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18 Oct 2018

You work for a venture capital firm and are approached to finance a new high-tech start-up. While you believe in the business idea, you also believe it is very risky. What strategies can help to mitigate the risk to your firm? Explain how these measures would work.

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Collen Von
Collen VonLv2
20 Oct 2018

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Related questions

1. In contrast to venture capital, commercial banks are notoriously conservative in lending to new business firms. What makes venture capitalists more eager to finance risky projects?

2. Suppose you are very favorably considering a venture that has the following risk-return profile.

Probability Return

1/3 -10

1/3 0

1/3 +13

Since the expected return = 1.0, you give it a thumbs up.

But the venture capitalist who will fund the venture requires that he receive 25% of any positive profit. How would that change your verdict??

Short answers please, original work only. Thank you.

As a recent graduate of UB, you were hired an analyst in the finance department of Sun and Sea Investment Company., a new firm in a profitable but risky high-tech business. Several growth opportunities have presented themselves recently, but the company doesn't have enough capital to undertake them. Stock prices are down, so it doesn't make sense to try to raise new capital through the sale of equity. The company's bank would not lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow Flyover to borrow. Write a brief memo summarizing your ideas.

1 - What are the key reasons for most business failures?

2 - What are some ways to mitigate these risks?

3 - Sometimes early adopters pay a hefty price to be one of the first to own a tool or technology. Can you think of an example where the price of a good or service, when introduced, was very high, but still many consumers still wanted to be one of the first to buy it?

You must Cite all your work.

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