Practicing Success

Target Exam

CUET

Subject

Entrepreneurship

Chapter

Resource Mobilisation

Question:

Arrange the following steps starting from early stage financing to the last stage of financing

A. Second round financing

B. Pre-start up and startup

C. Seed capital finance

D. Bridge finance

Choose the correct answer from the options given below.

Options:

A, B, C, D

D, B, A, C

C, B, A, D

A, C, D, B

Correct Answer:

C, B, A, D

Explanation:

The correct answer is option (3) - C, B, A, D

Entrepreneurs can typically seek venture capital to assist at any of the following four stages in the company's development.

1) Early stage financing: This stage includes-

(a) Seed capital(C) : It refers to the capital required by an entrepreneur for conducting research at precommercialization stage. During this stage, the entrepreneur has to convince the investor (VC) why his idea/product is worthwhile. The investor will investigate into the technical and the economical feasibility of the idea.

(b) Pre-start up and start up (B): If the idea/product/process is qualified for further investigation and/or investment, the process will go to the second stage; this is also called the start-up stage. A business plan is presented by the entrepreneur to the VC firm. A management team is being formed to run the venture. If the company has a board of directors, a person from the VC firms will take seats at the board of directors.

(c) Second-round financing (A) : At this stage, we presume that the idea has been transformed into a product and is being produced and sold. This is the first encounter with the rest of the market, the competitors and attempt is to squeeze in the market and get some market share from the competitors.

2) Last stage financing /bridge /pre-public stage (D): In general, this is the last stage of the venture capital financing process. The main goal of this stage is for the venture to go public so that investors can exit the venture with a profit commensurate with the risk they have taken.