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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. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.






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






4. 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






5. 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.






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






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






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






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






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






11. The internal rate of return on an investment.






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






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






14. 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






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






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






17. How you get to vote






18. 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.






19. 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.






20. 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.






21. Term sheet for equity offering






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






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






24. 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






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






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






28. Cannot get other outside investors-No Shop






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 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.






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






32. How you get out






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






34. 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






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. 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.






37. 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.






38. 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






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






40. 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






41. 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






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






43. 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






44. 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






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






46. 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






47. How much the company is worth before an investment






48. 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






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






50. 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







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