Assertion : Venture capital is invested in exchange for an equity stake in the business.
Reasoning : Entrepreneurs should seek funding from this source after a careful evaluation.
Answer & explanation
Correct answer: option 2
A venture capital is invested in exchange for an equity stake in the business. Because of the strict requirements venture capitalists have for potential investments, entrepreneurs should seek funding from this source after a careful evaluation. Thus, entrepreneurs are expected to carry out detailed due diligence prior to seeking venture capital as a source of financing. As venture capitalists investments are illiquid, requiring extended time frame to harvest, an entrepreneur should carefully evaluate and analyse, the stage which he/she would require venture capitalist to assist in.