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CS Executive · Setting Up of Business, Industrial and Labour Laws · Startups and its Registration

Kabir's startup, DPIIT-recognised, is considering raising funds through a venture capital fund. Which statement about such funding is correct?

Venture capital funding typically involves taking an equity stake in a high-growth, usually unlisted, business. The investor accepts high risk and seeks returns on exit through a sale or public offer. It is not a fixed-repayment loan, and it is not restricted to listed companies.

  1. AThe fund typically takes an equity stake, bears high risk and expects returns on exitCorrect
  2. BThe fund must be repaid monthly with fixed interest irrespective of profits
  3. CThe fund acquires no ownership and never exits
  4. DThe fund is available only to listed companies

Explanation

Venture capital invests in high-growth unlisted businesses for equity or quasi-equity, accepting high risk and seeking returns through an exit such as a sale or IPO. Fixed monthly repayment describes ordinary debt. VC does not require listing and does plan an exit, so the other options are wrong.

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