Correct Answer: Because it allows the venture capitalist to participate in the growth of the company as the value grows
Explanation:
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More Venture Capital MCQ Questions
Why don't the investors in venture capital firms invest directly in the target companies rather than investing in a venture capital firm as an intermediary?
Why does corporate structure matter when the investment is for equity?
Why would specialized consultants be hired for the final stage of the due diligence process?
Why is the venture capitalist in charge of the drawing up of the term sheet and not the target company?
Why would a merger with another company also be considered an investment exit?
What is the term sheet used for once it is agreed upon and signed?
What is a 'first round' investment?
How much in funding, in general, will an investor want to invest?
What options does a venture capitalist have when holding convertible debt?
What is meant by 'exit strategy'?