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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.
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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. 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
debt financing
NDA (Non-disclosure agreement)
buyout
Business Plan
2. 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.
Limited Partnership Agreement
Venture Capital Financing
Term Sheet
exit route
3. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
Post-Money Valuation
Outstanding Stock
leverage buy-out(LBO)
due diligence
4. 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
Outstanding Stock
Senior Stock
Restricted Stock
bridge loans
5. Date the LP's subscription is effective and they become partner
Preferred Stock
Liquidation Preference
Closing
Seed Money
6. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
Capitalization Table
Conversion Rights
going private
turnaround
7. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
Anti-Dilution Protections
going private
Common Stock
Liquidation
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
Restricted Stock
Pre-Money Valuation
debt financing
management buy-in (MBI)
9. Investments by a private equity fund in a publicly traded company - usually at a discount.
Capital Commitment
private investment in public equities (PIPE)
Restricted Shares
syndication
10. 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
Restricted Shares
Term Sheet
exit route
management buy-out (MBO)
11. 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) ...
fund of funds
Post-money
Initial Public Offering
due diligence
12. A request from the GPs requiring each limited partner to deliver a portion of their capital commitment. Usually specified as a percentage of the capital commitment
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13. 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.
minority enterprise small business investment companies (MESBICS)
recapitalization
Dividends
Limited Partner
14. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
exit route
NDA (Non-disclosure agreement)
Restricted Shares
Post-money
15. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
IPO(initial public offerings)
Capital
Private Equity
Membership Interest
16. A financial institution specializing in the provision of equity and other forms of long-term capital to enterprises - usually to firms with a limited track record but with the expectation of substantial growth. The venture capitalist may provide bot
Conversion Rights
Venture Capitalist
Deal Structure
Cash-out election
17. This word is used to describe businesses that are in trouble and whose management will cause the business to become profitable so they are no longer in trouble.
benchmarks
seed capital
turnaround
Capital Call 'Drawdown'
18. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
return on investment (ROI)
Senior Stock
Deal Structure
Common Equity
19. The total value of the company immediately prior to the latest round of financing
leverage buy-out(LBO)
going private
Pre-money valuation
Common Stock
20. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Capital
Preferred Stock
Closing
Burn Rate
21. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
exit
Warrants
Membership Interest
Lead Investor
22. No double tax - Limited number of investors
term sheet
Pre-Money Valuation
Book Value
S Corporation
23. The company or entity into which a fund invests directly.
management buy-in (MBI)
General Partner (GP)
portfolio compaay
venture capital
24. 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
return on investment (ROI)
venture capital
going private
executive summary
25. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
S Corporation
Liquidation
institutional investors
IPO(initial public offerings)
26. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
Conversion Rights
Preferred Stock
Outstanding Stock
secondary purchase
27. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
Capital
Angel Financing
secondary public offering
Term Sheet
28. 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.
Venture Capitalist
lead investor
management buy-out (MBO)
lock-up period
29. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
Adjusted Book Value
syndication
capital gain
Capital
30. 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
institutional investors
Preferred Stock
series a preferred stock
exit
31. Don't talk to the market about the company
Initial Public Offering
Confidentiality
Membership Interest
Angel Financing
32. Compound internal rate of return.
IRR
seed capital
series a preferred stock
Term Sheet
33. 'I will buy stock at price we negotiate'
Stock Price Agreement
Common Stock
PPM
Voting Rights
34. 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.
Bootstrapping
Liquidation Preference
corporate venturing
institutional investors
35. 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.
portfolio compaay
Adjusted Book Value
minority enterprise small business investment companies (MESBICS)
follow-on
36. The residual ownership in a company like a corporation or LLC 51%=control
Seed Money
portfolio compaay
Equity
benchmarks
37. An IPO that has met certain
Qualified IPO
exit
recapitalization
Lead Investor
38. The party that manages a limited partnership and is liable for the debts of the company
General Partner (GP)
debt financing
Private Equity
Common Stock
39. A security with limits on its transferability. Usually issued in connection with a private placement
Restricted Stock
Common Equity
C Corporation
portfolio compaay
40. 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
Preferred Stock
Seed Money
Restricted Shares
leverage buy-out(LBO)
41. 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
management buy-out (MBO)
Internal Rate of Return
Preferred Stock
42. The sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.
Capital
liquidation
Pre-Money Valuation
institutional investors
43. The practice of a large company taking a minority equity position in a smaller company in a related field.
syndication
corporate venturing
Bootstrapping
venture capital
44. 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.).
Term Sheet
Business Summary
institutional investors
Bootstrapping
45. 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
Post-Money Valuation
Limited Partner
series a preferred stock
46. 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
IPO (Initial Public Offering)
capital gain
leverage buy-out(LBO)
series a preferred stock
47. Letter of intent summarizing the key legal and financial terms
Term Sheet
Market Capitalization
management buy-in (MBI)
executive summary
48. A type of equity ownership in a corporation - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights.
Preferred Stock
minority enterprise small business investment companies (MESBICS)
Capital
capital under management
49. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
buyout
private equity
fund of funds
Anti-Dilution Protections
50. 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
Business Summary
Common Stock
Series A Preferred Stock
closing
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