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Venture Capital

Subject : industries
  • 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. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last

2. Letter of intent summarizing the key legal and financial terms

3. 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

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

5. 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.

6. The way you buy stock

7. 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 -

8. 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

9. 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

10. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.

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

12. The total value of the company immediately prior to the latest round of financing

13. Compound internal rate of return.

14. 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

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

16. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.

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

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

19. 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) ...

20. 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

21. The reorganization of a company's capital structure. A company may seek to save on taxes by replacing preferred stock with bonds in order to gain interest deductibility.

22. 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.

23. 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

24. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.

25. The value at which an asset is carried on a balance sheet (the cost of the item)

26. 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

27. 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

28. 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

29. 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.

30. How you get out

31. Pre-money valuation plus the amount invested in the latest round

32. 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

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

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

35. 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

36. 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.

37. 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

38. This refers to obtaining capital from investors or venture capital sources.

39. 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

40. 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.

41. 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

42. 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

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

44. The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During peri

45. 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.

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

47. 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

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

49. 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

50. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities