20 Questions
What is one way young scientists and engineers finance their start-up projects?
Using their own time and effort
Why are start-up enterprises more constrained compared to established businesses?
They do not generate large revenues
What makes it difficult for start-ups to access lending or obtain affordable loans?
High risk premia demanded by lenders
What specialized expertise do venture capitalists possess that allows them to evaluate market prospects of start-ups?
Industry-specific knowledge
What is the main reason a VC acquires equity in a startup instead of lending funds?
To gain stronger control over firm governance
What do venture capitalists aim for when they invest in multiple startups simultaneously?
Risk pooling and portfolio management
When do most venture capitalists plan to sell their shares in a startup?
After a few years for a capital gain
What is the role of business angels in startup investment?
Investing in early-stage startups using their own funds
How do venture capitalists contribute to startups apart from providing financial support?
Provide expertise in business administration and governance
In which region did the number of VC deals experience the largest growth in later VCs according to the text?
The U.S.
What type of financing involves external funds provided by lenders, with an expectation of being paid interest?
Debt financing
Why are startups more constrained compared to established businesses?
They do not generate (large) revenues
In what way do young scientists and engineers who found a start-up and work on a project mostly using their own time and effort finance their venture?
Opportunity cost financing
What specialized expertise do venture capitalists possess that allows them to better evaluate market prospects of startups?
Industry-specific market evaluation skills
What is a primary reason for venture capitalists to acquire equity in a startup instead of lending funds?
To gain stronger control over firm governance and participate in potential value increases
What is the main role of business angels in startup investment?
To invest in startups at the very early stages when the break-even point is not reached
In venture capital financing, what is the significance of VCs borrowing money at a significantly lower interest?
It allows them to act as an important financial intermediary in an investment area not covered by other intermediaries
What is the main reason why start-up enterprises find it difficult to access lending or obtain affordable loans?
The high-risk nature of their businesses and the lack of established credit history
Apart from providing financial support, how do venture capitalists contribute to startups?
By providing sector-specific knowledge, stock exchange market know-how, and business administration expertise
What makes VCs able to borrow money at a significantly lower interest compared to the individual startups they are financing?
Their pooling of multiple high-risk investments
Test your knowledge about financing for innovative efforts, including external funds, equity financing, and internal funds. Explore the different ways young scientists and engineers can invest in their start-ups, including the opportunity cost of not working for a wage.
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