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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. 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
Term Sheet
Common Equity
capital gain
2. A business owned by stockholders who share in its profits but are not personally responsible for its debts
Term Sheet
venture capital
Pre-Money Valuation
Corporation (Limited liability and taxation)
3. 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
Lead Investor
Cash-out election
minority enterprise small business investment companies (MESBICS)
management buy-out (MBO)
4. Letter of intent summarizing the key legal and financial terms
Common Equity
Warrants
Restricted Stock
Term Sheet
5. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
Business Summary
Capitalization Table
Adjusted Book Value
Post-money
6. The company or entity into which a fund invests directly.
Liquidation Preference
portfolio compaay
capital gain
Common Stock
7. 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.
Capital Call 'Drawdown'
syndication
Market Capitalization
Bootstrapping
8. 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
small business investment companies (SBIC)
Anti-Dilution Protections
Post-money
Preferred Stock
9. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
angel investors
bridge loans
turnaround
Preferred Stock
10. 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.).
angel investors
portfolio compaay
Term Sheet
institutional investors
11. The equity ownership in a corporation. Also has basic voting rights
Internal Rate of Return
Seed Money
Confidentiality
Common Stock
12. 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
angel investors
Preferred Stock
Term Sheet
Post-Money Valuation
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
Pre-Money Valuation
equity financing
series a preferred stock
Preferred Stock
14. Date the LP's subscription is effective and they become partner
Warrants
benchmarks
Closing
Limited Partner
15. Compound internal rate of return.
minority enterprise small business investment companies (MESBICS)
IRR
buyout
IPO (Initial Public Offering)
16. 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
Corporation (Limited liability and taxation)
Series A Preferred Stock
capital gain
recapitalization
17. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
exit
Post-money
Initial Public Offering
Capitalization Table
18. How much the company is worth before an investment
Post-money
Adjusted Book Value
exit
Pre-Money Valuation
19. 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
debt financing
Preferred Stock
Closing
20. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
IPO(initial public offerings)
Pre-Money Valuation
Capital
series a preferred stock
21. How you get to vote
follow-on
Voting Rights
Liquidation Preference
Cash-out election
22. 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
Bridge Financing
Business Plan
recapitalization
Liquidation Preference
23. The rate of return or profit that an investment is expected to earn.
due diligence
capital gain
equity financing
Internal Rate of Return
24. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Confidentiality
bridge loans
Adjusted Book Value
Capital Call 'Drawdown'
25. Investments by a private equity fund in a publicly traded company - usually at a discount.
Private Equity
private investment in public equities (PIPE)
Venture Capitalist
Bootstrapping
26. The total value of the company immediately prior to the latest round of financing
Pre-money valuation
Dividends
Restricted Stock
debt financing
27. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
closing
seed capital
Market Capitalization
Pre-Money Valuation
28. The value at which an asset is carried on a balance sheet (the cost of the item)
Book Value
General Partner (GP)
Capitalization Table
Common Stock
29. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Liquidation
Warrants
Conversion Rights
Business Plan
30. 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.
raising capital
acquisition
executive summary
capital under management
31. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
PPM
equity offerings
Preferred Stock
Confidentiality
32. 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 Capitalist
private equity
Elevator Pitch
buyout
33. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
leverage buy-out(LBO)
Term Sheet
Anti-Dilution Protections
liquidation
34. 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.
Liquidation
Outstanding Stock
liquidation
follow-on
35. 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
Preferred Stock
Pre-Money Valuation
going private
IRR
36. 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
equity offerings
Cash-out election
Capital
IPO (Initial Public Offering)
37. Assets are subject to double taxation - Unlimited number of investors
Series A Preferred Stock
C Corporation
management buy-in (MBI)
minority enterprise small business investment companies (MESBICS)
38. How you get out
Liquidation Preference
Market Capitalization
lead investor
series a preferred stock
39. 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
bridge loans
Book Value
No Shop/Confidentiality
Restricted Shares
40. 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
syndication
Term Sheet
Book Value
Limited Partner
41. 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
raising capital
lead investor
Lead Investor
Capitalization Table
42. This refers to a synopsis of the key points of a business plan.
Post-money
Term Sheet
PPM
executive summary
43. 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.
lead investor
lock-up period
venture capital
Capital Call 'Drawdown'
44. A security with limits on its transferability. Usually issued in connection with a private placement
acquisition
institutional investors
Preferred Stock
Restricted Stock
45. 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
acquisition
Lead Investor
debt financing
Bridge Financing
46. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
Angel Financing
Bridge Financing
private equity
corporate venturing
47. 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.
Qualified IPO
exit route
Venture Capital Financing
due diligence
48. No double tax - Limited number of investors
S Corporation
Restricted Shares
Preferred Stock
recapitalization
49. 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
PPM
Pre-Money Valuation
Post-Money Valuation
Bootstrapping
50. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
Pre-money valuation
turnaround
return on investment (ROI)
Senior Stock