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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.
  • 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. 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.






2. 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






3. 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.






4. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)






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






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 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






8. 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






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






10. 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 -






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






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






13. 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






14. A form of equity ownership in a corporation that contains preferences over common stock - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights






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






16. 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






17. 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






18. 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






19. 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






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






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






22. 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.






23. 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) ...






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






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






26. 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






27. 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.).






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






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






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






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






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






33. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan






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






35. How you get out






36. These are short-term financing agreements that fund a company's operation until it can arrange a more comprehensive longer-term financing. The need for these arises when a company runs out of cash before it can obtain more capital investment though l






37. 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






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






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






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






41. 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.






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






43. 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






44. No double tax - Limited number of investors






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






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






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






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






49. 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






50. 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.