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An unlisted software development company has recently reported disappointing results. This was partly due to weak economic conditions but also because of its poor competitive position. The company has a number of exciting development opportunities which would enable it to achieve significant future growth. The company's growth potential has been hindered by its inability to secure sufficient new finance. To enable the company raise new finance the Directors are considering working forwards an IPO in 10 years and accepting finance from a venture capitalist in order support in the intervening period. The directors are keen to retain a controlling stake in the company and full representation on the board. They therefore require venture capitalists to provide funds as a mix of debt and equity and not soley equity finance. Which THREE of the following are most likely to disrupt the directors' plans to use venture capital finance?
Correct Answer: A,C,D
A: VCs typically want at least one board seat - conflicts with directors wanting full board control. B: VCs mainly provide equity-type finance; reluctance to provide a debt-equity mix would disrupt the plan. D: VCs normally expect an exit in around 3-7 years, much earlier than an IPO in 10 years. (C) high cost is possible but not a defining structural conflict, and (E) "always >50% ownership" is not generally true.