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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. 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

2. 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

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

4. 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 -

5. 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

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

7. These are short-term financing agreements that fund a company's operation until it can arrange a more comprehensive longer-term financing. The need for these arises when a company runs out of cash before it can obtain more capital investment though l

8. 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

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

10. 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.

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

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

13. 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.

14. 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.

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

16. 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

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

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

19. The rate at which a company expends net cash over a certain period - usually a month.

20. The internal rate of return on an investment.

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

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

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

24. 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

25. 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.

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

27. 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.

28. 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

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

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

31. 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

32. 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

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

34. 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.

35. 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

36. Compound internal rate of return.

37. How much the company is worth before an investment

38. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.

39. Term sheet for equity offering

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

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

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

43. The way you buy stock

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

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 method by which an investor will realize an investment.

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

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

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

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