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Ventue capital

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zetawoman | 01:06 Tue 11th Jul 2006 | Business & Finance
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1. a. Why do venture capital companies prefer to advance money in stages? If you were
the management of Marvin Enterprises, would you have been happy with such an
arrangement? With the benefit of hindsight did First Meriam gain or lose by advancing
money in stages?

b. The price at which First Meriam would invest more money in Marvin was not fixed
in advance. But Marvin could have given First Meriam an option to buy more shares
at a preset price. Would this have been better?

c. At the second stage Marvin could have tried to raise money from another venture
capital company in preference to First Meriam. To protect themselves against this,
venture capital firms sometimes demand first refusal on new capital issues. Would
you recommend this arrangement?

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