Question

Venture capital is available for

• A. Very risky units
• B. Technical units
• C. Organisational units
• D. All of these

Hint:

Remember the "high risk, high return" principle of venture capital. VCs are not just lenders; they are partners who take on significant risk in the hope of a large payoff if the startup succeeds.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The question asks for the type of businesses for which venture capital is typically provided.
Step 2: Key Concept:
Venture Capital is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth.
Step 3: Detailed Explanation:
- Venture capitalists invest in these early-stage companies in exchange for an equity stake. They understand that these ventures are inherently high-risk.
- These startups often lack a track record, have unproven technologies or business models, and may not have access to traditional sources of funding like bank loans.
- Therefore, venture capital is specifically designed for businesses that are considered very risky but also offer the potential for exceptionally high returns.
- While many of these risky units might be in the technology sector (technical units), the defining characteristic is the high risk and high growth potential, not the sector itself. Venture capital can be provided to any type of unit (organizational, technical, etc.) as long as it fits the risk-return profile. The most encompassing and accurate description is 'very risky units'.
Step 4: Final Answer
Venture capital is primarily available for very risky ventures, such as startups and early-stage companies, that have high growth potential.