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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. 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
Business Plan
Stock Price Agreement
Warrants
Qualified IPO
2. How you get to vote
Voting Rights
Senior Stock
Due Diligence
Term Sheet
3. The total value of the company immediately prior to the latest round of financing
Pre-money valuation
Capital
follow-on
Capital Call 'Drawdown'
4. 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 -
Capital Commitment
Stock Price Agreement
Qualified IPO
limited partnerships
5. An IPO that has met certain
Due Diligence
Qualified IPO
Capitalization Table
PPM
6. A study of the background and financial reliability of the company - management team and industry.
raising capital
Limited Partner
Liquidation
Due Diligence
7. 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.
mezzanine financing
NDA (Non-disclosure agreement)
due diligence
equity offerings
8. 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.
follow-on
Series A Preferred Stock
return on investment (ROI)
Liquidation Preference
9. 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
Seed Money
Capital
IPO(initial public offerings)
Cash-out election
10. 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.
closing
private equity
term sheet
mezzanine financing
11. 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
Series A Preferred Stock
Cash-out election
private equity
Common Equity
12. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
Limited Partnership Agreement
Capitalization Table
lock-up period
Membership Interest
13. The total dollar value of all outstanding shares. Computed as shares multiplied by current price per share. Prior to an IPO - market capitalization is arrived at by estimating a company's future growth and by comparing a company with similar public
lead investor
portfolio compaay
Market Capitalization
IPO(initial public offerings)
14. 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) ...
follow-on
management buy-in (MBI)
minority enterprise small business investment companies (MESBICS)
Initial Public Offering
15. 'I will buy stock at price we negotiate'
syndication
Anti-Dilution Protections
C Corporation
Stock Price Agreement
16. How you get out
Liquidation Preference
Limited Partnership Agreement
seed capital
raising capital
17. The maximum amount of cash that a partner is required to contribute under the terms
Pre-Money Valuation
benchmarks
Capital Commitment
management buy-out (MBO)
18. The practice of a large company taking a minority equity position in a smaller company in a related field.
Bridge Financing
term sheet
Adjusted Book Value
corporate venturing
19. 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.
executive summary
Deal Structure
Preferred Stock
Adjusted Book Value
20. The equity ownership in a corporation. Also has basic voting rights
Membership Interest
Common Stock
Business Plan
Bridge Financing
21. 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.
Qualified IPO
Lead Investor
Series A Preferred Stock
acquisition
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
mezzanine financing
Book Value
IRR
Capitalization Table
23. 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
benchmarks
Lead Investor
buyout
bridge loans
24. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
Subordinated Debt
Anti-Dilution Protections
bridge loans
Liquidation Preference
25. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
benchmarks
angel investors
Adjusted Book Value
Internal Rate of Return
26. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
leverage buy-out(LBO)
minority enterprise small business investment companies (MESBICS)
fund of funds
secondary purchase
27. Assets are subject to double taxation - Unlimited number of investors
equity offerings
management buy-in (MBI)
C Corporation
Pre-Money Valuation
28. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Seed Money
Elevator Pitch
Limited Partner
Common Equity
29. 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
Preferred Stock
portfolio compaay
Limited Partner
Venture Capitalist
30. 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
benchmarks
Preferred Stock
Internal Rate of Return
31. How much the company is worth before an investment
Pre-Money Valuation
recapitalization
management buy-out (MBO)
Conversion Rights
32. 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.
Conversion Rights
syndication
Bootstrapping
management buy-out (MBO)
33. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
IRR
Liquidation Preference
Warrants
Post-Money Valuation
34. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
venture capital
Limited Partnership Agreement
Conversion Rights
management buy-out (MBO)
35. The company or entity into which a fund invests directly.
portfolio compaay
Dividends
fund of funds
No Shop/Confidentiality
36. The repurchasing of all of a company's outstanding stock by employees or a private investor. As a result of such an initiative - the company stops being publicly traded. Sometimes - the company might have to take on significant debt to finance the
private equity
series a preferred stock
going private
Restricted Shares
37. An investment vehicle designed to invest in a diversified group of investment funds.
portfolio compaay
fund of funds
Capitalization Table
Seed Money
38. Selling an interest in your business to an outside party to raise money.
Warrants
PPM
Deal Structure
equity financing
39. 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
Capital Commitment
Lead Investor
Cash-out election
private equity
40. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
buyout
Senior Stock
going private
lock-up period
41. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Seed Money
Liquidity Event
turnaround
Angel Financing
42. 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.
Common Stock
private investment in public equities (PIPE)
lead investor
Preferred Stock
43. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Capital
Pre-Money Valuation
Cash-out election
Corporation (Limited liability and taxation)
44. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
S Corporation
Preferred Stock
Adjusted Book Value
45. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
raising capital
Preferred Stock
equity offerings
management buy-in (MBI)
46. The rate at which a company expends net cash over a certain period - usually a month.
Burn Rate
management buy-in (MBI)
Preferred Stock
Liquidation Preference
47. The value at which an asset is carried on a balance sheet (the cost of the item)
series a preferred stock
Book Value
management buy-in (MBI)
Common Equity
48. 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.
Pre-Money Valuation
Cash-out election
minority enterprise small business investment companies (MESBICS)
Burn Rate
49. Don't talk to the market about the company
Angel Financing
Restricted Shares
syndication
Confidentiality
50. 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
exit route
Bridge Financing
Capitalization Table
Series A Preferred Stock