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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. 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
Lead Investor
Common Stock
Preferred Stock
Restricted Shares
2. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
Anti-Dilution Protections
Outstanding Stock
IPO (Initial Public Offering)
secondary purchase
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.
equity financing
Capital
buyout
acquisition
4. The amount of this available to a management team for venture investments.
capital under management
follow-on
secondary purchase
recapitalization
5. 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
Restricted Shares
Venture Capitalist
recapitalization
Private Equity
6. 'I will buy stock at price we negotiate'
Stock Price Agreement
Liquidation Preference
secondary public offering
IRR
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
follow-on
bridge loans
Common Stock
management buy-out (MBO)
8. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
Cash-out election
debt financing
Elevator Pitch
Conversion Rights
9. 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
bridge loans
Adjusted Book Value
angel investors
Pre-Money Valuation
10. Letter of intent summarizing the key legal and financial terms
Term Sheet
Elevator Pitch
fund of funds
Preferred Stock
11. A business owned by stockholders who share in its profits but are not personally responsible for its debts
Corporation (Limited liability and taxation)
Capitalization Table
Liquidity Event
Membership Interest
12. The total value of the company immediately prior to the latest round of financing
Limited Partnership Agreement
Preferred Stock
Pre-money valuation
acquisition
13. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
Corporation (Limited liability and taxation)
due diligence
Venture Capital Financing
Venture Capitalist
14. An IPO that has met certain
Common Equity
Voting Rights
Qualified IPO
Post-Money Valuation
15. The rate at which a company expends net cash over a certain period - usually a month.
Business Plan
Outstanding Stock
Burn Rate
Venture Capitalist
16. 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.
recapitalization
IPO(initial public offerings)
institutional investors
IRR
17. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.
Anti-Dilution Protections
Liquidation Preference
Business Plan
capital under management
18. 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.
Seed Money
secondary public offering
raising capital
mezzanine financing
19. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
equity offerings
Closing
management buy-in (MBI)
due diligence
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
equity financing
Seed Money
private equity
acquisition
21. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
venture capital
NDA (Non-disclosure agreement)
seed capital
Venture Capitalist
22. 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
bridge loans
Business Plan
Pre-Money Valuation
recapitalization
23. 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
equity financing
Voting Rights
Closing
24. 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
Series A Preferred Stock
Pre-Money Valuation
Anti-Dilution Protections
Voting Rights
25. Pre-money valuation plus the amount invested in the latest round
Closing
NDA (Non-disclosure agreement)
Post-money
IRR
26. 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
venture capital
angel investors
small business investment companies (SBIC)
term sheet
27. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
Pre-Money Valuation
PPM
Senior Stock
28. A security with limits on its transferability. Usually issued in connection with a private placement
Book Value
Warrants
Restricted Stock
Venture Capital Financing
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
series a preferred stock
Venture Capitalist
closing
Dividends
30. 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.
Bootstrapping
Outstanding Stock
Post-Money Valuation
lead investor
31. 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.
Venture Capital Financing
private equity
Post-Money Valuation
Liquidity Event
32. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
recapitalization
leverage buy-out(LBO)
Adjusted Book Value
term sheet
33. The company or entity into which a fund invests directly.
NDA (Non-disclosure agreement)
seed capital
portfolio compaay
exit route
34. Compound internal rate of return.
IRR
Restricted Shares
Capitalization Table
Limited Partnership Agreement
35. 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.
Initial Public Offering
exit route
Preferred Stock
minority enterprise small business investment companies (MESBICS)
36. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
Conversion Rights
exit
corporate venturing
term sheet
37. The maximum amount of cash that a partner is required to contribute under the terms
management buy-out (MBO)
lead investor
corporate venturing
Capital Commitment
38. 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.
General Partner (GP)
lock-up period
syndication
Due Diligence
39. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Cash-out election
follow-on
Subordinated Debt
Seed Money
40. 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 -
Business Plan
limited partnerships
benchmarks
syndication
41. The method by which an investor will realize an investment.
exit route
S Corporation
Conversion Rights
bridge loans
42. 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
minority enterprise small business investment companies (MESBICS)
Pre-Money Valuation
Dividends
limited partnerships
43. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
Liquidation Preference
Venture Capitalist
Pre-Money Valuation
Business Summary
44. Date the LP's subscription is effective and they become partner
exit route
Business Plan
Senior Stock
Closing
45. 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.
seed capital
equity offerings
Post-Money Valuation
management buy-out (MBO)
46. No double tax - Limited number of investors
Common Equity
recapitalization
S Corporation
Seed Money
47. Issue of shares of a company to the public by the company (directly) for the first time.
Closing
Bootstrapping
IPO(initial public offerings)
Corporation (Limited liability and taxation)
48. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
IRR
Capital Call 'Drawdown'
small business investment companies (SBIC)
leverage buy-out(LBO)
49. 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
Subordinated Debt
Market Capitalization
Business Plan
PPM
50. An investment vehicle designed to invest in a diversified group of investment funds.
Common Stock
secondary public offering
bridge loans
fund of funds