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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. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Lead Investor
Liquidation
General Partner (GP)
Liquidation Preference
2. 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) ...
term sheet
Initial Public Offering
exit route
follow-on
3. 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
General Partner (GP)
follow-on
exit
4. 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.
mezzanine financing
management buy-out (MBO)
Deal Structure
Common Stock
5. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Liquidity Event
Bootstrapping
Series A Preferred Stock
Limited Partner
6. A form of equity ownership in a corporation that contains preferences over common stock - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights
Preferred Stock
portfolio compaay
Liquidation Preference
going private
7. The internal rate of return on an investment.
C Corporation
limited partnerships
return on investment (ROI)
Common Stock
8. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
Conversion Rights
due diligence
Equity
Angel Financing
9. Letter of intent summarizing the key legal and financial terms
Burn Rate
management buy-out (MBO)
Term Sheet
Senior Stock
10. 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.
Book Value
Venture Capital Financing
equity offerings
Business Plan
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. 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
seed capital
Lead Investor
fund of funds
Liquidity Event
13. 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
recapitalization
Cash-out election
Series A Preferred Stock
return on investment (ROI)
14. 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
turnaround
going private
Series A Preferred Stock
Restricted Shares
15. An investment vehicle designed to invest in a diversified group of investment funds.
fund of funds
Corporation (Limited liability and taxation)
term sheet
Market Capitalization
16. The rate of return or profit that an investment is expected to earn.
private equity
Internal Rate of Return
Business Plan
Pre-Money Valuation
17. The value at which an asset is carried on a balance sheet (the cost of the item)
management buy-in (MBI)
Book Value
management buy-out (MBO)
Preferred Stock
18. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
recapitalization
IRR
equity offerings
syndication
19. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
Membership Interest
Conversion Rights
fund of funds
term sheet
20. 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.
capital under management
seed capital
Senior Stock
term sheet
21. 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.
IPO (Initial Public Offering)
Subordinated Debt
Due Diligence
mezzanine financing
22. 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
Preferred Stock
Liquidation Preference
Elevator Pitch
small business investment companies (SBIC)
23. 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.
Bootstrapping
Venture Capitalist
Outstanding Stock
Confidentiality
24. Issue of shares of a company to the public by the company (directly) for the first time.
Common Stock
IPO(initial public offerings)
secondary purchase
exit
25. 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
Restricted Stock
Capitalization Table
IPO(initial public offerings)
Common Stock
26. Compound internal rate of return.
Post-money
Deal Structure
exit
IRR
27. 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
liquidation
corporate venturing
Common Equity
28. 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
Voting Rights
private equity
small business investment companies (SBIC)
Venture Capital Financing
29. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
NDA (Non-disclosure agreement)
liquidation
Liquidity Event
going private
30. Date the LP's subscription is effective and they become partner
Limited Partnership Agreement
Closing
Outstanding Stock
Preferred Stock
31. 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
due diligence
limited partnerships
Liquidation
Limited Partner
32. 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
IPO(initial public offerings)
Business Plan
Warrants
Capital Commitment
33. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Bridge Financing
term sheet
Adjusted Book Value
management buy-in (MBI)
34. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
debt financing
syndication
Business Summary
Term Sheet
35. 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)
venture capital
Anti-Dilution Protections
36. 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
Private Equity
Dividends
Market Capitalization
fund of funds
37. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
equity financing
portfolio compaay
Qualified IPO
38. A business owned by stockholders who share in its profits but are not personally responsible for its debts
Confidentiality
exit route
Corporation (Limited liability and taxation)
small business investment companies (SBIC)
39. 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
Restricted Shares
Private Equity
Bridge Financing
Capitalization Table
40. Assets are subject to double taxation - Unlimited number of investors
C Corporation
Pre-money valuation
Liquidation Preference
Book Value
41. The amount of this available to a management team for venture investments.
Liquidity Event
debt financing
bridge loans
capital under management
42. 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.
Business Summary
minority enterprise small business investment companies (MESBICS)
Elevator Pitch
follow-on
43. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Liquidation Preference
Capital
Stock Price Agreement
limited partnerships
44. 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.
Dividends
secondary public offering
turnaround
Elevator Pitch
45. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
Business Plan
buyout
Post-Money Valuation
Qualified IPO
46. 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.
Senior Stock
Internal Rate of Return
Common Stock
acquisition
47. 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
small business investment companies (SBIC)
No Shop/Confidentiality
Restricted Shares
Internal Rate of Return
48. 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
debt financing
NDA (Non-disclosure agreement)
Lead Investor
syndication
49. 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
equity offerings
Lead Investor
secondary public offering
Liquidation Preference
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.
Venture Capitalist
Bridge Financing
Anti-Dilution Protections
IRR