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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.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

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. Selling an interest in your business to an outside party to raise money.






2. The amount of common shares of a corporation which are in the hands of investors. It is equal to the amount of issued shares less treasury stock.






3. A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. This is a template that is used to develop more detailed legal documents.






4. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.






5. A subsequent investment made by an investor who has made a previous investment in the company - generally a later stage investment in comparison to the initial investments.






6. 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.






7. Pre-money valuation plus the amount invested in the latest round






8. Partner who does not share in a firm's management and is liable for its debts only to the limits of said partner's investment






9. 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






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






11. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.






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






13. Term sheet for equity offering






14. 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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15. 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






16. The equity ownership in a LLC. May be either common or preferred. Partnership agreement






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






18. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)






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






20. Money used to purchase equity-based interest in a new or existing company. A venture capitalists return usually comes from preferred stock - a share of profits - royalties or capital appreciation of common stock. Most venture capitalists look for c






21. Issue of shares of a company to the public by the company (directly) for the first time.






22. 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 -






23. 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






24. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.






25. 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






26. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity






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






28. Assets are subject to double taxation - Unlimited number of investors






29. Corporation's first offer to sell stock to the public - Allows for anyone to buy stock and now falls under the SEC (No longer accredited investor) ...






30. 'I will buy stock at price we negotiate'






31. 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






32. 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






33. 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






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






35. Shares acquired in a private placement are considered restricted shares and may not be sold in a public offering absent registration - or after an appropriate holding period has expired. Non-affiliates must wait one year after purchasing the shares






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






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






38. These are government-chartered venture firms that can invest only in companies that are at least 51 percent owned by members of a minority group or person recognized by the rules that govern this to be economically disadvantaged.






39. 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.






40. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.






41. 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.






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






43. The sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.






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






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






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






47. This refers to a synopsis of the key points of a business plan.






48. The total value of the company immediately prior to the latest round of financing






49. The period an investor must wait before selling or trading company shares subsequent to an exit. Usually in an initial public offering this period is determined by the underwriters.






50. 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.