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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. 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.






2. Term sheet for equity offering






3. 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






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






5. 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.






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






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






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






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






10. 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






11. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.






12. How much the company is worth before an investment






13. 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.






14. Cannot get other outside investors-No Shop






15. 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.






16. 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






17. 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






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






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






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






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.






22. 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






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






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






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






26. 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.






27. 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






28. 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






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






30. 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






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. 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






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






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






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






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






38. 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.






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






40. 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.






41. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities






42. 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






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






44. 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) ...






45. 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.






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






47. 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






48. The total value of the company immediately prior to the latest round of financing






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






50. 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.