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Venture Capital

Subject : 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. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.






2. 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






3. The equity ownership in a corporation. Also has basic voting rights






4. 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






5. 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






6. Don't talk to the market about the company






7. 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






8. 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.






9. 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.






10. 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.).






11. The way you buy stock






12. 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.






13. 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






14. 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.






15. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.






16. 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






17. Document between general and limited partnership of each fund spells out details of the partnership.






18. 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






19. 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.






20. 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






21. 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






22. 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.






23. How much the company is worth before an investment






24. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)






25. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan






26. 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






27. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock






28. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything






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






30. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.






31. 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.






32. The amount of this available to a management team for venture investments.






33. 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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34. 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






35. 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






36. 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.






37. The maximum amount of cash that a partner is required to contribute under the terms






38. The practice of a large company taking a minority equity position in a smaller company in a related field.






39. 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






40. 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






41. These are lending and investment firms that are licensed by the federal government. The licensing enables them to borrow from the federal government to supplement the private funds of their investors. Some of these funds engage only in making loans t






42. This refers to a synopsis of the key points of a business plan.






43. Assets are subject to double taxation - Unlimited number of investors






44. A study of the background and financial reliability of the company - management team and industry.






45. The party that manages a limited partnership and is liable for the debts of the company






46. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)






47. A business owned by stockholders who share in its profits but are not personally responsible for its debts






48. An Agreement made between the investor and the company defining the rights and obligations of the parties involved. The process by which one arrives at the final term and conditions of the investment.






49. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.






50. The rate of return or profit that an investment is expected to earn.