F317 Final

Corporate Venture Capital is a relatively new phenomenon an primarily exists within large technology companies True False

True

EBITDA stands for "Earnings Before Interest, Taxes, Depreciation, and Amortization" True False

True

From Phil Funk's lecture, how long do individuals need to hold investments in order to recognize the long-term capital gains tax rate rather than the ordinary tax rate a. 10 years b. 5 years c. 1 year d. six months e. one month

1 year

On average, out of every 10 investments that an early-stage venture capital firm makes in Series A round deals, what percentage of those deals end up as 20x or higher COIC harvest events? a. 10% (1 out of 10) b. 30% (3 out of 10) c. 50% (5 out of 10) d. 80% (8 out of 10) e. 100% (10 out of 10)

10% (1 out of 10)

"Vesting" a. applies to employee stock options b. applies to founder's stock c. is meant to incentivize retention d. is designed to reward performance e. All of the above

All of the above

"Fully-Diluted Shares" includes all common shares of a company plus the a. conversion of all preferred shares b. exercise of all authorized, issued, and unissued stock options c. exercise of all additions of available stock to the company's authorized stock option pool d. exercise of all issued stock warrants e. All of the above are included in the definition

All of the above are included in the definition

One of the first successful venture capital investments was in Digital Equipment Corporation. What venture capital firm made this investment? a. Microsoft b. American Research and Development Corporation c. KKR d. Blackstone e. None of the above

American Research and Development Corporation

One of the differences between Venture Capital and Private Equity is that Venture Capital firms tend to do larger deals than Private Equity firms because they acquire higher percentages of companies and focus on bigger, more mature companies True False

False

Prior to the JOBS Act it was acceptable to raise money from investors who were accredited as long as general solicitations were made True False

False

Private Equity firms consider stable and predictable Free Cash Flows paramount to a strong LBO investment opportunity so that the investment opportunity (the portfolio company) can make consistent dividend payments True False

False

A business organized as a Sub-S Corporation can complete an IPO and become a public company True False

False

A business's Capitalization Table is part of the Net Worth section of the business's Balance Sheet and lists how much money investors have invested in the business True False

False

EBITDA stands for "Earnings Before Interest, Taxes, Depreciation, and Accounting" True False

False

Middle market private equity firms generally look for High Potential Ventures that have IPO potential True False

False

The use of criteria for evaluating venture opportunities is only effective in helping investors spot High Potential Ventures... it is useless in identifying Attractive Small Businesses True False

False

Venture Debt lenders structure loans to businesses with the primary source of repayment being assets of the business, specifically accounts receivable and inventory, and the secondary source of repayment being cash flows of the business True False

False

Match the following characteristics to the Five Stages of Business Growth Formative Stage Development Stage Early Stage Growth Stage Maturity Stage Seed Round Financing Public Capital Markets as a Financing Service Exploding Profitability Focus on Market Penetration Professional Angels and Early Stage VCs as a Financing Source

Formative Stage - Seed Round Financing Development Stage - Professional Angels and Early Stage VCs as a Financing Source Early Stage - Focus on Market Penetration Growth Stage - Exploding Profitability Maturity Stage - Public Capital Markets as a Financing Service

Match the following characteristics to the correct Legal Form of Business Enterprise General Partnership Limited Partnership Corporation Sub-S Corporation Limited Liability Company Organizationally and Administratively Simple Chosen by Venture Capital Funds All Owners have Unlimited Liability Best Choice for Raising Venture Capital Has Pro Rata Income Tax Flow-Through Consequences

General Partnership - All Owners have Unlimited Liability Limited Partnership - Chosen by Venture Capital Funds Corporation - Best Choice for Raising Venture Capital Sub-S Corporation - Has Pro Rata Income Tax Flow-Through Consequences Limited Liability Company - Organizationally and Administratively Simple OR Chosen by Venture Capital Funds

One of the first things an entrepreneur should do when starting a business is to hire a good lawyer, but the entrepreneur should be careful a. to make sure to allow their lawyer to negotiate a term sheet b. to make sure NOT to allow their lawyer to negotiate a term sheet c. to make sure to allow their lawyer to run the business's financial models d. to make sure that their lawyer fully understands the technology model when negotiating a term sheet e. None of the above

