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Venture Capital
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Subject
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industries
Instructions:
Answer 50 questions in 15 minutes.
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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. 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.
small business investment companies (SBIC)
Bootstrapping
Venture Capital Financing
liquidation
2. The amount of this available to a management team for venture investments.
acquisition
capital under management
Term Sheet
executive summary
3. 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 -
IPO(initial public offerings)
equity offerings
limited partnerships
Preferred Stock
4. The residual ownership in a company like a corporation or LLC 51%=control
debt financing
Membership Interest
Liquidation Preference
Equity
5. 'I will buy stock at price we negotiate'
follow-on
Stock Price Agreement
No Shop/Confidentiality
Confidentiality
6. 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.
Term Sheet
minority enterprise small business investment companies (MESBICS)
syndication
management buy-out (MBO)
7. 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
Dividends
secondary public offering
Preferred Stock
Pre-money valuation
8. The maximum amount of cash that a partner is required to contribute under the terms
Restricted Shares
closing
Capital Commitment
Voting Rights
9. Compound internal rate of return.
buyout
IRR
institutional investors
Limited Partnership Agreement
10. A security with limits on its transferability. Usually issued in connection with a private placement
raising capital
equity financing
Restricted Stock
Common Equity
11. 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
Business Summary
liquidation
Qualified IPO
Limited Partner
12. 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.
Anti-Dilution Protections
institutional investors
equity offerings
recapitalization
13. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
Venture Capitalist
closing
Common Stock
NDA (Non-disclosure agreement)
14. A business owned by stockholders who share in its profits but are not personally responsible for its debts
Cash-out election
angel investors
lock-up period
Corporation (Limited liability and taxation)
15. Letter of intent summarizing the key legal and financial terms
Elevator Pitch
Book Value
Senior Stock
Term Sheet
16. 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
Post-money
fund of funds
Cash-out election
Pre-Money Valuation
17. 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
Corporation (Limited liability and taxation)
mezzanine financing
IPO (Initial Public Offering)
acquisition
18. The internal rate of return on an investment.
return on investment (ROI)
PPM
IRR
Limited Partnership Agreement
19. Term sheet for equity offering
management buy-out (MBO)
due diligence
Term Sheet
Preferred Stock
20. The rate of return or profit that an investment is expected to earn.
No Shop/Confidentiality
Common Stock
capital gain
Internal Rate of Return
21. 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
benchmarks
Outstanding Stock
Post-Money Valuation
capital under management
22. 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.
Outstanding Stock
due diligence
secondary purchase
Senior Stock
23. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
turnaround
Initial Public Offering
Business Summary
bridge loans
24. 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.
acquisition
Corporation (Limited liability and taxation)
NDA (Non-disclosure agreement)
going private
25. The way you buy stock
Series A Preferred Stock
Angel Financing
Capitalization Table
PPM
26. Date the LP's subscription is effective and they become partner
Senior Stock
Closing
Venture Capitalist
Private Equity
27. 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
Dividends
benchmarks
going private
Lead Investor
28. Assets are subject to double taxation - Unlimited number of investors
Confidentiality
Book Value
C Corporation
Stock Price Agreement
29. 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
follow-on
Preferred Stock
Capital
Restricted Shares
30. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Post-Money Valuation
leverage buy-out(LBO)
Liquidity Event
Business Summary
31. Selling an interest in your business to an outside party to raise money.
Confidentiality
Preferred Stock
equity financing
C Corporation
32. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
bridge loans
Book Value
Limited Partner
equity offerings
33. 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
Voting Rights
Seed Money
buyout
lock-up period
34. 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
Voting Rights
Liquidation Preference
return on investment (ROI)
term sheet
35. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
Bootstrapping
Book Value
minority enterprise small business investment companies (MESBICS)
closing
36. A subsequent investment made by an investor who has made a previous investment in the company - generally a later stage investment in comparison to the initial investments.
secondary purchase
follow-on
Restricted Stock
Liquidation Preference
37. The practice of a large company taking a minority equity position in a smaller company in a related field.
venture capital
Deal Structure
corporate venturing
raising capital
38. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Common Equity
Conversion Rights
Qualified IPO
venture capital
39. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Capital
Venture Capitalist
Elevator Pitch
Angel Financing
40. Investments by a private equity fund in a publicly traded company - usually at a discount.
private investment in public equities (PIPE)
Cash-out election
Liquidation Preference
Limited Partner
41. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
Market Capitalization
closing
management buy-in (MBI)
leverage buy-out(LBO)
42. The equity ownership in a corporation. Also has basic voting rights
IPO (Initial Public Offering)
Preferred Stock
recapitalization
Common Stock
43. Issue of shares of a company to the public by the company (directly) for the first time.
fund of funds
management buy-out (MBO)
IPO(initial public offerings)
follow-on
44. The company or entity into which a fund invests directly.
liquidation
Liquidation Preference
going private
portfolio compaay
45. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
Common Equity
private investment in public equities (PIPE)
buyout
Liquidity Event
46. 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
going private
Dividends
seed capital
Capitalization Table
47. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
Anti-Dilution Protections
Market Capitalization
Due Diligence
Membership Interest
48. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
recapitalization
angel investors
raising capital
lock-up period
49. 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
Angel Financing
Lead Investor
Dividends
Confidentiality
50. A study of the background and financial reliability of the company - management team and industry.
Preferred Stock
Dividends
Elevator Pitch
Due Diligence
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