Which term describes the funding provided by wealthy individuals to startups, often in early stages?

• A. Informal Venture Capital
• B. Debt Financing
• C. Initial Public Offering
• D. Credit Lines

Answer: (A)

Informal venture capital, often called angel investing, describes the funding provided by wealthy individuals to startups in early stages. These investors use their own money to buy equity in promising ventures, accepting higher risk for potentially higher returns and often offering guidance and connections. This differs from debt financing, which is money borrowed and owed with interest and no ownership stake. An initial public offering isn’t private investment from individuals but a process where a company sells stock to the public to raise capital. Credit lines are revolving borrowings from lenders and do not create equity in the company.