Final answer:
The claim that managers are more likely to work hard if they receive a steady salary from venture capitalists is false. Venture capitalists focus on investment growth and have mechanisms to monitor management effectiveness, making steady salaries for managers less of a focus for them.
Step-by-step explanation:
The assertion that venture capital companies believe managers are more likely to work hard if they can be assured of a good steady salary is false. Venture capitalists are more concerned about the growth prospects and potential returns on their investments rather than providing a steady income to managers. Instead, venture capitalists often own a substantial portion of the firm they invest in and are closely involved in its management and strategy, which allows them to monitor and reduce the problems associated with imperfect information regarding how well the company is run.
A firm that progresses beyond its initial stages and is on the verge of generating profits becomes more transparent in terms of its products, revenues, costs, and profits, making it less crucial for investors to know the individual managers personally. At this stage, other outside investors, such as bondholders and shareholders, who do not have direct contact with the management, may become more willing to contribute financial capital to the firm. This is because the availability of widely available information about the company's operations makes the personal knowledge of the managers less significant.