Question

An important part of obtaining venture capital funding is going through __________ diligence, which refers to the process of investigating the merits of a potential venture and verifying the key claims made by the business.

a) responsible
b) prior
c) appropriate
d) fit
e) due

Answer 1

The correct answer is due diligence, which is a comprehensive evaluation of a business by potential investors before funding. This process reduces information asymmetry and involves in-depth analysis of the company's operations and financial health.

Step-by-step explanation:

An important part of obtaining venture capital funding is going through due diligence, which refers to the process of investigating the merits of a potential venture and verifying the key claims made by the business. Due diligence allows investors, such as angel investors and venture capitalists, to overcome the imperfect information by closely examining the business plan, assessing the commitment of the founders, and ensuring the firm is being well run. Founders who invest their own money show belief in their venture, and early-stage investors provide valuable advice while evaluating the potential for growth and success.