Test your basic knowledge |

Venture Capital

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. Compound internal rate of return.






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






3. 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.






4. 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






5. 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






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






7. 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.






8. 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.






9. Cannot get other outside investors-No Shop






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






11. The method by which an investor will realize an investment.






12. 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






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






14. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.






15. 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






16. 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.






17. Date the LP's subscription is effective and they become partner






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






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. 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 -






21. No double tax - Limited number of investors






22. Funds provided to enable an enterprise to acquire another enterprise or product line or business.






23. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.






24. An IPO that has met certain






25. 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






26. This refers to a synopsis of the key points of a business plan.






27. 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






28. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)






29. 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






30. 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






31. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.






32. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.






33. 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






34. How you get out






35. 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.






36. 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






37. 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






38. 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






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






40. How you get to vote






41. 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.






42. 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






43. 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






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






45. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






46. 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






47. The amount of this available to a management team for venture investments.






48. How much the company is worth before an investment






49. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last






50. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.