Test your basic knowledge |

Venture Capital

Subject : industries
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. No double tax - Limited number of investors






2. 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






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






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






5. This word is used to describe businesses that are in trouble and whose management will cause the business to become profitable so they are no longer in trouble.






6. Date the LP's subscription is effective and they become partner






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






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






9. How much the company is worth before an investment






10. 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






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






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






13. These are equity securities of companies that have not 'gone public' (in other words - companies that have not listed their stock on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are no






14. 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






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






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






17. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






18. 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






19. The amount of this available to a management team for venture investments.






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






21. 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






22. 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






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






24. 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.






25. The first round of capital for a start-up business. Seed money usually takes the structure of a loan or an investment in preferred stock or convertible bonds - although sometimes it is common stock. Seed money provides startup companies with the cap






26. 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.






27. 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






28. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock






29. 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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30. The amount to be paid when the company is liquidated or sold before any payments are made lower classes of investors. Not everyone gets paid equally






31. How you get out






32. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities






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






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






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






36. 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






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






38. 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






39. The internal rate of return on an investment.






40. The way you buy stock






41. Investments by a private equity fund in a publicly traded company - usually at a discount.






42. 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.






43. Money that business owners must pay back with interest. There are myriad types of these - from simple commercial loans to bridge/swing loans in which a lender makes a short-term loan in anticipation of equity financing at a later stage in the develo






44. 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.






45. A unit of ownership of a corporation. In the case of a public company - the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in






46. 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






47. 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






48. 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






49. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value






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