Test your basic knowledge |

Venture Capital

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. Letter of intent summarizing the key legal and financial terms






2. 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






3. 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.






4. 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.






5. 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






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






7. 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.






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






9. 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 -






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






11. 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.






12. An IPO that has met certain






13. 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.






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






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






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






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






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






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






20. How you get to vote






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






22. 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






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






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






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






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






27. 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.






28. 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






29. 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






30. 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.






31. Compound internal rate of return.






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






33. 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






34. The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During peri






35. 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.






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






37. 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.






38. 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






39. 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.






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






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






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






43. 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






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






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






46. Term sheet for equity offering






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






48. 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






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






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