Editing Stock exchange (section)

===Raising capital for businesses===
Besides the borrowing capacity provided to an individual or firm by the [[banking system]], in the form of [[credit (finance)|credit]] or a loan, a stock exchange provides [[company|companies]] with the facility to raise [[Financial capital|capital]] for expansion through selling [[Share (finance)|shares]] to the investing public.<ref>{{cite journal |last=Gilson |first=Ronald J. |author2=Black, Bernard S. |year=1998 |title=Venture Capital and the Structure of Capital Markets: Banks Versus Stock Markets |journal=Journal of Financial Economics |volume=47 |doi=10.2139/ssrn.46909 |s2cid=154673504 |url=https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=2152&context=faculty_scholarship |access-date=16 December 2019 |archive-date=9 May 2023 |archive-url=https://web.archive.org/web/20230509225728/https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=2152&context=faculty_scholarship |url-status=live }}</ref>

[[Capital intensive]] companies, particularly [[high tech]] companies, typically need to raise high volumes of capital in their early stages. For this reason, the public market provided by the stock exchanges has been one of the most important funding sources for many capital intensive [[Startup company|startup]]s. In the 1990s and early 2000s, hi-tech listed companies experienced a boom and bust in the world's major stock exchanges.<ref>{{Citation |last=White |first=Eugene N. |title=Bubbles and Busts: The 1990s in the Mirror of the 1920s |date=2006-04-01 |type=Working Paper |url=https://www.nber.org/papers/w12138 |access-date=2024-08-19 |series=Working Paper Series |doi=10.3386/w12138}}</ref> Since then, it has been much more demanding for the high-tech entrepreneur to take his/her company public, unless either the company is already generating sales and earnings, or the company has demonstrated credibility and potential from successful outcomes: clinical trials, market research, patent registrations, etc. This shift in market expectations has led to an increased reliance on private equity and venture capital funding in the early stages of high-tech companies.<ref>{{Cite journal |last1=Yuji |first1=Honjo |last2=Koki |first2=Kurihara |date=2023 |title=Graduation of initial public offering firms from junior stock markets: Evidence from the tokyo stock exchange |url=https://doi.org/10.1017/S0305741017000637 |journal=Small Business Economics |volume=60 |issue=2 |pages=813–841|doi=10.1017/S0305741017000637 }}</ref> This is quite different from the situation of the 1990s to early-2000s period, when a number of companies (particularly Internet boom and biotechnology companies) [[Initial public offering|went public]] in the most prominent stock exchanges around the world in the total absence of sales, earnings, or any type of well-documented promising outcome. Though it is not as common, it still happens that highly speculative and financially unpredictable hi-tech startups are listed for the first time in a major stock exchange. Additionally, there are smaller, specialized entry markets for these kind of companies with [[stock index]]es tracking their performance (examples include the [[Alternext]], [[CAC Small]], [[SDAX]], [[TecDAX]]).

====Alternatives to stock exchanges for raising capital====
Alternative investment funds refer to funds that include '''hedge funds, venture capital, private equity, angel funds, real estate, commodities, collectibles, structured products''', etc. Alternative investment funds are an alternative to traditional investment options (stocks, bonds, and cash).

===== Research and Development limited partnerships =====
Companies have also raised significant amounts of capital through [[R&D]] [[limited partnership]]s. Tax law changes that were enacted in 1987 in the United States changed the tax deductibility of investments in R&D limited partnerships.<ref>{{Cite web |last1=Fullerton |first1=Don |last2=Gillette |first2=Robert |last3=Mackie |first3=James |title=Investment incentives under the tax reform act of 1986 |url=https://home.treasury.gov/system/files/131/Report-Compendium-1987-Part5.pdf}}</ref> In order for a partnership to be of interest to investors today, the [[cash on cash return]] must be high enough to entice investors.

=====Venture capital=====
A general source of capital for startup companies has been [[venture capital]]. This source remains largely available today, but the maximum statistical amount that the venture company firms in aggregate will invest in any one company is not limitless (it was approximately $15 million in 2001 for a biotechnology company).<ref>{{Cite web |last1=Da Rin |first1=Marco |last2=Hellmann |first2=Thomas F. |last3=Puri |first3=Manju |date=October 2011 |title=A survey of venture capital research |url=https://www.nber.org/system/files/working_papers/w17523/w17523.pdf |publisher=National Bureau of Economic Research}}</ref>

=====Corporate partners=====
Another alternative source of cash for a private company is a corporate partner, usually an established multinational company, which provides capital for the smaller company in return for marketing rights, patent rights, or equity. Corporate partnerships have been used successfully in a large number of cases.