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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 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.
Closing
Post-money
follow-on
going private
2. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
No Shop/Confidentiality
Membership Interest
secondary public offering
Liquidation Preference
3. A business owned by stockholders who share in its profits but are not personally responsible for its debts
acquisition
seed capital
Corporation (Limited liability and taxation)
Term Sheet
4. 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.).
syndication
institutional investors
Due Diligence
Liquidation Preference
5. This word is used to describe businesses that are in trouble and whose management will cause the business to become profitable so they are no longer in trouble.
turnaround
return on investment (ROI)
raising capital
Due Diligence
6. Date the LP's subscription is effective and they become partner
Closing
raising capital
Term Sheet
Term Sheet
7. 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.
follow-on
Voting Rights
capital under management
term sheet
8. 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
venture capital
Conversion Rights
Pre-Money Valuation
NDA (Non-disclosure agreement)
9. The company or entity into which a fund invests directly.
Preferred Stock
portfolio compaay
Bootstrapping
Bridge Financing
10. Assets are subject to double taxation - Unlimited number of investors
Book Value
C Corporation
executive summary
General Partner (GP)
11. The maximum amount of cash that a partner is required to contribute under the terms
Limited Partner
Capital Commitment
Bridge Financing
recapitalization
12. 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.
Closing
private equity
syndication
Series A Preferred Stock
13. Cannot get other outside investors-No Shop
debt financing
seed capital
mezzanine financing
No Shop/Confidentiality
14. Letter of intent summarizing the key legal and financial terms
Liquidation Preference
Market Capitalization
Term Sheet
Post-money
15. 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.
exit route
lead investor
Term Sheet
IPO (Initial Public Offering)
16. 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
executive summary
Conversion Rights
Common Equity
Preferred Stock
17. Compound internal rate of return.
executive summary
Closing
IRR
leverage buy-out(LBO)
18. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
management buy-in (MBI)
No Shop/Confidentiality
closing
Warrants
19. 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
executive summary
NDA (Non-disclosure agreement)
Lead Investor
20. 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) ...
recapitalization
exit route
Initial Public Offering
Book Value
21. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
due diligence
minority enterprise small business investment companies (MESBICS)
equity financing
Term Sheet
22. Issue of shares of a company to the public by the company (directly) for the first time.
angel investors
IPO(initial public offerings)
S Corporation
C Corporation
23. Investments by a private equity fund in a publicly traded company - usually at a discount.
Liquidation Preference
Book Value
private investment in public equities (PIPE)
General Partner (GP)
24. 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.
raising capital
equity financing
Capital
Bridge Financing
25. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
Preferred Stock
capital gain
leverage buy-out(LBO)
secondary public offering
26. The rate at which a company expends net cash over a certain period - usually a month.
raising capital
Burn Rate
Confidentiality
General Partner (GP)
27. 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
Business Summary
Lead Investor
Liquidity Event
S Corporation
28. 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
Cash-out election
minority enterprise small business investment companies (MESBICS)
Capital
Bridge Financing
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
equity offerings
Pre-Money Valuation
closing
Conversion Rights
30. 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
Common Stock
Venture Capitalist
going private
Common Equity
31. 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
Post-Money Valuation
lock-up period
series a preferred stock
syndication
32. 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
Elevator Pitch
corporate venturing
Post-money
benchmarks
33. 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.
executive summary
Bootstrapping
Liquidity Event
angel investors
34. An IPO that has met certain
Liquidity Event
Capitalization Table
lead investor
Qualified IPO
35. The method by which an investor will realize an investment.
exit route
liquidation
Capital Call 'Drawdown'
buyout
36. 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
capital gain
Subordinated Debt
C Corporation
Private Equity
37. No double tax - Limited number of investors
S Corporation
exit
Initial Public Offering
angel investors
38. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
seed capital
Business Summary
NDA (Non-disclosure agreement)
Private Equity
39. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
No Shop/Confidentiality
Liquidation Preference
management buy-in (MBI)
Elevator Pitch
40. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
closing
Anti-Dilution Protections
capital gain
PPM
41. 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.
Capital Commitment
corporate venturing
minority enterprise small business investment companies (MESBICS)
management buy-out (MBO)
42. The practice of a large company taking a minority equity position in a smaller company in a related field.
recapitalization
Capital Call 'Drawdown'
Pre-Money Valuation
corporate venturing
43. 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
C Corporation
Equity
Seed Money
44. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Subordinated Debt
Private Equity
exit route
Initial Public Offering
45. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
venture capital
Subordinated Debt
term sheet
Common Equity
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.
capital under management
Capital Call 'Drawdown'
Closing
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
Common Equity
Membership Interest
term sheet
Restricted Shares
48. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
portfolio compaay
Conversion Rights
limited partnerships
acquisition
49. How you get out
Post-Money Valuation
Liquidation Preference
Anti-Dilution Protections
Post-money
50. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
No Shop/Confidentiality
Series A Preferred Stock
Pre-Money Valuation
buyout