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Venture Capital

Subject : industries
  • 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. The company or entity into which a fund invests directly.

3. 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.

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

5. 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

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

7. How you get out

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

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

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

11. 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

12. 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.

13. 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

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

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

16. 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

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

18. Corporation's first offer to sell stock to the public - Allows for anyone to buy stock and now falls under the SEC (No longer accredited investor) ...

19. 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

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

21. The internal rate of return on an investment.

22. 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.

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

24. 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.

25. 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.

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

27. The equity ownership in a LLC. May be either common or preferred. Partnership agreement

28. The amount of common shares of a corporation which are in the hands of investors. It is equal to the amount of issued shares less treasury stock.

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

30. How much the company is worth before an investment

31. No double tax - Limited number of investors

32. 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

33. The rate of return or profit that an investment is expected to earn.

34. Document between general and limited partnership of each fund spells out details of the partnership.

35. 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.

36. 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.

37. Cannot get other outside investors-No Shop

38. 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.

39. 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.).

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

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

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

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

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

45. 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.

46. Term sheet for equity offering

47. 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

48. 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

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

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