Question

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

Answer 1

SOLUTION:-

* There are many ways by which Venture Capitalist reduces their risk of investment.

* Some of them are :-

1) Time diversification

2) Stage diversification

3) Sector diversification

4) Pro rata investing over time

5) Portfolio management

* Since it is going to be a newly starting business.

* Then the following of risk management ways are very important.

* The best example if a person wants to invest in new company, instesd of investing the entire fund required, he can do it on timely basis depending on the performance of the business.

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