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Venture Capital
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Subject
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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. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
minority enterprise small business investment companies (MESBICS)
Limited Partnership Agreement
Anti-Dilution Protections
raising capital
2. Letter of intent summarizing the key legal and financial terms
Common Stock
Term Sheet
Pre-money valuation
capital under management
3. 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.
syndication
Voting Rights
raising capital
Private Equity
4. 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
Restricted Shares
Preferred Stock
secondary public offering
secondary purchase
5. The rate at which a company expends net cash over a certain period - usually a month.
executive summary
management buy-out (MBO)
Burn Rate
Capitalization Table
6. 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) ...
Dividends
Initial Public Offering
lock-up period
limited partnerships
7. 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.
secondary public offering
exit
leverage buy-out(LBO)
Bridge Financing
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.
Qualified IPO
Capital Call 'Drawdown'
Preferred Stock
fund of funds
9. The company or entity into which a fund invests directly.
portfolio compaay
Voting Rights
Senior Stock
Venture Capital Financing
10. The way you buy stock
debt financing
S Corporation
PPM
syndication
11. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Book Value
capital under management
Warrants
limited partnerships
12. The rate of return or profit that an investment is expected to earn.
angel investors
Internal Rate of Return
small business investment companies (SBIC)
Post-money
13. Term sheet for equity offering
Qualified IPO
due diligence
Venture Capital Financing
Term Sheet
14. 'I will buy stock at price we negotiate'
turnaround
equity offerings
Stock Price Agreement
portfolio compaay
15. How you get to vote
Due Diligence
Voting Rights
lead investor
angel investors
16. 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.
mezzanine financing
Equity
Burn Rate
minority enterprise small business investment companies (MESBICS)
17. Compound internal rate of return.
IPO(initial public offerings)
IRR
Liquidation Preference
portfolio compaay
18. 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.
lock-up period
fund of funds
institutional investors
Common Stock
19. Document between general and limited partnership of each fund spells out details of the partnership.
Limited Partnership Agreement
Restricted Shares
Subordinated Debt
exit route
20. 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
angel investors
Capital
Restricted Stock
21. 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
going private
Post-Money Valuation
term sheet
Warrants
22. A security with limits on its transferability. Usually issued in connection with a private placement
Capital
debt financing
management buy-out (MBO)
Restricted Stock
23. An IPO that has met certain
Qualified IPO
lock-up period
Bootstrapping
Membership Interest
24. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Subordinated Debt
NDA (Non-disclosure agreement)
Seed Money
IRR
25. This refers to obtaining capital from investors or venture capital sources.
Liquidity Event
raising capital
Business Plan
Lead Investor
26. 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 -
return on investment (ROI)
Membership Interest
limited partnerships
portfolio compaay
27. 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.
No Shop/Confidentiality
Deal Structure
follow-on
closing
28. The value at which an asset is carried on a balance sheet (the cost of the item)
return on investment (ROI)
Voting Rights
Stock Price Agreement
Book Value
29. 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.
Market Capitalization
Angel Financing
Series A Preferred Stock
management buy-out (MBO)
30. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
Bridge Financing
IPO(initial public offerings)
Series A Preferred Stock
Business Summary
31. An investment vehicle designed to invest in a diversified group of investment funds.
Liquidation Preference
fund of funds
Initial Public Offering
Common Equity
32. Issue of shares of a company to the public by the company (directly) for the first time.
Closing
lead investor
IPO(initial public offerings)
limited partnerships
33. 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
equity financing
Dividends
Capital
Restricted Shares
34. Don't talk to the market about the company
Preferred Stock
private equity
Common Stock
Confidentiality
35. 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
Seed Money
Series A Preferred Stock
Lead Investor
36. The internal rate of return on an investment.
management buy-in (MBI)
exit
Anti-Dilution Protections
return on investment (ROI)
37. This refers to a synopsis of the key points of a business plan.
buyout
Conversion Rights
acquisition
executive summary
38. Cannot get other outside investors-No Shop
management buy-in (MBI)
lock-up period
No Shop/Confidentiality
small business investment companies (SBIC)
39. Date the LP's subscription is effective and they become partner
term sheet
lock-up period
Term Sheet
Closing
40. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
Restricted Stock
management buy-in (MBI)
secondary public offering
Conversion Rights
41. The total value of the company immediately prior to the latest round of financing
Venture Capitalist
Pre-money valuation
Preferred Stock
bridge loans
42. 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
Anti-Dilution Protections
small business investment companies (SBIC)
going private
limited partnerships
43. 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
bridge loans
exit route
Venture Capitalist
Seed Money
44. The amount of this available to a management team for venture investments.
corporate venturing
acquisition
capital under management
Limited Partnership Agreement
45. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
executive summary
General Partner (GP)
Senior Stock
capital gain
46. 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.
IPO (Initial Public Offering)
Venture Capital Financing
Confidentiality
Term Sheet
47. How much the company is worth before an investment
benchmarks
return on investment (ROI)
Pre-Money Valuation
S Corporation
48. 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.
Series A Preferred Stock
Liquidity Event
seed capital
mezzanine financing
49. 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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50. 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
Preferred Stock
Capital
Seed Money
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