Investing in a startup company is about as risky as it gets. High uncertainty in respect to the business model, the technology, and the team combined with inherent market risks gave rise to miscellaneous methods to assess these young companies and inform funding decisions. However, even the organizations lauded as the financing motors of the startup world — venture capital firms — struggle to yield returns adequate for the risks taken. In fact, the majority of European VCs do not make a profit at all. Venture capital funds remain a hoard though, primarily due to investors’ portfolio diversification strategies and because capital has fewer and fewer safe places with decent returns to go to —and of course because some VC funds indeed fulfill their yield promises.
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