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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. 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.
capital gain
Common Stock
No Shop/Confidentiality
recapitalization
2. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
IPO(initial public offerings)
management buy-in (MBI)
Business Summary
Post-money
3. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Liquidity Event
recapitalization
seed capital
liquidation
4. An investment vehicle designed to invest in a diversified group of investment funds.
Anti-Dilution Protections
Venture Capitalist
closing
fund of funds
5. How much the company is worth before an investment
recapitalization
Pre-Money Valuation
S Corporation
Membership Interest
6. 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.
portfolio compaay
turnaround
Liquidation Preference
Pre-Money Valuation
7. Selling an interest in your business to an outside party to raise money.
equity financing
Term Sheet
Burn Rate
Venture Capital Financing
8. Don't talk to the market about the company
Liquidation Preference
mezzanine financing
Capitalization Table
Confidentiality
9. The amount of this available to a management team for venture investments.
Preferred Stock
capital under management
Capital Commitment
Adjusted Book Value
10. 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
angel investors
Common Stock
Term Sheet
capital under management
11. 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
Business Plan
General Partner (GP)
mezzanine financing
Private Equity
12. 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
Closing
private equity
Term Sheet
Liquidation Preference
13. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Liquidity Event
Subordinated Debt
Preferred Stock
Dividends
14. 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
minority enterprise small business investment companies (MESBICS)
debt financing
Common Stock
Series A Preferred Stock
15. 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) ...
private equity
Elevator Pitch
Initial Public Offering
Preferred Stock
16. The way you buy stock
PPM
seed capital
Bootstrapping
Liquidation Preference
17. 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
closing
series a preferred stock
limited partnerships
equity offerings
18. 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.
Deal Structure
Pre-money valuation
term sheet
C Corporation
19. This refers to a synopsis of the key points of a business plan.
exit
Liquidation
Term Sheet
executive summary
20. The sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.
Capital Call 'Drawdown'
liquidation
C Corporation
Term Sheet
21. 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
Market Capitalization
Seed Money
buyout
22. 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.
General Partner (GP)
Bridge Financing
leverage buy-out(LBO)
IPO (Initial Public Offering)
23. 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.
Warrants
Term Sheet
term sheet
syndication
24. Issue of shares of a company to the public by the company (directly) for the first time.
follow-on
Capitalization Table
management buy-in (MBI)
IPO(initial public offerings)
25. The practice of a large company taking a minority equity position in a smaller company in a related field.
corporate venturing
Term Sheet
management buy-out (MBO)
Post-Money Valuation
26. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
General Partner (GP)
Pre-Money Valuation
Angel Financing
fund of funds
27. Cannot get other outside investors-No Shop
Common Equity
No Shop/Confidentiality
S Corporation
Closing
28. 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
private investment in public equities (PIPE)
liquidation
Seed Money
Bridge Financing
29. 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
30. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
Membership Interest
Capital Call 'Drawdown'
Common Stock
Conversion Rights
31. 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
Outstanding Stock
Term Sheet
seed capital
benchmarks
32. 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
Conversion Rights
Pre-Money Valuation
going private
Business Plan
33. 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
recapitalization
Venture Capital Financing
Equity
34. 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
seed capital
recapitalization
portfolio compaay
IPO (Initial Public Offering)
35. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
small business investment companies (SBIC)
Voting Rights
Membership Interest
Common Stock
36. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
Qualified IPO
Pre-Money Valuation
Senior Stock
Common Stock
37. A security with limits on its transferability. Usually issued in connection with a private placement
Pre-Money Valuation
Restricted Stock
General Partner (GP)
return on investment (ROI)
38. 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
S Corporation
raising capital
Common Stock
Capitalization Table
39. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
Post-Money Valuation
Cash-out election
Adjusted Book Value
buyout
40. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Adjusted Book Value
Venture Capitalist
return on investment (ROI)
Liquidation Preference
41. 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
private investment in public equities (PIPE)
syndication
Post-Money Valuation
Dividends
42. Compound internal rate of return.
IRR
syndication
Dividends
exit route
43. 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
Lead Investor
Series A Preferred Stock
IPO (Initial Public Offering)
44. 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
closing
Cash-out election
due diligence
Liquidation
45. Assets are subject to double taxation - Unlimited number of investors
C Corporation
follow-on
Capital Commitment
Restricted Shares
46. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
bridge loans
Dividends
closing
Bridge Financing
47. An extremely concise presentation of an entrepreneur's idea - business model - company solution - marketing strategy - and competition delivered to potential investors. Should not last more than a few minutes - or the duration of an elevator rid
Venture Capital Financing
Capital Commitment
Pre-money valuation
Elevator Pitch
48. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
Deal Structure
benchmarks
minority enterprise small business investment companies (MESBICS)
NDA (Non-disclosure agreement)
49. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Common Equity
Deal Structure
Term Sheet
Market Capitalization
50. 'I will buy stock at price we negotiate'
debt financing
going private
Stock Price Agreement
Voting Rights