Problem:
Mr. John Smith has inherited $18,000,000 and would like to start his own business. One of the financial consultants suggested for him to become a venture capitalist while another consultant suggested to him to become an angel financer. He is still confused as to what to do because previous consultants did not answer all his questions clearly.
Since Mr. John Smith is not fully satisfied with the previous consulting services, he is looking for a new consultant who can satisfy his needs by answering all the questions. He has heard a lot of good things about you and is interested in receiving your advice.
Read the information in the background material, look for more information, and answer the following questions:
1) Would you recommend Mr. Smith to become a venture capitalist or an angel financer in USA? Please explain your reasoning.
Mr. Smith would also like you to answer the following questions:
1) What are the risks involved with both venture capital and angel investing?
2) What are the potential returns from these two types of investing?
3) What are the main differences between these two types of financing?
4) Is angel financing better than the venture capitalist? Please explain your reasoning.
It may not be wise to recommend Mr. Smith to use all the funds ($18,000,000) to become a venture capitalist or an angel financer in USA. It is important to invest some funds in other countries to diversify risk. The Indian economy is an emerging economy. Therefore, it may be wise to invest some money in India to become an angel investor.
2) Would you recommend Mr. Smith to invest some funds in India to become an angel financer? Please explain your reasoning.
In your answer to the above question, Mr. Smith would like you provide information on the risk involved and potential return from investment in India together with other necessary information that you think should be provided in the report.