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. Don't talk to the market about the company






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






3. How you get out






4. 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.






5. 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.






6. 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






7. 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






8. 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






9. 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.






10. How much the company is worth before an investment






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






12. 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






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






14. 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.






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






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






17. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities






18. 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






19. 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






20. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value






21. 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






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






23. 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






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






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






26. 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.






27. 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






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






29. Term sheet for equity offering






30. Compound internal rate of return.






31. 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.






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






33. 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






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






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






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






37. 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






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






39. The way you buy stock






40. 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.






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






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






43. 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.






44. Selling an interest in your business to an outside party to raise money.






45. 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.






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






47. 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






48. 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.






49. 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.






50. A security with limits on its transferability. Usually issued in connection with a private placement