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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. 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






2. 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.






3. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity






4. 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) ...






5. 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.






6. The value at which an asset is carried on a balance sheet (the cost of the item)






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






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






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






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






11. 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






12. The way you buy stock






13. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)






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






15. A study of the background and financial reliability of the company - management team and industry.






16. 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






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






18. 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.






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






20. The method by which an investor will realize an investment.






21. 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






22. 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






23. The rate at which a company expends net cash over a certain period - usually a month.






24. 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






25. 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.






26. 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






27. 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






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






29. 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.






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






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






32. 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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33. 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.






34. Issue of shares of a company to the public by the company (directly) for the first time.






35. 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






36. Assets are subject to double taxation - Unlimited number of investors






37. 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.






38. The maximum amount of cash that a partner is required to contribute under the terms






39. The internal rate of return on an investment.






40. 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.






41. 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.






42. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.






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






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






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






46. 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.






47. 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






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






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






50. 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