MCQ
Venture Capital MCQ - Practice Questions with Answers
Solve 92 Venture Capital questions for RAS/RPSC preparation.
Practice questions
Q1Consider the following statements about angel funds and angel investors under SEBI's AIF framework: 1. An angel fund is a sub-category of Venture Capital Fund under Category I AIF. 2. An individual angel investor must have net tangible assets of at least one crore rupees, excluding the value of the principal residence. 3. A body corporate can qualify as an angel investor if it has a net worth of at least ten crore rupees. Which of the statements given above are correct?
Statement 1 is correct because SEBI defines an angel fund as a sub-category of Venture Capital Fund under Category I AIF. Statement 2 is incorrect because the individual net tangible asset threshold is at least two crore rupees, not one crore. Statement 3 is correct because the body corporate threshold is at least ten crore rupees.
Q2Consider the following statements about tenure, leverage and concentration limits for AIFs: 1. Category I and Category II AIFs must be close-ended and have a minimum tenure of three years. 2. Category III AIFs may be open-ended or close-ended. 3. Category I AIFs can borrow for temporary funding needs only within the limits of 30 days, four occasions in a year and 10 percent of corpus. 4. Category I and II AIFs may invest up to 50 percent of their corpus in one investee company. Which of the statements given above are correct?
Statements 1 and 2 are true under the tenure rule. Statement 3 is true: Category I AIF borrowing is allowed only for temporary funding within the stated 30-day, four-occasion and 10 percent limits. Statement 4 is false: the one-investee-company limit for Category I and II AIFs is 25 percent, not 50 percent.
Q3Consider the following statements about exit routes for startup investors: 1. Venture capital and private equity funds must exit all their investments before the end of the fund's life. 2. An IPO is the first time that the stock of a private company is offered to the public. 3. Founders are never allowed to buy back shares from fund investors. Which of the statements given above are correct?
Statements 1 and 2 are correct. Startup India says venture capital and private equity funds must exit before the end of the fund's life, and defines IPO as first public offering of a private company's stock. Statement 3 is incorrect because founders may buy back their shares in specified circumstances.
Q4Consider the following statements about venture capital and fund-of-funds channels in India: 1. The Fund of Funds for Startups directly invests in individual startups instead of providing capital to AIFs. 2. Category III AIFs are prohibited from employing leverage through derivatives. 3. A venture capital fund primarily invests in listed government securities rather than start-ups or early-stage undertakings. Which of the statements given above are correct?
All three statements are incorrect. Startup India's funding guide says FFS does not invest directly in startups but routes capital through SEBI-registered AIFs. SEBI associates leverage through derivatives with Category III AIFs. SEBI also defines a venture capital fund by its investment in unlisted securities of start-ups and early-stage venture capital undertakings, not listed government securities.
Q51. Startup India FoF 2.0 is implemented through commitments to SEBI-registered Category I and II AIFs. 2. These AIFs will invest in DPIIT-recognised startups. 3. The scheme is implemented only through Category III AIFs trading in listed derivatives. Which of the statements given above are correct?
Statements 1 and 2 are true: the implementation route is commitments to Category I and II SEBI-registered AIFs that invest in DPIIT-recognised startups. Statement 3 is false because Category III derivative-trading funds are not the stated route.
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6Consider the following statements about angel funds under SEBI's AIF framework: 1. Angel Funds were provided as a sub-category under Category I Venture Capital Funds. 2. Angel Funds were required to have a corpus of at least Rs. 10 crore. 3. Investment in an investee company by an Angel Fund had to be between Rs. 50 lakh and Rs. 5 crore. Which of the statements given above are correct?
7Consider the following statements about corpus, investor count and fundraising restrictions for AIFs: 1. A scheme of an AIF other than an angel fund shall have a corpus of at least ₹20 crore. 2. An angel fund shall have a corpus of at least ₹10 crore. 3. No scheme of an AIF other than an angel fund shall have more than 1000 investors. 4. AIFs can freely make invitation to the public at large to subscribe their units. Which of the statements given above are correct?
8Consider the following statements about Startup India Fund of Funds 2.0's policy focus: 1. One objective is to strengthen India's domestic venture capital base, particularly smaller funds. 2. The scheme is designed to address high-risk capital gaps in priority areas. 3. Its national-reach feature confines investment only to major metros. Which of the statements given above are correct?
9Consider the following statements about the older Fund of Funds for Startups and related startup-support instruments: 1. The Fund of Funds for Startups is a flagship DPIIT initiative under the Startup India Action Plan and is managed by SIDBI. 2. The scheme supports SEBI-registered AIFs, which in turn invest in startups. 3. The Credit Guarantee Scheme for Startups is operationalized by SIDBI as the venture-capital fund manager. 4. The Startup India Investor Connect Portal was developed in collaboration with SIDBI and connects startups with venture capital funds and investors. Which of the statements given above are correct?
10Consider the following statements about Angel Fund investment safeguards in the 2013 SEBI release: 1. Angel Funds had to invest only in venture capital undertakings not more than 3 years old. 2. Such undertakings had to have turnover not exceeding ₹25 crore. 3. Such undertakings could be promoted by an industrial group with group turnover above ₹300 crore. 4. Investment by an Angel Fund in an investee company was required to be held for at least 3 years. Which of the statements given above are correct?
11Consider the following statements about exit and investor returns in startup financing: 1. Startup India states that investors put capital in exchange for equity. 2. If the startup fails, investors lose the money they have invested. 3. Venture capital and private equity funds must exit all investments before the end of the fund's life. 4. Buybacks are listed by Startup India as an exit route for founders and investors. Which of the statements given above are correct?
121. Category I and II AIFs are close-ended. 2. Category I and II AIFs have a minimum tenure of 3 years. 3. Category III AIFs can never be open-ended. Which of the statements given above are correct?
13Consider the following statements about SEBI investment conditions for venture capital funds: 1. At least one-third of investable funds must be invested in unlisted equity shares or equity-linked instruments of a venture capital undertaking. 2. More than two-thirds of investable funds may be invested in IPO subscriptions, debt instruments and preferential allotments. 3. The prescribed investment conditions must be achieved by the fund before its first close. Which of the statements given above are correct?
14Consider the following statements about venture capital fund behaviour: 1. A VC fund has an investment thesis covering preferred sectors, stage and funding amount. 2. Startup India recommends approaching larger-ticket VC funds only after significant market traction for late-stage startups. 3. VC funds are described as professionally managed investment funds that invest exclusively in high-growth startups. 4. Startup India describes venture debt funds as public grant-making bodies that never invest alongside angel or VC rounds. Which of the statements given above are correct?
15Consider the following statements about angel funds under the AIF framework: 1. An angel fund is a sub-category of Venture Capital Fund under Category I AIF. 2. An individual angel investor must have net tangible assets of at least ₹2 crore, excluding the value of the principal residence. 3. A body corporate angel investor must have a net worth of at least ₹10 crore. 4. Every angel fund scheme can have more than 1000 angel investors. Which of the statements given above are correct?