Module: General Practice
Q179: Consider the following assertion and reason regarding Venture Capital (VC) financing.
Assertion (A): Venture Capital is considered "patient capital" but typically requires a defined "Exit Strategy" within 3 to 7 years.
Reason (R): VC funds are usually structured as closed-end funds with a fixed life cycle, and must return capital with profits to their Limited Partners.
Reason (R): VC funds are usually structured as closed-end funds with a fixed life cycle, and must return capital with profits to their Limited Partners.
✅ Correct Answer: A
A Venture Capital Fund collects money from investors (Limited Partners) for a fixed period (e.g., 10 years). Because the fund must close and return money to investors by year 10 (Reason), the Fund Manager is forced to sell their stake in the SME (Exit Strategy) within 3 to 7 years to realize the cash (Assertion). They cannot stay invested forever like a family owner.