9.1c Ventures

Question 1

Corporate venturing definition

Answer 1

An agreement between two companies that will see an established company invest in a new company that it believes will have high growth potential

Question 2

Venture capitalists/business angels definition

Answer 2

An individual or small group that invests in companies

Question 3

What is an alternative source of finance for ventures?

Answer 3

Merchant banks

Question 4

Examples of corporate venturing

Answer 4

• Unilever Ventures

- Google Ventures

Question 5

What happens in corporate venturing?

Answer 5

The bigger business will buy shares in the business (an equity stake) and become very active in the decision making process

Question 6

Why do bigger companies invest in smaller companies?

Answer 6

• To benefit financially from their future success
• Part of a strategy to move into a new industry or market
• To gain access to their intellectual property

Question 7

Why do smaller companies welcome investments?

Answer 7

They can grow by gaining access to:

• Additional funding
• Expertise
• Operation processes

Question 8

Advantages of venture capital:

Answer 8

• Venturists can have option of not taking dividends they are entitled to in order to keep more money in the business
• Comes with knowledge and contacts
• Used by high-risk start-ups who would struggle to get funding elsewhere

Question 9

Disadvantages of venture capital:

Answer 9

• Smaller business has to give up some ownership

- The larger business might have too much influence on the smaller business