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






2. This refers to a synopsis of the key points of a business plan.






3. 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.






4. Investments by a private equity fund in a publicly traded company - usually at a discount.






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






6. 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.






7. 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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8. 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.






9. 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






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






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






12. An investment vehicle designed to invest in a diversified group of investment funds.






13. Cannot get other outside investors-No Shop






14. 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.






15. The party that manages a limited partnership and is liable for the debts of the company






16. A security with limits on its transferability. Usually issued in connection with a private placement






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






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






19. 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






20. Term sheet for equity offering






21. 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






22. 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






23. 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






24. 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






25. 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






26. 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






27. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last






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






29. The internal rate of return on an investment.






30. An IPO that has met certain






31. Document between general and limited partnership of each fund spells out details of the partnership.






32. 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.






33. 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) ...






34. Don't talk to the market about the company






35. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.






36. Funds provided to enable operating management to acquire a product line or business - which may be at any stage of development - from either a public or private company.






37. The amount of common shares of a corporation which are in the hands of investors. It is equal to the amount of issued shares less treasury stock.






38. 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.






39. 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






40. 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






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






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






43. The company or entity into which a fund invests directly.






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






45. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value






46. 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.






47. 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






48. Date the LP's subscription is effective and they become partner






49. 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






50. 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.