Test your basic knowledge |

Venture Capital

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. This refers to obtaining capital from investors or venture capital sources.






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






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






4. The internal rate of return on an investment.






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






6. 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.






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. 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






9. 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






10. 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


11. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.






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






13. 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.).






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






15. 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






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






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






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






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






20. 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.






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






22. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock






23. 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






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






25. 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.






26. Compound internal rate of return.






27. Term sheet for equity offering






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






29. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






30. No double tax - Limited number of investors






31. 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






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






33. 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






34. 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.






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






36. 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 -






37. 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.






38. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.






39. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.






40. 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.






41. How you get out






42. 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.






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






44. The equity ownership in a LLC. May be either common or preferred. Partnership agreement






45. 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






46. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.






47. Selling an interest in your business to an outside party to raise money.






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






49. 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






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