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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. 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






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






3. The act of one company taking over controlling interest in another company. Investors often look for companies that are likely candidates for this - because the acquiring firms are often willing to pay a premium to the market price for the shares.






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






5. Shares acquired in a private placement are considered restricted shares and may not be sold in a public offering absent registration - or after an appropriate holding period has expired. Non-affiliates must wait one year after purchasing the shares






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






7. 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






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






9. 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






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






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






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






13. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.






14. An IPO that has met certain






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






16. 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.






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






18. 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.






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






20. 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






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






22. 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






23. 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.






24. 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






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






26. 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






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






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






29. 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






30. 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.






31. 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.






32. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value






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






34. Compound internal rate of return.






35. 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.






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






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






38. 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.






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






40. 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 -






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






42. Cash - stock and other property by the company to the investor in the investor's capacity as a stock - payment to owner for their appreciation






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






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






45. 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.






46. No double tax - Limited number of investors






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






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






49. 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






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