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






2. 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.






3. 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






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






5. 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.






6. 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.






7. 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) ...






8. 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






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






10. Compound internal rate of return.






11. 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






12. How much the company is worth before an investment






13. 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.






14. 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






15. 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






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






17. The internal rate of return on an investment.






18. 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






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






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






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






22. An IPO that has met certain






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






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






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






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






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






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






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






30. How you get out






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






32. 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






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






34. 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.).






35. 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






36. 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






37. 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.






38. 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






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






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






41. 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






42. 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






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






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






45. The total dollar value of all outstanding shares. Computed as shares multiplied by current price per share. Prior to an IPO - market capitalization is arrived at by estimating a company's future growth and by comparing a company with similar public






46. 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






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






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






49. 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.






50. 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