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Venture Capital

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






2. 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.






3. 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






4. An Agreement made between the investor and the company defining the rights and obligations of the parties involved. The process by which one arrives at the final term and conditions of the investment.






5. The internal rate of return on an investment.






6. An IPO that has met certain






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






8. No double tax - Limited number of investors






9. 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






10. 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






11. 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






12. 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






13. 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.






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






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






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






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






18. 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.






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






20. 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






21. A study of the background and financial reliability of the company - management team and industry.






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






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






24. The sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.






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






26. The maximum amount of cash that a partner is required to contribute under the terms






27. 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






28. 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.).






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






30. 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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31. 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.






32. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.






33. The rate at which a company expends net cash over a certain period - usually a month.






34. 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






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






36. 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






37. Issue of shares of a company to the public by the company (directly) for the first time.






38. The way you buy stock






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






40. Don't talk to the market about the company






41. 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.






42. 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






43. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.






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






45. 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.






46. 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.






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






48. The equity ownership in a LLC. May be either common or preferred. Partnership agreement






49. 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






50. 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.