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Test your basic knowledge |
Venture Capital
Start Test
Study First
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. 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
return on investment (ROI)
Term Sheet
Pre-Money Valuation
portfolio compaay
2. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Subordinated Debt
private equity
Dividends
Term Sheet
3. Selling an interest in your business to an outside party to raise money.
secondary purchase
equity financing
Market Capitalization
PPM
4. 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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5. 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
venture capital
series a preferred stock
Preferred Stock
Senior Stock
6. 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
lead investor
Stock Price Agreement
Term Sheet
Capitalization Table
7. 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
follow-on
Liquidation Preference
return on investment (ROI)
secondary purchase
8. Investments by a private equity fund in a publicly traded company - usually at a discount.
Capitalization Table
Outstanding Stock
Burn Rate
private investment in public equities (PIPE)
9. The total value of the company immediately prior to the latest round of financing
leverage buy-out(LBO)
exit
No Shop/Confidentiality
Pre-money valuation
10. 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.
Pre-Money Valuation
Preferred Stock
Restricted Stock
angel investors
11. 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
Adjusted Book Value
return on investment (ROI)
Preferred Stock
Seed Money
12. The residual ownership in a company like a corporation or LLC 51%=control
capital under management
Pre-Money Valuation
raising capital
Equity
13. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
leverage buy-out(LBO)
management buy-in (MBI)
Outstanding Stock
Senior Stock
14. 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
Business Summary
seed capital
Business Plan
Dividends
15. How you get to vote
Voting Rights
S Corporation
Adjusted Book Value
Conversion Rights
16. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
Liquidation Preference
Liquidation
Membership Interest
Anti-Dilution Protections
17. 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.
portfolio compaay
seed capital
minority enterprise small business investment companies (MESBICS)
General Partner (GP)
18. 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.
Preferred Stock
Seed Money
Bridge Financing
Term Sheet
19. 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
Venture Capitalist
due diligence
small business investment companies (SBIC)
equity financing
20. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
small business investment companies (SBIC)
Equity
IPO(initial public offerings)
closing
21. 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
Limited Partnership Agreement
S Corporation
Cash-out election
Common Stock
22. Means of financing a small firm by employing highly creative ways of using and acquiring resources without raising equity from traditional sources or borrowing money from the bank.
capital gain
Common Stock
Bootstrapping
management buy-out (MBO)
23. 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 -
Senior Stock
return on investment (ROI)
minority enterprise small business investment companies (MESBICS)
limited partnerships
24. The amount of this available to a management team for venture investments.
capital under management
syndication
buyout
Preferred Stock
25. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
mezzanine financing
institutional investors
liquidation
Anti-Dilution Protections
26. The internal rate of return on an investment.
Bridge Financing
return on investment (ROI)
Limited Partner
IRR
27. The party that manages a limited partnership and is liable for the debts of the company
Liquidation Preference
IPO (Initial Public Offering)
General Partner (GP)
recapitalization
28. Pre-money valuation plus the amount invested in the latest round
debt financing
private equity
Post-money
Bootstrapping
29. The practice of a large company taking a minority equity position in a smaller company in a related field.
corporate venturing
IRR
raising capital
Senior Stock
30. 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
Qualified IPO
seed capital
Seed Money
Venture Capitalist
31. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
capital under management
Liquidity Event
Post-Money Valuation
IRR
32. 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.
Private Equity
NDA (Non-disclosure agreement)
Conversion Rights
lock-up period
33. 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.
recapitalization
Private Equity
equity financing
limited partnerships
34. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
NDA (Non-disclosure agreement)
Cash-out election
equity financing
Series A Preferred Stock
35. 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
NDA (Non-disclosure agreement)
Post-Money Valuation
General Partner (GP)
IPO (Initial Public Offering)
36. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
IPO(initial public offerings)
secondary purchase
C Corporation
Pre-Money Valuation
37. The rate at which a company expends net cash over a certain period - usually a month.
closing
Burn Rate
Angel Financing
Voting Rights
38. 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
angel investors
Limited Partner
Common Stock
Private Equity
39. A study of the background and financial reliability of the company - management team and industry.
Due Diligence
Seed Money
Cash-out election
IRR
40. 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.).
fund of funds
institutional investors
syndication
Post-money
41. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
General Partner (GP)
Bridge Financing
Warrants
42. 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.
lead investor
leverage buy-out(LBO)
benchmarks
acquisition
43. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Liquidation
General Partner (GP)
Equity
Common Equity
44. 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.
Closing
debt financing
term sheet
equity financing
45. 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.
Pre-Money Valuation
Preferred Stock
lead investor
Capital Call 'Drawdown'
46. 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
going private
acquisition
exit
Business Plan
47. This refers to a synopsis of the key points of a business plan.
limited partnerships
mezzanine financing
exit
executive summary
48. 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
corporate venturing
seed capital
institutional investors
Liquidation Preference
49. 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.
equity financing
benchmarks
follow-on
secondary public offering
50. 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.
secondary public offering
acquisition
leverage buy-out(LBO)
turnaround