Why are only wealthy individuals or organizations allowed to invest in high-risk private ventures? What are...

Why are only wealthy individuals or organizations allowed to invest in high-risk private ventures?

What are the advantages and disadvantages of raising money from private investors?

Expert Solution

Wealthy individuals or organisations are allowed to invest into high risk private ventures because these high risk private ventures will be exposed to higher fluctuations and it can even lead to wiping out of their overall capital so, only the high risk and high capital individuals can be bear with that much of risk of erosion of their capital.

These private ventures are exposed to various kinds of market risk in the initial stages of their life and they are highly exposed to getting liquidated so only high risk and high capital individuals can invest into such business who have a high risk appetite and high return appetite as well.

2. Advantages of raising money through private investors-

A. Large sum of money can be raised through the private investors

B. They are willing to take high risk

C. They are also willing to provide specialised services and expertised services

Disadvantage of private investors are-

A. There is is lack of control on the part of the original owners as they exchange their equity for capital

B. Interference into the overall management of the company.

jeff jeffy answered 1 year ago

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