What is the role of venture capital in the economy?

Venture capital plays a crucial role in the economy by providing funding to startups and small businesses that have high growth potential but may not have access to traditional sources of financing, such as bank loans. Venture capitalists invest in early-stage companies in exchange for equity, with the hope that the business will grow and generate substantial returns. This type of funding is essential for innovation, as it helps entrepreneurs turn their ideas into reality. Venture capital is particularly important in sectors such as technology, biotech, and clean energy, where substantial investments are needed to develop new products and services.