What is the primary source of funding for startups from venture capital firms?Bank loansEquity investmentCrowdfundingGovernment grants
Question
What is the primary source of funding for startups from venture capital firms?
- Bank loans
- Equity investment
- Crowdfunding
- Government grants
Solution
To determine the primary source of funding for startups from venture capital firms, it's essential to understand what venture capital entails and the options available to startups.
Venture capital primarily involves equity investment, where investors provide capital to startups in exchange for ownership equity in the company. This funding is crucial for startups, especially in their early stages, as they often lack the historical performance or collateral to secure bank loans.
While crowdfunding and government grants are viable funding options, they don't typically represent the primary mechanism through which venture capital firms operate. Therefore, the correct answer to the question is:
Equity investment.
Equity investment is the main method by which venture capital firms financially support startups, enabling them to grow and scale their businesses in exchange for an ownership stake in return.
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