Why do investors require entrepreneurs to put in a lot of their own capital?
A) Entrepreneurs know more about the venture opportunity than the investor.
B) Their capital serves as an incentive to be careful with the investor's capital.
C) It is useful for reducing venture finance problems.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

Entrepreneurs investing their own capital demonstrates their commitment to the venture, aligns their interests with those of the investors, and helps mitigate issues related to asymmetric information and moral hazard. This commitment serves as a signal of the venture's potential and the entrepreneur's confidence in its success, thereby reducing the perceived risk for investors.

Why Do Investors Require Entrepreneurs to Put in a Lot