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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. No double tax - Limited number of investors
acquisition
Preferred Stock
Seed Money
S Corporation
2. 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
closing
Limited Partner
Post-money
private investment in public equities (PIPE)
3. Pre-money valuation plus the amount invested in the latest round
fund of funds
Adjusted Book Value
Bootstrapping
Post-money
4. Letter of intent summarizing the key legal and financial terms
capital gain
syndication
Membership Interest
Term Sheet
5. 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.
turnaround
closing
term sheet
Cash-out election
6. Date the LP's subscription is effective and they become partner
exit
Term Sheet
lock-up period
Closing
7. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Internal Rate of Return
management buy-out (MBO)
Warrants
Term Sheet
8. The rate at which a company expends net cash over a certain period - usually a month.
Corporation (Limited liability and taxation)
Initial Public Offering
Business Plan
Burn Rate
9. How much the company is worth before an investment
Pre-Money Valuation
Capital Call 'Drawdown'
Senior Stock
Liquidation Preference
10. 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
Bridge Financing
Common Stock
benchmarks
fund of funds
11. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
Limited Partner
institutional investors
Membership Interest
Liquidity Event
12. A study of the background and financial reliability of the company - management team and industry.
Anti-Dilution Protections
Common Stock
Due Diligence
capital gain
13. 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
seed capital
Pre-Money Valuation
Bootstrapping
14. 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
benchmarks
venture capital
bridge loans
Liquidity Event
15. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
Angel Financing
Limited Partner
Preferred Stock
16. Assets are subject to double taxation - Unlimited number of investors
General Partner (GP)
Capital
C Corporation
equity financing
17. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
C Corporation
Qualified IPO
Preferred Stock
exit
18. 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
Term Sheet
Cash-out election
raising capital
exit route
19. The amount of this available to a management team for venture investments.
Due Diligence
capital under management
Liquidity Event
benchmarks
20. 'I will buy stock at price we negotiate'
Business Summary
executive summary
Stock Price Agreement
small business investment companies (SBIC)
21. 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
acquisition
NDA (Non-disclosure agreement)
Dividends
Liquidation Preference
22. 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
Angel Financing
private investment in public equities (PIPE)
Subordinated Debt
23. Document between general and limited partnership of each fund spells out details of the partnership.
angel investors
Limited Partnership Agreement
return on investment (ROI)
series a preferred stock
24. 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
Common Stock
Burn Rate
closing
25. 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
Membership Interest
equity offerings
Seed Money
return on investment (ROI)
26. 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.
Liquidity Event
S Corporation
acquisition
venture capital
27. 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
Preferred Stock
limited partnerships
Elevator Pitch
Post-money
28. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
Conversion Rights
Preferred Stock
Burn Rate
Preferred Stock
29. 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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30. 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
Liquidation Preference
debt financing
Market Capitalization
Preferred Stock
31. How you get out
Elevator Pitch
Liquidation Preference
closing
debt financing
32. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Bootstrapping
Liquidation
Warrants
Conversion Rights
33. A security with limits on its transferability. Usually issued in connection with a private placement
executive summary
General Partner (GP)
management buy-out (MBO)
Restricted Stock
34. An investment vehicle designed to invest in a diversified group of investment funds.
Liquidity Event
fund of funds
secondary public offering
Cash-out election
35. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Bridge Financing
Restricted Stock
turnaround
Liquidity Event
36. 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
Post-Money Valuation
closing
Elevator Pitch
Term Sheet
37. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
Dividends
Senior Stock
Post-Money Valuation
Capitalization Table
38. 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
series a preferred stock
minority enterprise small business investment companies (MESBICS)
Senior Stock
Restricted Shares
39. The internal rate of return on an investment.
Deal Structure
return on investment (ROI)
follow-on
raising capital
40. The way you buy stock
PPM
minority enterprise small business investment companies (MESBICS)
Stock Price Agreement
institutional investors
41. Investments by a private equity fund in a publicly traded company - usually at a discount.
syndication
C Corporation
private investment in public equities (PIPE)
debt financing
42. 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.
IRR
equity offerings
lock-up period
private equity
43. 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
Dividends
debt financing
Voting Rights
Market Capitalization
44. 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.
Common Stock
PPM
term sheet
Cash-out election
45. 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
Common Stock
exit
Bootstrapping
IPO(initial public offerings)
46. 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
Private Equity
Burn Rate
Liquidation
management buy-in (MBI)
47. 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
No Shop/Confidentiality
Capitalization Table
closing
Business Summary
48. 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
Dividends
term sheet
Capitalization Table
Series A Preferred Stock
49. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
series a preferred stock
liquidation
Adjusted Book Value
due diligence
50. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
Term Sheet
Lead Investor
Anti-Dilution Protections
Cash-out election