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






2. 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






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






4. No double tax - Limited number of investors






5. Financing for a company expecting to go public usually within 6-12 months; usually so structured to be repaid from proceeds of a public offerings - or to establish floor price for public offer.






6. 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






7. 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.






8. 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






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






10. 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.).






11. 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






12. 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.






13. 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






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






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






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






17. 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






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






19. 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






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






21. 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.






22. 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






23. 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) ...






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






25. 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






26. 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.






27. 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






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






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






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






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






32. 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.






33. 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






34. 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






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






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






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






38. 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






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






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






41. The equity ownership in a corporation. Also has basic voting rights






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






43. How you get to vote






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






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






46. 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






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






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






49. 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






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