Q.Venture capital is most typically provided to:
(A) Large, well-established companies with a long credit history
(B) New, innovative or high-growth-potential ventures that carry high risk
(C) The government, for public infrastructure projects
(D) Companies wishing to raise a short-term overdraft from a bank

Venture capital fills a specific gap in the financial system — funding ventures too risky or too new for conventional lenders to touch.

We evaluate each option against what venture capital is designed to do.

(A) Large, well-established companies with a long credit history can typically raise funds far more easily and cheaply through banks, debentures or a public issue of shares — they are not the target of venture capital, which exists precisely because such conventional avenues are NOT available to the firms it funds. This option is incorrect.

(B) New, innovative or high-growth-potential ventures that carry high risk are exactly the target of venture capital. Such ventures often lack the track record, collateral or credit history that a bank or bond investor would require, so a venture capitalist steps in, accepting the high risk in exchange for an equity stake and the prospect of a very large return if the venture succeeds. This matches correctly. …

Students sometimes think of venture capital as just another type of 'loan' — it is important to remember it is provided in exchange for equity (an ownership stake), not as a loan carrying interest, which …