venture capital

In contrast to an entrepreneur, a venture capitalist is a professional money manager who makes risk investments from a ..... of capital to obtain a high rate of return.

• pool

• portfolio

• stock

• stream

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CCSS.RI.9-10.4

CCSS.RI.9-10.4

CCSS.RI.11-12.4

CCSS.RI.7.4

CCSS.RI.8.4

In a venture capital deal, ________________ownership chunks of a company are created and sold to ____________________ investors

• very small / many

• large / a few

• substantial / all

• small / most of the

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CCSS.RI.11-12.5

CCSS.RI.9-10.5

CCSS.RI.6.5

CCSS.RI.7.5

CCSS.RI.8.5

venture capital is not just about money

• it also provides high returns on investment

• it ensures bank secrecy

• it provides companies and entrepreneurs with technical and managerial advice

• it allows the venture capitalist to have a say in the company decisions as investors get equity in the company

Venture capital is invested in

• late stage and bigger firms

• early stage firms with short-term growth potential

• early stage firms which do not plan for growth

• early stage firms with long-term growth potential

Why do firms need VC (venture capital)?

• because they're in their early stage and need cash to invest

• because they are too small or risky for banks to give them loans

• because they do not have access to capital markets

• because most start up founders don't know how to approach traditional banks

VC capitalists can earn

• a portion of the firm's equity

• high returns

• small returns but influence on the company direction

• high returns, a chunk of the company's equity as well as influence on the company decisions

a company with a limited operating history means that

• it is no more than 2 years old

• it was set up at least 10 years before

• it is generally limited in its operations because it is not innovative enough

• it has limited start-up costs

True or false : venture capitalists cannot pull out the company until the company has gone public

• true

• false

Why can big VC firms risk losing money in their deals?

• because they will get high ROI

• because investing in a successful start-up will make up for their loss

• because they can be covered by the big banks

• because sometimes you win, sometimes you lose

In a typical VC portfolio, most of the returns are from 20% of the investments. This means that

• Statistically, if a VC makes ten investments, two will be winners and create most of the gains in the fund

• 1 in 5 VC funds will succeed in its investments

• 95% of investments made by venture capitalists fail, but 5 % make such spectacular returns that they subsidize the failures

• the VC will always have one fifth of the votes in the companies' decisions

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CCSS.6.SP.B.5C

CCSS.HSS.ID.A.3