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← Lesson
Venture Capital: What It Actually Is
Question 1 of 7
Multiple choice
Why do VC funds invest in many companies knowing most will fail?
They don't know most will fail, they expect all to succeed
1-2 outlier successes can return 50-100x and cover all the losses while generating profit
Legal requirements force them to diversify
Small investments are cheaper so they spread risk evenly
Check answer