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Test your basic knowledge |
Venture Capital
Start Test
Study First
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. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Pre-Money Valuation
Common Stock
mezzanine financing
Adjusted Book Value
2. 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.
PPM
secondary public offering
C Corporation
capital gain
3. 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
Term Sheet
Venture Capitalist
Bootstrapping
4. 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
Voting Rights
Business Plan
benchmarks
Lead Investor
5. Selling an interest in your business to an outside party to raise money.
debt financing
equity financing
Conversion Rights
Pre-Money Valuation
6. The internal rate of return on an investment.
return on investment (ROI)
capital under management
Business Summary
Capital Commitment
7. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
IPO(initial public offerings)
Corporation (Limited liability and taxation)
Anti-Dilution Protections
Membership Interest
8. A security with limits on its transferability. Usually issued in connection with a private placement
Restricted Stock
Subordinated Debt
lock-up period
Bridge Financing
9. 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
private equity
Restricted Shares
No Shop/Confidentiality
Pre-Money Valuation
10. Date the LP's subscription is effective and they become partner
Preferred Stock
Equity
Closing
Capitalization Table
11. 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
Outstanding Stock
due diligence
Elevator Pitch
Anti-Dilution Protections
12. This refers to a synopsis of the key points of a business plan.
Liquidation Preference
executive summary
C Corporation
Bridge Financing
13. 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
turnaround
IPO (Initial Public Offering)
Conversion Rights
Restricted Shares
14. 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.
lock-up period
institutional investors
NDA (Non-disclosure agreement)
Pre-Money Valuation
15. The value at which an asset is carried on a balance sheet (the cost of the item)
portfolio compaay
Angel Financing
Confidentiality
Book Value
16. 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.
S Corporation
Membership Interest
minority enterprise small business investment companies (MESBICS)
secondary purchase
17. 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
Preferred Stock
seed capital
buyout
Term Sheet
18. 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.
Common Stock
Common Stock
Pre-money valuation
follow-on
19. 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
Business Plan
Qualified IPO
follow-on
Post-Money Valuation
20. 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.
Preferred Stock
Post-money
recapitalization
going private
21. 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
venture capital
Post-money
Membership Interest
exit
22. 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
Elevator Pitch
capital under management
secondary purchase
Liquidation Preference
23. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
C Corporation
IRR
Capitalization Table
Capital
24. The equity ownership in a corporation. Also has basic voting rights
Common Stock
Voting Rights
Term Sheet
Outstanding Stock
25. Issue of shares of a company to the public by the company (directly) for the first time.
Pre-Money Valuation
Subordinated Debt
Initial Public Offering
IPO(initial public offerings)
26. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
Capitalization Table
Confidentiality
Due Diligence
buyout
27. 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.
management buy-in (MBI)
General Partner (GP)
turnaround
acquisition
28. Term sheet for equity offering
No Shop/Confidentiality
Term Sheet
Internal Rate of Return
Qualified IPO
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
Pre-Money Valuation
term sheet
Adjusted Book Value
Common Stock
30. No double tax - Limited number of investors
S Corporation
Common Equity
angel investors
Conversion Rights
31. An investment in a startup business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.
Restricted Stock
Venture Capital Financing
S Corporation
No Shop/Confidentiality
32. 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
Preferred Stock
Post-money
corporate venturing
series a preferred stock
33. 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.
syndication
Preferred Stock
Preferred Stock
Restricted Shares
34. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
Series A Preferred Stock
recapitalization
institutional investors
Angel Financing
35. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
mezzanine financing
Term Sheet
series a preferred stock
due diligence
36. The residual ownership in a company like a corporation or LLC 51%=control
Equity
Pre-Money Valuation
Subordinated Debt
IRR
37. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Bridge Financing
Warrants
Post-money
Membership Interest
38. 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.
No Shop/Confidentiality
lead investor
Preferred Stock
Limited Partner
39. 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
lock-up period
buyout
Conversion Rights
Series A Preferred Stock
40. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
secondary purchase
Post-Money Valuation
minority enterprise small business investment companies (MESBICS)
leverage buy-out(LBO)
41. 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.
Market Capitalization
Capital Call 'Drawdown'
term sheet
Common Stock
42. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
angel investors
Liquidation Preference
General Partner (GP)
Anti-Dilution Protections
43. 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
Angel Financing
recapitalization
Membership Interest
Private Equity
44. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
return on investment (ROI)
Liquidity Event
Liquidation Preference
capital gain
45. Cannot get other outside investors-No Shop
No Shop/Confidentiality
Bridge Financing
secondary public offering
IRR
46. The rate of return or profit that an investment is expected to earn.
Internal Rate of Return
PPM
Post-money
raising capital
47. Assets are subject to double taxation - Unlimited number of investors
leverage buy-out(LBO)
Post-money
Due Diligence
C Corporation
48. Compound internal rate of return.
Limited Partner
Preferred Stock
IRR
Senior Stock
49. An investment vehicle designed to invest in a diversified group of investment funds.
Stock Price Agreement
fund of funds
closing
Qualified IPO
50. Pre-money valuation plus the amount invested in the latest round
Pre-money valuation
fund of funds
term sheet
Post-money