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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. 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.

2. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity

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

4. 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.

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 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.

7. 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

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

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

10. 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

11. 'I will buy stock at price we negotiate'

12. 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.

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

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

15. 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

16. 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.

17. 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

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

19. 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

20. Term sheet for equity offering

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

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

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. How you get to vote

25. 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

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

27. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan

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

29. 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.

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

31. A business owned by stockholders who share in its profits but are not personally responsible for its debts

32. 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

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

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

35. 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 -

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

37. 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.

38. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.

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

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

41. 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

42. How you get out

43. 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.

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

45. 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

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

47. 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.

48. 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

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

50. 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