Venture capital is a form of private equity which funds newly established companies by checking their growth potential. Whereas Financial Market is a place where financial securities are traded between two parties at low transaction costs.
Venture Capital firms usually fund an early-stage company in stake of ownership or equity. Venture Capital generally took risk of financing startups in hope that the startup can be successful but hopes come with risk reality as startups face high uncertainty of success. Apart from fund requirements companies also go for venture capital if they require strong mentoring. There are six types of venture capital. • Seed funding • Start up capital • the First stage or Series A • Expansion Funding • Late-stage funding • Bridge Funding
There are examples of successful startups like Flipkart, Ola, slack, sugar cosmetics, etc.
Sugar cosmetics is most successful startup in India. The company raised $50mn from L Catterton which is the largest global consumer-focused private equity firm. And valuation of sugar cosmetics is $100M in 2021.
Financial Market as the name suggest is a marketplace which provides an avenue to buy and sell securities like shares, bonds, foreign exchange, and derivatives. A financial market is also called Wall Street in the USA. It is the most important part of the financial system. This market brings together those who need funds and who have surplus funds and helps borrowers to get funds either short term or long term required by the company. Examples – NYSE, NSE, LSE, etc. There are different types of markets to trade different financial instruments like – Stock market, Bond market, Derivative Market, Forex market, and Commodity market.
Financial markets are a broad concept and come under the financial system whereas venture capital is a different concept which helps in funding the company. But both come under the financial system.
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