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Venture Capital
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Subject
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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. 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
Deal Structure
term sheet
acquisition
Lead Investor
2. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
equity offerings
Pre-Money Valuation
minority enterprise small business investment companies (MESBICS)
Post-Money Valuation
3. The amount of this available to a management team for venture investments.
Restricted Stock
Venture Capitalist
capital under management
Term Sheet
4. Also called a 'Cap Table' - this is a table showing the total amount of the various securities issued by a firm. This typically includes the amount of investment obtained from each source and the securities distributed -- e.g. common and preferred s
S Corporation
Capitalization Table
Liquidation Preference
Post-Money Valuation
5. 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.
Venture Capital Financing
series a preferred stock
recapitalization
Initial Public Offering
6. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
Liquidation
No Shop/Confidentiality
Senior Stock
management buy-in (MBI)
7. Selling an interest in your business to an outside party to raise money.
going private
Common Stock
Liquidity Event
equity financing
8. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
closing
private investment in public equities (PIPE)
Business Summary
Outstanding Stock
9. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Liquidity Event
secondary purchase
return on investment (ROI)
Adjusted Book Value
10. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
small business investment companies (SBIC)
Lead Investor
angel investors
Bridge Financing
11. The internal rate of return on an investment.
Elevator Pitch
Bridge Financing
return on investment (ROI)
raising capital
12. A business owned by stockholders who share in its profits but are not personally responsible for its debts
recapitalization
Corporation (Limited liability and taxation)
going private
Limited Partner
13. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Lead Investor
Qualified IPO
acquisition
Liquidity Event
14. 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
portfolio compaay
Dividends
Qualified IPO
going private
15. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
angel investors
Term Sheet
Angel Financing
Private Equity
16. The method by which an investor will realize an investment.
exit route
angel investors
Elevator Pitch
going private
17. How you get to vote
Capital Call 'Drawdown'
turnaround
Voting Rights
Liquidation
18. 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.
mezzanine financing
Lead Investor
IPO (Initial Public Offering)
Internal Rate of Return
19. 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.
closing
Elevator Pitch
Preferred Stock
syndication
20. 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.
term sheet
Preferred Stock
Deal Structure
lock-up period
21. Term sheet for equity offering
Seed Money
Term Sheet
return on investment (ROI)
limited partnerships
22. The rate at which a company expends net cash over a certain period - usually a month.
due diligence
Liquidation Preference
Burn Rate
Capital Call 'Drawdown'
23. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
private investment in public equities (PIPE)
Dividends
minority enterprise small business investment companies (MESBICS)
Anti-Dilution Protections
24. 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
General Partner (GP)
Warrants
Private Equity
S Corporation
25. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Warrants
capital gain
return on investment (ROI)
series a preferred stock
26. 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
seed capital
benchmarks
Voting Rights
small business investment companies (SBIC)
27. Assets are subject to double taxation - Unlimited number of investors
management buy-out (MBO)
Term Sheet
Preferred Stock
C Corporation
28. Cannot get other outside investors-No Shop
Preferred Stock
No Shop/Confidentiality
Series A Preferred Stock
benchmarks
29. 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
Liquidation
Liquidity Event
Series A Preferred Stock
Common Stock
30. 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.
IRR
seed capital
recapitalization
capital under management
31. The practice of a large company taking a minority equity position in a smaller company in a related field.
limited partnerships
corporate venturing
Limited Partnership Agreement
Term Sheet
32. How you get out
Seed Money
Post-money
Liquidation Preference
bridge loans
33. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Common Equity
Internal Rate of Return
Conversion Rights
Term Sheet
34. 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
IPO (Initial Public Offering)
series a preferred stock
buyout
recapitalization
35. 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.
Business Plan
minority enterprise small business investment companies (MESBICS)
Anti-Dilution Protections
acquisition
36. 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.
Stock Price Agreement
Seed Money
Senior Stock
turnaround
37. 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.
Restricted Stock
lead investor
Preferred Stock
series a preferred stock
38. 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
Limited Partner
IPO (Initial Public Offering)
Series A Preferred Stock
turnaround
39. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Restricted Shares
liquidation
debt financing
Subordinated Debt
40. 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
executive summary
Market Capitalization
Liquidation
corporate venturing
41. 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
Pre-Money Valuation
Cash-out election
closing
Capital Call 'Drawdown'
42. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
Common Stock
NDA (Non-disclosure agreement)
minority enterprise small business investment companies (MESBICS)
Senior Stock
43. A unit of ownership of a corporation. In the case of a public company - the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in
Common Stock
Senior Stock
Series A Preferred Stock
corporate venturing
44. 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
Pre-Money Valuation
Business Summary
Seed Money
IPO (Initial Public Offering)
45. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
raising capital
Liquidation
IPO (Initial Public Offering)
Conversion Rights
46. These are performance goals against which a company's success is measured. Often - they are used by investors to help determine whether a company will receive additional funding or whether management will receive extra stock. Sometimes management wi
capital gain
Pre-Money Valuation
syndication
benchmarks
47. How much the company is worth before an investment
C Corporation
Preferred Stock
equity financing
Pre-Money Valuation
48. 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
executive summary
private equity
recapitalization
Pre-Money Valuation
49. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
private equity
secondary purchase
liquidation
50. 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
return on investment (ROI)
Restricted Shares
closing
Dividends
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