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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 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.
recapitalization
small business investment companies (SBIC)
term sheet
institutional investors
2. 'I will buy stock at price we negotiate'
Stock Price Agreement
Term Sheet
angel investors
debt financing
3. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
Warrants
Liquidation
Membership Interest
equity offerings
4. 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.
Adjusted Book Value
turnaround
limited partnerships
Qualified IPO
5. 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
minority enterprise small business investment companies (MESBICS)
Confidentiality
management buy-in (MBI)
seed capital
6. The way you buy stock
S Corporation
PPM
Term Sheet
institutional investors
7. Letter of intent summarizing the key legal and financial terms
Term Sheet
Venture Capitalist
IPO (Initial Public Offering)
Common Stock
8. 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.
Book Value
Venture Capitalist
Outstanding Stock
Lead Investor
9. 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
10. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
capital gain
Subordinated Debt
S Corporation
Limited Partner
11. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
Series A Preferred Stock
closing
benchmarks
Capital Call 'Drawdown'
12. Compound internal rate of return.
Liquidity Event
term sheet
IRR
turnaround
13. 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.
follow-on
Business Plan
Due Diligence
Qualified IPO
14. Document between general and limited partnership of each fund spells out details of the partnership.
Limited Partnership Agreement
Adjusted Book Value
leverage buy-out(LBO)
Liquidation Preference
15. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
PPM
Pre-Money Valuation
Conversion Rights
management buy-in (MBI)
16. 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
Market Capitalization
venture capital
Restricted Stock
mezzanine financing
17. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
Burn Rate
Liquidation
Capital Call 'Drawdown'
angel investors
18. 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.
small business investment companies (SBIC)
Venture Capital Financing
Post-money
going private
19. 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.
Bootstrapping
Preferred Stock
private investment in public equities (PIPE)
Capital
20. Date the LP's subscription is effective and they become partner
Closing
Liquidation
series a preferred stock
return on investment (ROI)
21. The internal rate of return on an investment.
Subordinated Debt
IPO(initial public offerings)
Elevator Pitch
return on investment (ROI)
22. The method by which an investor will realize an investment.
lead investor
Pre-Money Valuation
Voting Rights
exit route
23. 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.
secondary public offering
PPM
due diligence
Preferred Stock
24. How much the company is worth before an investment
General Partner (GP)
Lead Investor
Seed Money
Pre-Money Valuation
25. The rate of return or profit that an investment is expected to earn.
Internal Rate of Return
Restricted Stock
PPM
General Partner (GP)
26. 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
IPO (Initial Public Offering)
management buy-out (MBO)
equity financing
Adjusted Book Value
27. The total value of the company immediately prior to the latest round of financing
Limited Partner
seed capital
Corporation (Limited liability and taxation)
Pre-money valuation
28. An IPO that has met certain
Qualified IPO
mezzanine financing
S Corporation
Subordinated Debt
29. 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
Cash-out election
return on investment (ROI)
executive summary
Elevator Pitch
30. Assets are subject to double taxation - Unlimited number of investors
going private
term sheet
C Corporation
Subordinated Debt
31. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
NDA (Non-disclosure agreement)
Confidentiality
Common Equity
lead investor
32. 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.
Private Equity
Post-money
due diligence
management buy-out (MBO)
33. Pre-money valuation plus the amount invested in the latest round
Capitalization Table
Market Capitalization
Post-money
recapitalization
34. 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
going private
private equity
Deal Structure
Book Value
35. 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
Adjusted Book Value
executive summary
Cash-out election
recapitalization
36. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
Equity
Adjusted Book Value
Anti-Dilution Protections
institutional investors
37. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Liquidation
IRR
Initial Public Offering
Preferred Stock
38. How you get to vote
Voting Rights
Adjusted Book Value
Burn Rate
Post-money
39. 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.
Corporation (Limited liability and taxation)
lead investor
Cash-out election
Deal Structure
40. 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
Restricted Shares
Voting Rights
lead investor
Membership Interest
41. A security with limits on its transferability. Usually issued in connection with a private placement
capital under management
Book Value
Restricted Stock
Liquidation Preference
42. 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
Warrants
S Corporation
Term Sheet
Business Plan
43. 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
Internal Rate of Return
closing
secondary public offering
private equity
44. 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
small business investment companies (SBIC)
Cash-out election
Capital Call 'Drawdown'
going private
45. 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
Burn Rate
Venture Capitalist
venture capital
debt financing
46. Selling an interest in your business to an outside party to raise money.
Corporation (Limited liability and taxation)
C Corporation
Qualified IPO
equity financing
47. The amount of this available to a management team for venture investments.
institutional investors
capital under management
leverage buy-out(LBO)
Subordinated Debt
48. 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
Deal Structure
Voting Rights
syndication
49. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Book Value
Qualified IPO
Capital
Pre-money valuation
50. 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) ...
Voting Rights
Initial Public Offering
return on investment (ROI)
Angel Financing