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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. No double tax - Limited number of investors






2. 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






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






4. 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.






5. 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.).






6. Compound internal rate of return.






7. An Agreement made between the investor and the company defining the rights and obligations of the parties involved. The process by which one arrives at the final term and conditions of the investment.






8. 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






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






10. The rate of return or profit that an investment is expected to earn.






11. 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.






12. 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






13. 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






14. How much the company is worth before an investment






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






16. The way you buy stock






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






18. The process whereby a group of venture capitalists will each put in a portion of the amount of money needed to finance a small business.






19. The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During peri






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






21. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last






22. Cannot get other outside investors-No Shop






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






24. Term sheet for equity offering






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






26. 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






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






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






29. 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






30. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.






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






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






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






34. 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) ...






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






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






37. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.






38. 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






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






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






41. 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






42. 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 -






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






44. 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






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






46. 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.






47. 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






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






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. 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







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