IPA IP 2024 Question 5
A question IPA Japan published in 令和6年度 ITパスポート試験 公開問題 問5, translated into English. ITPEC is based on the same exams.
Which of the following is the most appropriate description concerning venture capital?
Explanation
A company that invests in companies entering the market with new products or services, to profit from selling the shares — this is venture capital.
A venture capital (VC) firm provides funds to unlisted start-ups with high growth potential, usually in exchange for their shares, and often supports their management as well. When a start-up grows and goes public (IPO) or is acquired, the VC sells its shares and earns a capital gain. Since many start-ups fail, a VC spreads its money over many companies.
Answer (b)
Why not others:
- •(a) — setting up a company funded jointly with other companies, to acquire new technology or pursue economies of scale, is a joint venture
- •(c) — forming co-creation relationships with outside organizations and bringing their technologies and resources into the company is open innovation
- •(d) — an organization set up for a fixed period to solve a specific issue, staffed from related departments and dissolved once its purpose is achieved, is a project organization
Key rule: Venture capital is an investor in start-ups that profits by selling its shares later; a joint venture is a company owned jointly by the companies that founded it.
Technological Strategy Management · AI-written, may contain errors
This question comes from the past questions IPA Japan publishes, translated into English by ITPEC Practice. ITPEC Practice is an independent study tool and is not affiliated with IPA or ITPEC. See the original paper (PDF) or Report an issue.