What does venture capital mean?

Answer: (b) A long-term start-up capital provided to new entrepreneurs

Venture capital is risk capital invested for the long term in new, unlisted, early-stage businesses, usually in return for equity. That matches 'long-term start-up capital provided to new entrepreneurs'. It is not short-term finance, rescue money for loss-making firms, or funds for replacing and renovating existing plant.

• ✗ (a) Venture capital is not short-term working capital. It is patient equity put into young firms, and it is held until the firm grows enough for the investor to exit.
• ✓ (b) Venture capital funds fall in SEBI's Category I Alternative Investment Funds, which invest in start-up or early-stage ventures. Under SEBI's venture capital rules, the companies they back are unlisted domestic companies. The money is committed for the long term, typically as equity, to help a young business grow.
• ✗ (c) Money given to rescue loss-making firms is turnaround or distress finance. Venture capital is meant to back new, high-risk ideas.
• ✗ (d) Funding for replacement and renovation of existing units is ordinary capital expenditure finance, such as term loans. It is not start-up risk capital.

Remember · Venture capital means long-term, high-risk equity funding for start-ups and early-stage unlisted companies. In SEBI's framework, venture capital funds are a type of Category I Alternative Investment Fund.

Question: UPSC Civil Services (Preliminary) 2014, General Studies paper. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). · Report an error