PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
Question
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Chapter 15, Problem 7PS

a)

Summary Introduction

To discuss: True or false of following situations based on venture capital.

b)

Summary Introduction

To discuss: True or false of following situations based on venture capital.

c)

Summary Introduction

To discuss: True or false of following situations based on venture capital.

d)

Summary Introduction

To discuss: True or false of following situations based on venture capital.

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Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies that can't raise funds through other means. In exchange for this financing, VCs receive a share of a company's equity, and the founders of the firm typically stay on and continue to manage the company. A VC firm wants management to focus on improving while the managers may also act to increase VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company's board. Management ownership serves to the alignment of the incentives of managers with the incentives of owners.
Which of the following statements is NOT true? Venture capitalists’ sole function is to provide financing for new firms. Modern venture capital firms tend to specialize in a specific line of business, such as hospitality, food manufacturing, or medical devices. Venture capitalists bear a substantial amount of risk when they fund a new business. A significant number of venture capital firms focus on high-technology investments.
An investor provides an entrepreneurial firm with the capital that it needs to grow. over and above providing the capital, in what other ways can the investor add value to the firm? What are the possible downsides of having a venture capitalist as an investor in the business?
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