What is VC money used for? (Check all that apply)

Question

What is VC money used for?  (Check all that apply)

BlackTom AI · Accepted Answer

When evaluating what VC money is used for, it helps to distinguish the typical roles of venture capital in the funding ecosystem.
Option 1: 'Early capital for private equity strategies' — This is not accurate. Venture capital funds typically invest in early-stage or high-growth companies, not as part of private equity strategies that focus more on later-stage buyouts and restructuring. The phrasing also conflates venture capital with private equity, which are distinct parts of the investment world. 
Option 2: 'Venture funds to cash out family members' — This is incorrect. VC funding is generally aimed at providing growth capital to companies, not mechanisms for personal cash outs for family members. It describes an improper use that does not reflect the canonical purpose of VC money. 
Option 3: 'Source of capital for start-ups' — This is correct. A core function of VC money is to supply early and growth-stage capital to start-ups that have high growth potential but may not yet have access to large traditional financing. 
Option 4: 'Source of capital for companies to scale' — This is also correct. As startups evolve, they need funds to scale product, market reach, and operations; venture capital provides this scaling capital to help companies grow rapidly. 
In summary, VC money is primarily used to fund the growth trajectory of startups from early stages through scaling phases, while the other described uses do not align with the standard purposes of venture capital funding.

BUSFIN 4236 SP2025 (5326) Capital Markets - FINAL EXAM- Requires Respondus LockDown Browser

What is VC money used for? (Check all that apply)

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