Question

Discuss how venture capitalists reduce their risk when investing in startup businesses. Justify your answer citing appropriate examples from Saudi Firms.

Answer 1

Venture Capitalist are the companies which provide seed capital assistance to the start ups. It is important for them to be extra attentive with respect of their money being subjected to the newly formed companies. Unlike the other financial institutions their money is at more risk as the money is given ti companies which are in their initial phase. They may or may not succeed. These kinds of companies secure their funds by securtization of their own assets. Also, by giving co-loans. They prefer to protect themselves by co-investing with other firms. 2 or more venture firms or groups are involved mostly for all the functions of the Venture capitalists. In Saudi Arabia firms usually secure themselves by investing in larger and much secure and stable firms for example like SoftBank Vision fund which invested in many American tech companies like Wag, Slack , Uber etc.