Question

32. The venture capital market place has shifted substantially since 1985. One of the major shifts is in the sources of venture capital financing. During the period 1985-1990, what was the major source of venture capital financing?

A. Institutional investors.

B. Intermediaries.

C. Pension funds.

D. Endowments.

33. Which of the following describes the J-Curve effect in the life cycle of the venture capital firm?

A. Profits in the early years followed by losses in the later years.

B. Flat revenues in the early years followed by profits in the later years.

C. Losses in the early years followed by profits in the later years.

D. Moderate profits in the early years followed large profits in the later years.

Answer 1

Q 32) Answer to this question is Option C: Pension funds.

Over the period 1985 – 1990, the main source of venture capital financing was pension funds because of the revisions to the prudent person standard for pension fund investing which happened in the year 1979.

Q33) Answer to this ques is: Option C. Losses in the early years followed by profits in the later years.

J-Curve effect in the life cycle of VC firm is a graphic representation showing the typical trend in the life cycle of venture capital firms. It letter J is formed during the same depicting negative returns in the early stage owing to expenses like R&D, Product design. However, returns tend to increase over the years(mid-stage) as proof of concept gets into real production. The returns for the investors of VC are maximum at the later stage signifying 'J curve effect'