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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. 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.






2. 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






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






4. 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.).






5. 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.






6. Term sheet for equity offering






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






8. No double tax - Limited number of investors






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






10. 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.






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






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






13. 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






14. 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






15. How you get to vote






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






17. 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.






18. 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.






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






20. 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


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. How much the company is worth before an investment






23. 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.






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






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






26. 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






27. 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.






28. 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






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






30. An IPO that has met certain






31. 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.






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






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






34. 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






35. 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.






36. Compound internal rate of return.






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






38. This refers to obtaining capital from investors or venture capital sources.






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






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






41. A financial institution specializing in the provision of equity and other forms of long-term capital to enterprises - usually to firms with a limited track record but with the expectation of substantial growth. The venture capitalist may provide bot






42. The amount to be paid when the company is liquidated or sold before any payments are made lower classes of investors. Not everyone gets paid equally






43. 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.






44. 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






45. 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






46. 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






47. 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.






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






49. The way you buy stock






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