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CS Professional · Strategic Management and Corporate Finance · Sources of Corporate Funding

In the typical life cycle of a venture capital investment, which sequence correctly represents the stages from the investor's viewpoint?

The correct sequence is deal sourcing and screening, then due diligence and investment, then monitoring and value addition, and finally exit. A fund cannot invest before finding and evaluating a proposal, and returns are realised only at the end through an exit.

  1. AExit, deal sourcing, investment, monitoring
  2. BDeal sourcing and screening, due diligence and investment, monitoring and value addition, exitCorrect
  3. CInvestment, deal sourcing, exit, monitoring
  4. DMonitoring, due diligence, deal sourcing, exit

Explanation

A venture capital fund first finds and screens proposals, then conducts due diligence and invests, then monitors and adds value to the investee, and finally realises returns through an exit. The other orders place exit or investment before sourcing, which is illogical.

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