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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. Term sheet for equity offering






2. 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






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






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






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






6. 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






7. A detailed document that outlines what you are going to do and how you are going to do it - including a clear and simple discussion of the idea; the management team - including full resumes; business strategy; marketing plan - including sales projec






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. 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






10. Also known as a bell cow investor. Member of a syndicate of private equity investors holding the largest stake - in charge of arranging the financing and most actively involved in the overall project






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






12. The internal rate of return on an investment.






13. 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.






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






15. 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






16. 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






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






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






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






20. 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






21. The way you buy stock






22. The practice of a large company taking a minority equity position in a smaller company in a related field.






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






24. This refers to a public offering subsequent to an initial public offering. A secondary public offering can be either an issuer offering or an offering by a group that has purchased the issuer's securities in the public markets.






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






26. A limited amount of equity or short-term debt financing typically raised within 6-18 months of an anticipated public offering or private placement meant to 'bridge' a company to the next round of financing.






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






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






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






30. How you get out






31. The repurchasing of all of a company's outstanding stock by employees or a private investor. As a result of such an initiative - the company stops being publicly traded. Sometimes - the company might have to take on significant debt to finance the






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






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






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






35. The residual ownership in a company like a corporation or LLC 51%=control






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






37. 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) ...






38. A type of equity ownership in a corporation - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights.






39. 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






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






41. These are lending and investment firms that are licensed by the federal government. The licensing enables them to borrow from the federal government to supplement the private funds of their investors. Some of these funds engage only in making loans t






42. 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.






43. 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.).






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






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






46. 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






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. No double tax - Limited number of investors






49. 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






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