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






2. These are government-chartered venture firms that can invest only in companies that are at least 51 percent owned by members of a minority group or person recognized by the rules that govern this to be economically disadvantaged.






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






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






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






6. 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.






7. 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






8. An investment vehicle designed to invest in a diversified group of investment funds.






9. 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.






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






11. Cannot get other outside investors-No Shop






12. 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 -






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






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






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






16. 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






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






18. 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.






19. 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






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






21. 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






22. 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






23. 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.






24. 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






25. 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.






26. 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.






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






28. Compound internal rate of return.






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






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






31. 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.






32. 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






33. 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.






34. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.






35. 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






36. 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






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






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






39. 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.






40. 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






41. 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.






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






43. Term sheet for equity offering






44. 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






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






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






47. This refers to a public offering subsequent to an initial public offering. A secondary public offering can be either an issuer offering or an offering by a group that has purchased the issuer's securities in the public markets.






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






49. 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






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