money in startup companies and small businesses which they believe have the long term potential growth.
*Necessity of Venture Capital
Venture capital is generally comes from angel investors, Investment banks and financial institutions. It cannot always be in the monetary form , an investor can provide expertise also in various areas such as how to advertise the product,how to tackle the competition,managerial and technical skills.
Maybe a small business or startup have the potential and expertise in their business area but they may lack the way to make their product advertise properly, so an investor can help them by funding the business as well as provide their expertise in advertising sector. As we all watched the show shark tank , the same thing is happening there startup companies and business came to investors for funding in exchange for equity stake in their companies and the investors help the business with funding and also providing their expertise.
*The reason for rapidly growing high value startups:
One reason is that venture capital funding rounds are getting larger.
The number of venture rounds worth at least $100 million has been steadily increasing since the second half of 2020.
There were 327 of these mega-deals in 2020 (just less than half of total VC deal volume).
And January of 2021 saw a record 102 venture-backed investment rounds worth $100 million or more.December of 2020 and January and February of 2021 all saw record funding compared to prior years.
And now we talk about Financial Markets. It’s a marketplace where trading of securities occur, including the stock , bond, derivative, forex markets. https://pitchbook.com/news/articles/2020-vc-in-charts
Financial market is an order driven/exchange traded market where trading occurs in regulated exchanges and otc market. Equities trade on exchanges and bonds traded on otc platform.
Financial markets plays a important role in facilitating the smooth business operation by allocating the resources and create liquidity for business and entrepreneurs.
*Role of venture capital & Financial Market
So,venture Capitalising and financial market both plays a vital role in business by raising a capital for meet the businesse’s long term and short term needs. Small and startup seek the venture capital to raise funds in exchange for stake in their business and big corporate businesses can raise the raise the capital via many options available in a financial markets
Peepalfarm. 