Test: Entrepreneurial Sustainability - 2 - B Com MCQ

The goal of business incubation programs is to help create and grow young businesses. These programs provide support and resources to entrepreneurs, including physical space, capital, coaching, common services, and networking connections. The aim is to accelerate the growth and success of these entrepreneurial companies. Additional Fact: Business incubation programs are often sponsored by private companies or municipal entities and public institutions, such as colleges and universities. There are approximately 900 business incubators nationwide, according to the National Business Incubation Association.

Owners of startup businesses receive several benefits from incubators. These include below-market rates for office and manufacturing space, advice and expertise in developing business and marketing plans, and sharing of expenses with other startup companies. Incubators aim to reduce overhead and operational costs for these businesses and provide necessary support for their growth and success. Additional Fact: Companies typically spend an average of two years in a business incubator. During this time, they can benefit from the resources and services provided by the incubator, which can significantly contribute to their development and success.

An angel investor is an individual who invests his or her own money in an entrepreneurial company. Unlike institutional venture capitalists who invest other people's money, angel investors use their personal funds to support and finance young businesses. Angel investing has become increasingly popular as individuals seek better returns on their money than traditional investment vehicles. Additional Fact: Contrary to popular belief, most angel investors are not millionaires. Typically, they earn between $60,000 and $100,000 a year. This means there are likely to be plenty of angel investors in local communities who can provide support and funding for startup businesses.

Angel investors are motivated by both the potential for high financial returns and the enjoyment of helping a young business succeed. While financial gains are a common motivation, many angel investors, especially those who are current or former entrepreneurs, are also driven by the satisfaction of supporting and nurturing the growth of a promising startup. They are more likely to be persuaded by an entrepreneur's drive to succeed, persistence, and mental discipline. Additional Fact: Angels can be classified into two groups: affiliated and nonaffiliated. Affiliated angels have some sort of contact with the entrepreneur or the business, while nonaffiliated angels have no connection. It is often beneficial to start the investor search by seeking affiliated angels who are already familiar with the entrepreneur or the business and have a vested interest in the relationship.

Venture capital is money for new, young, and/or small businesses that typically have little or no access to capital markets. It is a form of investment that fosters entrepreneurship, especially in high-tech and innovative industries. Venture capital firms pool money from various investors and use it to acquire stakes in these businesses, providing them with the necessary funds for growth and development. Additional Fact: Venture capital firms usually take an active management role in the companies they invest in, often acquiring board seats and influencing decision-making. They provide not only financial support but also crucial managerial or technical expertise, particularly in areas where the entrepreneur may need additional guidance.

The ultimate goal of venture capital firms is to make the company worth more than before and produce a return for investors. They seek opportunities in which their investments will grow rapidly, leading to a successful exit within a certain timeframe. This goal drives their decision-making process, as they carefully select companies that have the potential for significant growth and profitability. Additional Fact: Venture capital firms review hundreds of business plans, meet entrepreneurs and company managers, and perform extensive due diligence on investment candidates before making investment decisions. They are highly selective and seek opportunities that align with their goal of generating substantial returns for their investors.

The primary characteristic of private equity funds is that they invest in established businesses in need of revitalization. Private equity funds are often associated with mature, revenue-generating companies in industries such as manufacturing, service businesses, and franchises. These funds provide capital and expertise to help these businesses undergo improvements and become worth more. Additional Fact: Private equity funds may use various strategies, such as buying out a company outright, providing expansion capital, or offering recapitalization for struggling businesses. They aim to make the company more valuable and profitable, often making tough choices and implementing changes to achieve this goal.

A leveraged buyout is a strategy in which a private equity fund borrows additional money to enhance its buying power. The fund uses the assets of the acquisition target as collateral to secure the additional funds. This strategy allows the fund to acquire a larger stake in the company and potentially increase its potential returns. Additional Fact: Leveraged buyouts can involve significant financial risk, as the fund must rely on the success and profitability of the acquired company to repay the borrowed funds. However, if the investment is successful, the fund can generate substantial returns on its investment.

In the private equity context, a search fund refers to a fund that supports an entrepreneur in finding and acquiring a suitable business to run. Instead of pooling money to invest directly in a business, the investors provide funding to an entrepreneur who searches for the best business opportunity. If the entrepreneur finds a suitable target, the investors then contribute the necessary funds to make the purchase and support the future CEO. Additional Fact: Search funds have gained popularity as a way to combine entrepreneurship with investment. They provide an opportunity for entrepreneurs to acquire and lead businesses while also benefiting from the financial backing and expertise of investors.

The primary purpose of private equity funds is to acquire stakes in established businesses for revitalization or expansion. These funds seek mature, revenue-generating companies that can benefit from capital infusion, strategic improvements, or new management. The goal is to enhance the value and profitability of these businesses and generate significant returns for the private equity fund and its investors. Additional Fact: Private equity funds often take an active management role in the companies they invest in, providing expertise, guidance, and resources to drive growth and success. They may implement changes, make tough choices, and work closely with the management team to achieve the desired outcomes.