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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. 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.
capital under management
Due Diligence
term sheet
Bootstrapping
2. 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
capital under management
Preferred Stock
Pre-Money Valuation
Term Sheet
3. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
Bootstrapping
Private Equity
secondary purchase
Term Sheet
4. 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.
minority enterprise small business investment companies (MESBICS)
series a preferred stock
Outstanding Stock
Pre-money valuation
5. 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
Deal Structure
Due Diligence
lead investor
venture capital
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.
turnaround
exit
Capitalization Table
Term Sheet
7. The rate of return or profit that an investment is expected to earn.
IPO (Initial Public Offering)
IRR
Initial Public Offering
Internal Rate of Return
8. Don't talk to the market about the company
NDA (Non-disclosure agreement)
syndication
Confidentiality
Book Value
9. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Warrants
due diligence
Venture Capitalist
Due Diligence
10. 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
Capital
small business investment companies (SBIC)
exit
fund of funds
11. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Dividends
Initial Public Offering
Adjusted Book Value
Limited Partner
12. The way you buy stock
private equity
IRR
PPM
Seed Money
13. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
management buy-in (MBI)
NDA (Non-disclosure agreement)
Capital
Post-money
14. The maximum amount of cash that a partner is required to contribute under the terms
IPO (Initial Public Offering)
Angel Financing
Capital Commitment
turnaround
15. This refers to a public offering subsequent to an initial public offering. A secondary public offering can be either an issuer offering or an offering by a group that has purchased the issuer's securities in the public markets.
private equity
secondary public offering
Pre-money valuation
series a preferred stock
16. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
management buy-out (MBO)
Capitalization Table
NDA (Non-disclosure agreement)
Seed Money
17. 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 -
Common Equity
minority enterprise small business investment companies (MESBICS)
limited partnerships
Warrants
18. 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
Post-Money Valuation
private equity
Capital Call 'Drawdown'
Liquidation Preference
19. 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
Capital Commitment
PPM
private equity
Preferred Stock
20. The rate at which a company expends net cash over a certain period - usually a month.
Burn Rate
management buy-out (MBO)
Voting Rights
Limited Partnership Agreement
21. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
leverage buy-out(LBO)
NDA (Non-disclosure agreement)
IPO (Initial Public Offering)
Liquidation Preference
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.
management buy-in (MBI)
Bridge Financing
Bootstrapping
Market Capitalization
23. The amount of this available to a management team for venture investments.
capital under management
Stock Price Agreement
exit route
Market Capitalization
24. Cannot get other outside investors-No Shop
PPM
Post-money
fund of funds
No Shop/Confidentiality
25. 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
Term Sheet
Business Plan
IPO(initial public offerings)
Membership Interest
26. 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
debt financing
IRR
portfolio compaay
Seed Money
27. Letter of intent summarizing the key legal and financial terms
Seed Money
private equity
Post-money
Term Sheet
28. The internal rate of return on an investment.
return on investment (ROI)
Capitalization Table
secondary purchase
PPM
29. 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.
Capital
Limited Partner
Venture Capital Financing
IPO(initial public offerings)
30. 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.
liquidation
term sheet
corporate venturing
Capital
31. Assets are subject to double taxation - Unlimited number of investors
Term Sheet
management buy-in (MBI)
exit route
C Corporation
32. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
management buy-in (MBI)
Capital Call 'Drawdown'
PPM
Subordinated Debt
33. 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
Voting Rights
raising capital
mezzanine financing
Lead Investor
34. An investment vehicle designed to invest in a diversified group of investment funds.
management buy-in (MBI)
Warrants
private equity
fund of funds
35. 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
Warrants
Anti-Dilution Protections
raising capital
Elevator Pitch
36. 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
management buy-out (MBO)
Limited Partner
return on investment (ROI)
going private
37. Compound internal rate of return.
Closing
turnaround
IRR
Adjusted Book Value
38. Funds provided to enable an enterprise to acquire another enterprise or product line or business.
portfolio compaay
Limited Partner
leverage buy-out(LBO)
buyout
39. 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.
seed capital
Series A Preferred Stock
Deal Structure
Voting Rights
40. Selling an interest in your business to an outside party to raise money.
equity financing
closing
Limited Partner
Corporation (Limited liability and taxation)
41. How much the company is worth before an investment
S Corporation
Series A Preferred Stock
Pre-Money Valuation
equity financing
42. The equity ownership in a corporation. Also has basic voting rights
Common Stock
Outstanding Stock
Preferred Stock
No Shop/Confidentiality
43. 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
Capitalization Table
Bridge Financing
Seed Money
Book Value
44. No double tax - Limited number of investors
Voting Rights
Membership Interest
Dividends
S Corporation
45. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
angel investors
equity offerings
equity financing
small business investment companies (SBIC)
46. 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.
Angel Financing
corporate venturing
Term Sheet
recapitalization
47. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Angel Financing
Common Equity
S Corporation
NDA (Non-disclosure agreement)
48. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
Limited Partnership Agreement
capital under management
due diligence
Subordinated Debt
49. 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
angel investors
Common Stock
Adjusted Book Value
Seed Money
50. 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
Series A Preferred Stock
institutional investors
Equity
Common Equity