Entrepreneurial Financing Quiz

What is one way young scientists and engineers finance their start-up projects?

Using their own time and effort (correct)
Borrowing from venture capitalists
Receiving grants from the government
Taking out loans from banks

Why are start-up enterprises more constrained compared to established businesses?

They do not generate large revenues (correct)
They have already gained significant market shares
They have proven management ability
They have access to abundant internal funds

What makes it difficult for start-ups to access lending or obtain affordable loans?

Large market shares already gained by the start-ups
High risk premia demanded by lenders (correct)
Proven management ability of the founders
Low interest rates offered by lenders

What specialized expertise do venture capitalists possess that allows them to evaluate market prospects of start-ups?

Industry-specific knowledge (C) Signup and view all the answers

What is the main reason a VC acquires equity in a startup instead of lending funds?

To gain stronger control over firm governance (A) Signup and view all the answers

What do venture capitalists aim for when they invest in multiple startups simultaneously?

Risk pooling and portfolio management (D) Signup and view all the answers

When do most venture capitalists plan to sell their shares in a startup?

After a few years for a capital gain (C) Signup and view all the answers

What is the role of business angels in startup investment?

Investing in early-stage startups using their own funds (D) Signup and view all the answers

How do venture capitalists contribute to startups apart from providing financial support?

Provide expertise in business administration and governance (B) Signup and view all the answers

In which region did the number of VC deals experience the largest growth in later VCs according to the text?

The U.S. (C) Signup and view all the answers

What type of financing involves external funds provided by lenders, with an expectation of being paid interest?

Debt financing (D) Signup and view all the answers

Why are startups more constrained compared to established businesses?

They do not generate (large) revenues (B) Signup and view all the answers

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 (B) Signup and view all the answers

What specialized expertise do venture capitalists possess that allows them to better evaluate market prospects of startups?

Industry-specific market evaluation skills (D) Signup and view all the answers

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 (B) Signup and view all the answers

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 (A) Signup and view all the answers

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 (C) Signup and view all the answers

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 (A) Signup and view all the answers

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 (D) Signup and view all the answers

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 (A) Signup and view all the answers