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






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






3. 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






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






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






6. 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






7. 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






8. 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.






9. A study of the background and financial reliability of the company - management team and industry.






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






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






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






13. 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






14. The internal rate of return on an investment.






15. 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






16. Compound internal rate of return.






17. 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






18. How you get out






19. 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






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






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






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






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






24. Term sheet for equity offering






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






26. No double tax - Limited number of investors






27. 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






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






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






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






32. 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.






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






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






35. How much the company is worth before an investment






36. 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.






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






38. 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






39. Pre-money valuation plus the amount invested in the latest round






40. 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.






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






42. These are equity securities of companies that have not 'gone public' (in other words - companies that have not listed their stock on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are no






43. 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






44. 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






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. 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.






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






48. 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






49. 'I will buy stock at price we negotiate'






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