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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. 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 -






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






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






4. No double tax - Limited number of investors






5. 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.






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






7. 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






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






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






10. 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






11. 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

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






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






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






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






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






17. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.






18. 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.






19. 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






20. 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






21. 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






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






23. 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.






24. 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.






25. 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.






26. 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.






27. 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






28. 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.).






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






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






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






32. The amount of this available to a management team for venture investments.






33. 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






34. 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.






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






36. 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.






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






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






39. 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






40. The rate of return or profit that an investment is expected to earn.






41. 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






42. 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






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






44. 'I will buy stock at price we negotiate'






45. 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






46. 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






47. 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.






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. 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.






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







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