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Test your basic knowledge |
Venture Capital
Start Test
Study First
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. Compound internal rate of return.
Limited Partner
IRR
Voting Rights
Restricted Shares
2. The practice of a large company taking a minority equity position in a smaller company in a related field.
NDA (Non-disclosure agreement)
small business investment companies (SBIC)
corporate venturing
portfolio compaay
3. 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
Elevator Pitch
due diligence
bridge loans
4. 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
Internal Rate of Return
Liquidation Preference
mezzanine financing
Term Sheet
5. 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
limited partnerships
Preferred Stock
Liquidation
Corporation (Limited liability and taxation)
6. The equity ownership in a corporation. Also has basic voting rights
Membership Interest
Common Stock
Post-money
return on investment (ROI)
7. 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.
IRR
private investment in public equities (PIPE)
secondary public offering
Bootstrapping
8. 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
Liquidation Preference
syndication
fund of funds
9. Cannot get other outside investors-No Shop
series a preferred stock
Venture Capitalist
No Shop/Confidentiality
Private Equity
10. Pre-money valuation plus the amount invested in the latest round
Post-money
Elevator Pitch
private equity
C Corporation
11. The method by which an investor will realize an investment.
No Shop/Confidentiality
institutional investors
exit route
Pre-Money Valuation
12. 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
Series A Preferred Stock
IPO(initial public offerings)
liquidation
Business Plan
13. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Common Equity
Voting Rights
corporate venturing
Business Plan
14. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
follow-on
Closing
leverage buy-out(LBO)
bridge loans
15. 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
Pre-Money Valuation
Warrants
minority enterprise small business investment companies (MESBICS)
Liquidation
16. 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.
Liquidation Preference
liquidation
PPM
syndication
17. Date the LP's subscription is effective and they become partner
venture capital
Pre-Money Valuation
Closing
capital under management
18. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
due diligence
Anti-Dilution Protections
capital gain
lead investor
19. Corporation's first offer to sell stock to the public - Allows for anyone to buy stock and now falls under the SEC (No longer accredited investor) ...
Initial Public Offering
Angel Financing
going private
Bridge Financing
20. 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 -
Series A Preferred Stock
Liquidation
limited partnerships
Elevator Pitch
21. No double tax - Limited number of investors
S Corporation
Limited Partner
Qualified IPO
recapitalization
22. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
Warrants
return on investment (ROI)
Dividends
buyout
23. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
closing
Preferred Stock
Warrants
secondary public offering
24. An IPO that has met certain
limited partnerships
Qualified IPO
Post-money
Senior Stock
25. 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
capital gain
acquisition
Restricted Shares
Term Sheet
26. This refers to a synopsis of the key points of a business plan.
Bridge Financing
Preferred Stock
Business Plan
executive summary
27. 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
going private
Capitalization Table
Liquidation Preference
Market Capitalization
28. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Term Sheet
Liquidity Event
Internal Rate of Return
Pre-Money Valuation
29. 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
Private Equity
Seed Money
PPM
Market Capitalization
30. 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
IPO (Initial Public Offering)
small business investment companies (SBIC)
Lead Investor
Elevator Pitch
31. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
exit
Anti-Dilution Protections
General Partner (GP)
Series A Preferred Stock
32. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
due diligence
equity offerings
return on investment (ROI)
Adjusted Book Value
33. These are equity securities of companies that have not 'gone public' (in other words - companies that have not listed their stock on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are no
private equity
Venture Capitalist
turnaround
management buy-out (MBO)
34. How you get out
institutional investors
Liquidation Preference
Elevator Pitch
capital gain
35. 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.
buyout
Bridge Financing
due diligence
raising capital
36. 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
Lead Investor
Preferred Stock
limited partnerships
Post-Money Valuation
37. 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
Capital Commitment
Business Plan
IRR
Confidentiality
38. 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
Post-Money Valuation
Lead Investor
Market Capitalization
going private
39. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
closing
NDA (Non-disclosure agreement)
secondary public offering
Subordinated Debt
40. How you get to vote
Voting Rights
Series A Preferred Stock
Venture Capitalist
Liquidity Event
41. 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.
Series A Preferred Stock
portfolio compaay
acquisition
Membership Interest
42. 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
going private
corporate venturing
small business investment companies (SBIC)
management buy-out (MBO)
43. 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
PPM
NDA (Non-disclosure agreement)
debt financing
follow-on
44. Document between general and limited partnership of each fund spells out details of the partnership.
recapitalization
General Partner (GP)
Initial Public Offering
Limited Partnership Agreement
45. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
exit
Pre-money valuation
Outstanding Stock
Liquidation Preference
46. 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
No Shop/Confidentiality
Senior Stock
Lead Investor
Seed Money
47. The amount of this available to a management team for venture investments.
Dividends
angel investors
capital under management
Liquidity Event
48. How much the company is worth before an investment
IRR
Pre-Money Valuation
buyout
management buy-out (MBO)
49. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Subordinated Debt
Seed Money
management buy-in (MBI)
Capital Commitment
50. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
management buy-in (MBI)
portfolio compaay
debt financing
Limited Partnership Agreement