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






2. 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






3. 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.






4. Date the LP's subscription is effective and they become partner






5. 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






6. 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






7. 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






8. 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






9. The way you buy stock






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






11. 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






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






13. 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






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






15. No double tax - Limited number of investors






16. 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.






17. 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






18. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)






19. 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






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






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






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






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






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






25. How you get out






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






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






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






29. Cannot get other outside investors-No Shop






30. Compound internal rate of return.






31. The investor who leads a group of investors into an investment. Usually one venture capitalist will be this when a group of venture capitalists invest in a single business.






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






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






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






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






36. 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






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






38. 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


39. 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






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






41. The internal rate of return on an investment.






42. 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






43. 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






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






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






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






47. 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






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






49. Term sheet for equity offering






50. 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.