Test your basic knowledge |

Venture Capital

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. 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






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






3. 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






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






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






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






7. 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.






8. 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






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






10. 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.).






11. The equity ownership in a corporation. Also has basic voting rights






12. 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






13. 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






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






15. Compound internal rate of return.






16. 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






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






18. How much the company is worth before an investment






19. 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.






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






21. How you get to vote






22. 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






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






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






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






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






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






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






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






30. 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.






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






32. An extremely concise presentation of an entrepreneur's idea - business model - company solution - marketing strategy - and competition delivered to potential investors. Should not last more than a few minutes - or the duration of an elevator rid






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






34. 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.






35. 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






36. 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






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






38. How you get out






39. 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






40. 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






41. 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






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






43. 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.






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






45. Money that business owners must pay back with interest. There are myriad types of these - from simple commercial loans to bridge/swing loans in which a lender makes a short-term loan in anticipation of equity financing at a later stage in the develo






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






47. 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.






48. No double tax - Limited number of investors






49. 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






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