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CMA Final · Entrepreneurship and Startup · The Entrepreneurial Ecosystem

Which statement about venture capital funds as part of the entrepreneurial ecosystem is most accurate?

Venture capital funds pool money from investors and take equity stakes in high-growth, high-risk ventures, expecting returns mainly from an eventual exit such as an IPO or sale. They are not fixed-interest lenders, government-security investors, or regulators of startups.

  1. AThey pool money from investors and take equity stakes in high-growth ventures, expecting returns mainly through an eventual exitCorrect
  2. BThey provide only short-term working capital loans at a fixed interest rate with no ownership
  3. CThey invest exclusively in government securities for capital safety
  4. DThey act as the statutory regulator of all startups

Explanation

Venture capital funds pool investor money and buy equity in high-growth, high-risk ventures, aiming to earn through exit by IPO, sale, or buyback. They are not fixed-interest lenders, they do not invest only in government securities, and they are not regulators of startups.

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