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CMA Final · Entrepreneurship and Startup · The Entrepreneurial Ecosystem

A Pune-based founder has a working prototype and first few paying customers, and now needs about ₹40 lakh from wealthy individuals who also offer mentoring, in exchange for equity or convertible instruments. Which source of funds best fits this need?

Angel investors fit best. They are wealthy individuals who invest their own money in early-stage ventures, typically for equity or convertible instruments, and also offer mentoring. A public offer, institutional debentures, or a buyback are unsuitable or do not raise funds for a small early-stage startup.

  1. AAngel investorsCorrect
  2. BInitial public offer to retail investors
  3. CDebentures issued to mutual funds
  4. DBuyback of shares from existing holders

Explanation

Angel investors are high-net-worth individuals who invest their own money in early-stage startups, usually taking equity or convertible instruments and giving mentoring. A public offer is unrealistic at this stage, debentures to mutual funds suit established firms, and a buyback is a way of returning cash, not raising it.

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