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Venture Capital

Subject : industries
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A class of capital stock that may pay dividends at a specified rate and that has priority over common stock in the payment of dividends and the liquidation of assets. Many venture capital investments use preferred stock as their investment vehicle. T






2. Cash - stock and other property by the company to the investor in the investor's capacity as a stock - payment to owner for their appreciation






3. The internal rate of return on an investment.






4. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.






5. The rate at which a company expends net cash over a certain period - usually a month.






6. The company or entity into which a fund invests directly.






7. How you get to vote






8. The reorganization of a company's capital structure. A company may seek to save on taxes by replacing preferred stock with bonds in order to gain interest deductibility.






9. Means of financing a small firm by employing highly creative ways of using and acquiring resources without raising equity from traditional sources or borrowing money from the bank.






10. Allows the holder to choose whether a merge or sale will be treated as a liquidation event for the purpose of receiving the funds they are entitled to under the liquidation preferences of the term sheet






11. An extremely concise presentation of an entrepreneur's idea - business model - company solution - marketing strategy - and competition delivered to potential investors. Should not last more than a few minutes - or the duration of an elevator rid






12. It refers mainly to insurance companies - pension funds and investment companies collecting savings and supplying funds to markets - but also to other types of institutional wealth (e.g. endowments funds - foundations etc.).






13. Funds provided to enable an enterprise to acquire another enterprise or product line or business.






14. Also called a 'Cap Table' - this is a table showing the total amount of the various securities issued by a firm. This typically includes the amount of investment obtained from each source and the securities distributed -- e.g. common and preferred s






15. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything






16. An investment in a startup business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.






17. The maximum amount of cash that a partner is required to contribute under the terms






18. A business owned by stockholders who share in its profits but are not personally responsible for its debts






19. Document between general and limited partnership of each fund spells out details of the partnership.






20. An IPO that has met certain






21. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.






22. Letter of intent summarizing the key legal and financial terms






23. The valuation of a company immediately after the most recent round of financing. For example - a venture capitalist may invest $3.5 million in a company valued at $2 million 'pre-money' (before the investment was made). As a result - the startup will






24. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.






25. The first round of stock offered during the seed or early stage round by a portfolio company to the venture investor or fund. This stock is convertible into common stock in certain cases such as an IPO or the sale of the company. Later rounds of pref






26. The party that manages a limited partnership and is liable for the debts of the company






27. Financing for a company expecting to go public usually within 6-12 months; usually so structured to be repaid from proceeds of a public offerings - or to establish floor price for public offer.






28. The act of one company taking over controlling interest in another company. Investors often look for companies that are likely candidates for this - because the acquiring firms are often willing to pay a premium to the market price for the shares.






29. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan






30. A form of equity ownership in a corporation that contains preferences over common stock - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights






31. These are short-term financing agreements that fund a company's operation until it can arrange a more comprehensive longer-term financing. The need for these arises when a company runs out of cash before it can obtain more capital investment though l






32. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.






33. Funds provided to enable operating management to acquire a product line or business - which may be at any stage of development - from either a public or private company.






34. A request from the GPs requiring each limited partner to deliver a portion of their capital commitment. Usually specified as a percentage of the capital commitment

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35. The method by which an investor will realize an investment.






36. An investment vehicle designed to invest in a diversified group of investment funds.






37. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.






38. A financial institution specializing in the provision of equity and other forms of long-term capital to enterprises - usually to firms with a limited track record but with the expectation of substantial growth. The venture capitalist may provide bot






39. Equity securities of companies that have not 'gone public' (are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange - any investor wishing to sell






40. The value at which an asset is carried on a balance sheet (the cost of the item)






41. A security with limits on its transferability. Usually issued in connection with a private placement






42. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.






43. The valuation of a company prior to a round of investment. This amount is determined by using various calculation models - such as discounted P/E ratios multiplied by periodic earnings or a multiple times a future cash flow discounted to a present c






44. The legal structure used by most venture and private equity funds. Usually fixed life investment vehicles. The general partner or management firm manages the partnership using policy laid down in a partnership agreement. The agreement also covers -






45. These are performance goals against which a company's success is measured. Often - they are used by investors to help determine whether a company will receive additional funding or whether management will receive extra stock. Sometimes management wi






46. The investor who leads a group of investors into an investment. Usually one venture capitalist will be this when a group of venture capitalists invest in a single business.






47. The first round of stock offered during the seed or early stage round by a portfolio company to the venture investor or fund. This stock is convertible into common stock in certain cases such as an IPO or the sale of the company. Later rounds of pref






48. Don't talk to the market about the company






49. A study of the background and financial reliability of the company - management team and industry.






50. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)






Can you answer 50 questions in 15 minutes?



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