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Venture Capital

Subject : industries
  • 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. 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

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

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

4. 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.

5. 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

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

8. 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

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

10. 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

11. 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

12. 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

13. 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

14. Funds provided to enable an enterprise to acquire another enterprise or product line or business.

15. 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

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

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

18. How you get out

19. 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.

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

21. 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 -

22. 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.

23. An IPO that has met certain

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

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. 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

27. 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.

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

29. 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

30. A type of equity ownership in a corporation - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights.

31. Compound internal rate of return.

32. Term sheet for equity offering

33. 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

34. 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.

35. Letter of intent summarizing the key legal and financial terms

36. No double tax - Limited number of investors

37. The way you buy stock

38. These are performance goals against which a company's success is measured. Often - they are used by investors to help determine whether a company will receive additional funding or whether management will receive extra stock. Sometimes management wi

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

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

41. 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

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

43. 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.

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

45. 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

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

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

48. 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.

49. 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

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