Venture Capital

• What is the definition of venture capital?

  A type of finance from venture capitalists
• What type of firms typically receive venture capital?

  High-risk high-reward firms
• In which phases of the product lifecycle do high-risk firms usually operate?

  Research and development or introduction phase
• What is a characteristic of venture capital as a source of finance?

  It is a long-term external source
• What types of businesses commonly seek venture capital?

  Startup or new businesses, especially tech firms
• What are the pros of venture capital?

  • Makes expansion possible for high-risk firms
  • No repayment required as it is equity finance
  • Reduces personal risk for business founders
  • Provides expertise from venture capitalists
• What are the cons of venture capital?

  • Giving up a share of the business
  • Potential loss of control over decision-making
  • Venture capitalists seek to exit the deal for profit
• Why might banks be unwilling to lend to high-risk firms?

  High-risk firms require enormous investments
• What does giving up a share of the business mean for profits?

  Profits must be shared with venture capitalists
• What happens if a founder gives up 50% of their business shares?

  They may lose decision-making power
• What do venture capitalists ultimately want from their investment?

  To sell the business for profit
• How do venture capitalists typically exit their investment?

  Through an initial public offering (IPO)
• What is a common goal of venture capitalists when investing?

  To make a profit