State any six features of Venture Capital Finance.

Question

Accepted Answer

Six features of venture capital finance are:

1. **Equity Finance:** It is basically equity finance in relatively new companies. Venture capital is invested in exchange for an equity stake in the business.

2. **Long-term Investment:** It is a long-term investment in growth-oriented small or medium firms, usually occurring over a five-year period.

3. **Business Skills Provided:** Venture capitalists not only provide capital but also business skills to investee firms. They offer proactive advice, guidance, industry connections, and mentoring.

4. **High Risk-Return Spectrum:** Venture capital involves a high risk-return spectrum. Since the investments are in early-stage companies with untested technology, the risk is very high, but so is the potential for returns.

5. **Subset of Private Equity:** It is a subset of private equity. Venture capital is a professionally managed pool of equity capital.

6. **Continuous Involvement:** Venture capital institutions have continuous involvement in the business after making the investment. They monitor the company's progress and provide ongoing support.