Ch.8
Informal risk capitalists are often referred to as "business angels."
a. True
The main objective of Regulation D is to
a. make it easier and less expensive for small ventures to sell stock.
The most common source of debt financing is
b. commercial banks.
Major trends in the venture capital field today include all of the following except
b. less specialized and more homogenous funds
Advantages of debt financing include all of the following except:
b. regular interest payments.
Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.
True
Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.
True
Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.
a. True
Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.
b. False
One of the advantages of public offerings is
liquidity
Which of the following is not a type of debt financing?
private placement
Venture capitalists, surprisingly, require little information before they make an investment.
b. False
A disadvantage of debt financing is
c. regular interest payments.
Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.
False
Regulation D augments the regulations for reports and statements required for selling stock to private parties, friends, employees, customers, relatives, local professionals.
False
The entrepreneur should ask the venture capitalist _____ questions.
d. an unlimited number of
Which of the following is a type of equity financing?
c. common stock
Which of the following terms is not synonymous with social lending?
c. commercially viable lending
What are the major types and uses of debt financing?
A public offering involves entering the stock exchange. Once the stock is publicly offered, anyone can buy shares and, in turn, ownership. Public offerings are very expensive and highly regulated. These disadvantages are offset by the large amounts of capital and liquidity the offerings can provide. A private placement is used more often by small ventures. It allows the sale of the stock to private, per-sonally selected individuals. The Securities and Exchange Commission has enacted special rules to make private placement easier and less expensive for small businesses. Both of these equity financing plans differ from debt financing. They require a relinquishment of ownership, but don't demand a fixed payback of the invested principal.
How does a public offering differ from a private placement?
A public offering involves entering the stock exchange. Once the stock is publicly offered, anyone can buy shares and, in turn, ownership. Public offerings are very expensive and highly regulated. These disadvantagesare offset by the large amounts of capital and liquidity the offerings can provide. A private placement is used more often by small ventures. It allows the sale of the stock to private, personally selected individuals.
What is the potential future of crowdfunding sites to raise capital with respect to entrepreneurs?
If the social equity investing sites (crowdfunding) continue, entrepreneurs will have an effective weapon in their arsenal to combat the cash-flow issues inherent in running a business. As with any investors, entrepreneurs need to carefully review the policies and procedures as well as the reputation for any funding site they are considering taking money through. In 2014, there were over 450 crowdfunding platforms (Kickstarter and Indiegogo are the most well-known) as the industry grew to be over $5.1 billion worldwide. It is now estimated that crowdfunding now raises over $2 million per day with some predictions of 100% growth each year.For those individuals who have been putting their entrepreneurial aspirations on hold due to financial fears, crowdfunding could provide the peace of mind needed for them to dust off their ideas and put them into action.
Private placement is a method of raising capital through the private placement of securities.
True
Informal risk capitalists are those who have already made their money and now seek to help new ventures.
a. True
An informal risk capitalist is referred to as:
a. a business angel.
Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?
b. Is the person someone with whom the entrepreneur can work?
Which of the following statements is not true of venture capitalists?
b. They are interested in trying to manage firms themselves.
Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?
b. What is it like to work with their firm?
Which of the following does not represent a category of angel investors?
b. amateur angels