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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. 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.






2. Investments by a private equity fund in a publicly traded company - usually at a discount.






3. 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






4. The internal rate of return on an investment.






5. 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 -






6. Cannot get other outside investors-No Shop






7. 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






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






9. 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.






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






11. These are short-term financing agreements that fund a company's operation until it can arrange a more comprehensive longer-term financing. The need for these arises when a company runs out of cash before it can obtain more capital investment though l






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 party that manages a limited partnership and is liable for the debts of the company






14. 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






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






16. 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.






17. 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






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






19. 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.






20. 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.






21. 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






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






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






24. 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






25. 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.).






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






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






28. How much the company is worth before an investment






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






30. 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.






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






32. 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






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






34. 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.






35. Term sheet for equity offering






36. Assets are subject to double taxation - Unlimited number of investors






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






38. 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






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






40. 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






41. 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.






42. 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






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






44. An IPO that has met certain






45. Compound internal rate of return.






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






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






48. 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






49. 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






50. 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