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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. The way you buy stock






2. The internal rate of return on an investment.






3. The residual ownership in a company like a corporation or LLC 51%=control






4. 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.






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






6. 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






7. 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






8. 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






9. The method by which an investor will realize an investment.






10. 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






11. 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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12. 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






13. 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






14. 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.






15. The company or entity into which a fund invests directly.






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






17. 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.






18. How you get out






19. 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.






20. 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






21. 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






22. 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






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






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






25. An investment vehicle designed to invest in a diversified group of investment funds.






26. 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) ...






27. 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.






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






29. 'I will buy stock at price we negotiate'






30. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value






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






32. 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.).






33. 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






34. Cannot get other outside investors-No Shop






35. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last






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






37. The rate at which a company expends net cash over a certain period - usually a month.






38. How much the company is worth before an investment






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






40. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.






41. The equity ownership in a LLC. May be either common or preferred. Partnership agreement






42. 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.






43. 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






44. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity






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






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






47. 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






48. 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






49. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






50. A limited amount of equity or short-term debt financing typically raised within 6-18 months of an anticipated public offering or private placement meant to 'bridge' a company to the next round of financing.