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Test your basic knowledge |
Venture Capital
Start Test
Study First
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. These are performance goals against which a company's success is measured. Often - they are used by investors to help determine whether a company will receive additional funding or whether management will receive extra stock. Sometimes management wi
Preferred Stock
Common Equity
benchmarks
Corporation (Limited liability and taxation)
2. The equity ownership in a corporation. Also has basic voting rights
Common Stock
Corporation (Limited liability and taxation)
Term Sheet
NDA (Non-disclosure agreement)
3. 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.
capital gain
Cash-out election
Warrants
acquisition
4. The party that manages a limited partnership and is liable for the debts of the company
private equity
General Partner (GP)
turnaround
going private
5. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
Limited Partnership Agreement
IPO (Initial Public Offering)
NDA (Non-disclosure agreement)
Capital Call 'Drawdown'
6. 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
Cash-out election
Seed Money
Liquidation Preference
Voting Rights
7. 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.
Limited Partner
liquidation
secondary public offering
Internal Rate of Return
8. 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.).
Adjusted Book Value
IPO (Initial Public Offering)
institutional investors
Capital
9. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
secondary public offering
Subordinated Debt
Capitalization Table
Warrants
10. 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.
lead investor
lock-up period
Burn Rate
Bridge Financing
11. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Warrants
Preferred Stock
Private Equity
Adjusted Book Value
12. 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
going private
leverage buy-out(LBO)
IPO (Initial Public Offering)
private investment in public equities (PIPE)
13. The way you buy stock
Liquidation Preference
Venture Capital Financing
PPM
Adjusted Book Value
14. 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.
lock-up period
Conversion Rights
turnaround
C Corporation
15. 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.
term sheet
Outstanding Stock
Anti-Dilution Protections
turnaround
16. 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
Liquidation Preference
going private
Venture Capital Financing
Stock Price Agreement
17. 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
management buy-out (MBO)
corporate venturing
Series A Preferred Stock
Pre-Money Valuation
18. Funds provided to enable operating management to acquire a product line or business - which may be at any stage of development - from either a public or private company.
corporate venturing
management buy-out (MBO)
Liquidation Preference
executive summary
19. A financial institution specializing in the provision of equity and other forms of long-term capital to enterprises - usually to firms with a limited track record but with the expectation of substantial growth. The venture capitalist may provide bot
Post-money
Private Equity
Venture Capitalist
recapitalization
20. The practice of a large company taking a minority equity position in a smaller company in a related field.
acquisition
Common Stock
Bootstrapping
corporate venturing
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
Capital Call 'Drawdown'
Restricted Stock
bridge loans
due diligence
22. 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.
fund of funds
Bridge Financing
Qualified IPO
minority enterprise small business investment companies (MESBICS)
23. 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
venture capital
Warrants
Pre-Money Valuation
exit route
24. The rate of return or profit that an investment is expected to earn.
Capital
Internal Rate of Return
Corporation (Limited liability and taxation)
fund of funds
25. The amount of this available to a management team for venture investments.
acquisition
seed capital
capital under management
term sheet
26. 'I will buy stock at price we negotiate'
Stock Price Agreement
Preferred Stock
Restricted Shares
Capitalization Table
27. An investment vehicle designed to invest in a diversified group of investment funds.
Venture Capital Financing
closing
fund of funds
management buy-out (MBO)
28. A request from the GPs requiring each limited partner to deliver a portion of their capital commitment. Usually specified as a percentage of the capital commitment
29. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
institutional investors
exit route
due diligence
venture capital
30. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Capital
IPO(initial public offerings)
seed capital
Conversion Rights
31. 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
Business Plan
leverage buy-out(LBO)
series a preferred stock
Anti-Dilution Protections
32. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
Senior Stock
Term Sheet
capital gain
management buy-in (MBI)
33. 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.
follow-on
Outstanding Stock
Book Value
Private Equity
34. 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
liquidation
Private Equity
capital gain
Due Diligence
35. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Adjusted Book Value
No Shop/Confidentiality
Capital
Outstanding Stock
36. A study of the background and financial reliability of the company - management team and industry.
Due Diligence
Capital
equity offerings
minority enterprise small business investment companies (MESBICS)
37. A unit of ownership of a corporation. In the case of a public company - the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in
Common Stock
syndication
bridge loans
executive summary
38. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
management buy-in (MBI)
Business Summary
Initial Public Offering
Anti-Dilution Protections
39. Assets are subject to double taxation - Unlimited number of investors
capital gain
C Corporation
return on investment (ROI)
turnaround
40. The residual ownership in a company like a corporation or LLC 51%=control
capital under management
Post-Money Valuation
Equity
Pre-Money Valuation
41. Date the LP's subscription is effective and they become partner
Pre-money valuation
exit route
Deal Structure
Closing
42. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
capital under management
Series A Preferred Stock
Angel Financing
Market Capitalization
43. 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.
Senior Stock
recapitalization
secondary public offering
Term Sheet
44. 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
management buy-in (MBI)
series a preferred stock
Post-Money Valuation
Internal Rate of Return
45. The method by which an investor will realize an investment.
exit route
private equity
Venture Capitalist
Bridge Financing
46. 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.
secondary public offering
Restricted Shares
Qualified IPO
Deal Structure
47. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
Capitalization Table
Corporation (Limited liability and taxation)
exit
angel investors
48. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
Qualified IPO
Senior Stock
Limited Partner
management buy-in (MBI)
49. 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
acquisition
small business investment companies (SBIC)
C Corporation
portfolio compaay
50. 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
lead investor
Restricted Stock
Elevator Pitch
Business Plan