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Question 28

What does venture capital mean?

AOptions

A) A short-term capital provided to industries

B) A long-term start-up capital provided to new entrepreneurs

C) Funds provided to industries at times of incurring losses

D) Funds provided for replacement and renovation of industries

BSolution

Venture capital (VC) is a form of private equity financing that is provided by venture capital firms or funds to start-ups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth. Venture capitalists typically invest in companies that are new or have limited operating history but are expected to generate significant returns, usually in exchange for an equity stake. This capital is characterized by its long-term nature, aiming to support the initial growth, development, and expansion phases of new, often innovative, businesses, thereby fostering entrepreneurship.

CStrategy

When encountering questions about economic or financial terms, focus on understanding the core definition, the purpose, and the typical characteristics of the concept. Differentiate between similar-sounding terms by their key attributes (e.g., short-term vs. long-term, type of recipient, nature of financing).

DSyllabus Analysis

This question pertains to Indian Economy, specifically Financial Markets, Capital Markets, and Entrepreneurship.

EQuestion Analysis

Easy. This is a direct definition-based question about a commonly used financial term.