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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. A unit of ownership of a corporation. In the case of a public company - the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in
private equity
Common Stock
Venture Capital Financing
No Shop/Confidentiality
2. Pre-money valuation plus the amount invested in the latest round
limited partnerships
Corporation (Limited liability and taxation)
Post-money
PPM
3. 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.
follow-on
Restricted Shares
Business Summary
Senior Stock
4. 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 -
Market Capitalization
Pre-Money Valuation
Preferred Stock
limited partnerships
5. 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
capital under management
Lead Investor
exit route
liquidation
6. 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
venture capital
Adjusted Book Value
Business Plan
Liquidation Preference
7. The rate at which a company expends net cash over a certain period - usually a month.
Preferred Stock
exit route
management buy-out (MBO)
Burn Rate
8. Compound internal rate of return.
IRR
liquidation
Liquidation Preference
Pre-Money Valuation
9. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
turnaround
closing
liquidation
Capitalization Table
10. How much the company is worth before an investment
Outstanding Stock
management buy-out (MBO)
Pre-Money Valuation
Preferred Stock
11. 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
Anti-Dilution Protections
Liquidation Preference
due diligence
Elevator Pitch
12. The total value of the company immediately prior to the latest round of financing
debt financing
Bridge Financing
Pre-money valuation
Limited Partnership Agreement
13. 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
Restricted Stock
Venture Capital Financing
Burn Rate
Pre-Money Valuation
14. 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
S Corporation
Burn Rate
Deal Structure
15. Cannot get other outside investors-No Shop
management buy-out (MBO)
No Shop/Confidentiality
Post-Money Valuation
Limited Partnership Agreement
16. The period an investor must wait before selling or trading company shares subsequent to an exit. Usually in an initial public offering this period is determined by the underwriters.
C Corporation
management buy-in (MBI)
term sheet
lock-up period
17. 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
Venture Capital Financing
Preferred Stock
PPM
Cash-out election
18. The internal rate of return on an investment.
Initial Public Offering
secondary public offering
return on investment (ROI)
small business investment companies (SBIC)
19. 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.).
IRR
Capitalization Table
Limited Partner
institutional investors
20. 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
Pre-money valuation
buyout
lead investor
series a preferred stock
21. 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
Corporation (Limited liability and taxation)
Dividends
secondary public offering
fund of funds
22. 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
Capitalization Table
Liquidation Preference
Deal Structure
Restricted Shares
23. 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.
Preferred Stock
term sheet
institutional investors
Corporation (Limited liability and taxation)
24. 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
Venture Capitalist
Capitalization Table
follow-on
bridge loans
25. Letter of intent summarizing the key legal and financial terms
Term Sheet
Elevator Pitch
Series A Preferred Stock
fund of funds
26. 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
Venture Capitalist
closing
syndication
IPO (Initial Public Offering)
27. A business owned by stockholders who share in its profits but are not personally responsible for its debts
Corporation (Limited liability and taxation)
Liquidation Preference
Preferred Stock
raising capital
28. The practice of a large company taking a minority equity position in a smaller company in a related field.
corporate venturing
Common Equity
Capitalization Table
Common Stock
29. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Capital
S Corporation
lead investor
No Shop/Confidentiality
30. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Initial Public Offering
Limited Partnership Agreement
S Corporation
Liquidity Event
31. 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
raising capital
liquidation
small business investment companies (SBIC)
due diligence
32. The company or entity into which a fund invests directly.
Post-money
Capital Call 'Drawdown'
portfolio compaay
syndication
33. No double tax - Limited number of investors
small business investment companies (SBIC)
Liquidity Event
S Corporation
Capital Commitment
34. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
fund of funds
buyout
Elevator Pitch
angel investors
35. The way you buy stock
PPM
follow-on
minority enterprise small business investment companies (MESBICS)
Preferred Stock
36. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
Deal Structure
Preferred Stock
buyout
management buy-in (MBI)
37. 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.
minority enterprise small business investment companies (MESBICS)
Term Sheet
Liquidation Preference
Deal Structure
38. An IPO that has met certain
follow-on
Qualified IPO
series a preferred stock
benchmarks
39. 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.
private equity
S Corporation
IPO (Initial Public Offering)
mezzanine financing
40. 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
Market Capitalization
IPO (Initial Public Offering)
Venture Capitalist
Outstanding Stock
41. 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
Bootstrapping
syndication
Limited Partner
Lead Investor
42. Issue of shares of a company to the public by the company (directly) for the first time.
Post-Money Valuation
series a preferred stock
Venture Capitalist
IPO(initial public offerings)
43. A security with limits on its transferability. Usually issued in connection with a private placement
Restricted Stock
Common Stock
Capital Call 'Drawdown'
return on investment (ROI)
44. 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
Capital Call 'Drawdown'
benchmarks
S Corporation
buyout
45. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Common Equity
Post-Money Valuation
corporate venturing
Restricted Shares
46. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Adjusted Book Value
recapitalization
follow-on
capital under management
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.
recapitalization
Voting Rights
acquisition
Bridge Financing
48. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Pre-Money Valuation
Subordinated Debt
Warrants
term sheet
49. 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.
acquisition
Venture Capitalist
Stock Price Agreement
Term Sheet
50. Assets are subject to double taxation - Unlimited number of investors
Restricted Shares
acquisition
C Corporation
Dividends