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Venture Capital

Subject : industries
Instructions:
  • Answer 50 questions in 15 minutes.
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  • 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 sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






2. 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.






3. 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






4. 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






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






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






7. The amount of this available to a management team for venture investments.






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






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






10. 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






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






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






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






14. 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.






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






16. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.






17. The total dollar value of all outstanding shares. Computed as shares multiplied by current price per share. Prior to an IPO - market capitalization is arrived at by estimating a company's future growth and by comparing a company with similar public






18. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.






19. An IPO that has met certain






20. 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






21. 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.).






22. 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.






23. Cannot get other outside investors-No Shop






24. 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.






25. 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.






26. 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.






27. The party that manages a limited partnership and is liable for the debts of the company






28. 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






29. Term sheet for equity offering






30. How much the company is worth before an investment






31. 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






32. 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






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






34. The internal rate of return on an investment.






35. 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






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






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






38. 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.






39. 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






40. 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






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






42. 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 -






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






44. 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






45. 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.






46. 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.






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






48. 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.






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






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