HIS Answer: to make sure NOT to allow their lawyer to negotiate a term sheet BOOK Answer: to make sure to allow their lawyer to negotiate a term sheet

Which of the following is the first retirement investment vehicle you should place the maximum contribution to according to Phil Funk? a. Roth IRA b. HSA c. 401(k) d. 529 plan e. none of the above

Roth IRA 401(k)

From Tom Cole's lecture, when a company comes to market via an IPO, they receive a market premium. Whereas, when a company is involved in a merger or acquisition it occurs typically at a discount True False

Somehow both True and False

A Shareholder Agreement governs the sale and/or transfer of shares among shareholders with the goal of controlling or limiting who may become future shareholders True False

True

An investor that chooses to invest in a convertible debt deal is planning to own equity in the company but is deferring the price discussion to the next financing True False

True

Angel deals are usually done on a "take it or leave it" basis True False

True

In most middle market Private Equity transactions, it is common for a Private Equity firm to provide for (and sometimes require) sellers to provide a roll-over investment in the restructured entity after the purchase True False

True

In terms of Game Theory, venture financing is one of the easiest games there is as you can really have a win-win outcome; don't negotiate in a vacuum and this is not a single instance game True False

True

In terms of using the Criteria for Evaluating Venture Opportunities, it is important for the investor to realize there is no such thing as a perfect deal, but the investors' goal is to realize that there are very few negative criteria for better investment opportunities, and then help the entrepreneurs minimize the risk associated with any negative criterion True False

True

Middle market private equity firms generally sponsor management buyouts of Attractive Small Businesses and incorporate leverage in the capital structure to enhance equity returns True False

True

One of the differences between Venture Capital and Private Equity is that Private Equity funds acquire mature companies, while Venture Capital firms invest in earlier-stage companies that are growing quickly or have the potential to grow quickly True False

True

One of the differences between Venture Capital and Private Equity is that Venture Capital funds normally take a minority interest in companies that they invest in, and Private Equity funds normally take a controlling interest in companies that they invest in True False

True

Secondary Buy-out transactions are defined as when private equity firms sell portfolio companies to one another as a desired harvest option True False

True

Subordinated Debt Lenders typically loan money to leveraged buyout opportunities led private equity firms True False

True

Traditional lenders (depository lenders institutions) structure Lines of Credit with the primary source of repayment being assets of the business (specifically accounts receivable and inventory), and the secondary source of repayment being cash flows of the business True False

True

Venture Capital investors have a fiduciary duty to their investors (limited partners in the fund) but do not have a fiduciary to the other shareholders of the companies they invest in unless they are also board members in those companies True False

True

Venture Debt is normally only available to companies that have raised equity from institutional sources True False

True

While Seed Deals have the lowest legal costs and usually involve the least contentious negotiations, they often allow for the most potential mistakes as the Seed Deal terms set an important precedent for future financings True False

True

With Venture Debt, Warrants sometimes referred to as an "Equity Kicker" are structured boost returns well beyond interest rate returns (all-in returns 12%-15% and sometimes higher) True False

True

A startup's burn rate is related to a. employee "burnout" and eventual turnover b. a company's liquidity and helps to predict how many months of capital availability c. how many venture capital firms a company contacts before finally landing investment d. the length of time it takes a company to land a round of financing e. All of the above

a company's liquidity and helps to predict how many months of capital availability

Public-to-private transactions normally make the most sense when a. a public equity is distressed or not performing b. the management team of the public equity are star performers c. the public equity has high revenue growth and increase profit margins d. retail investors have high opinions of the public entity and bid the stock price higher e. all of the above adequately completes this sentence

a public equity is distressed or not performing

From the investor's perspective, fair and equitable convertible debt deals would include which of the following? a. a high ceiling on the forced conversion valuation b. a reasonable time horizon on an equity financing and a forced conversion at a low floor if that time horizon is not met c. a high ceiling on the conversion valuation upon the occurrence of an equity financing within the time horizon d. a low floor on the conversion valuation upon the occurrence of an equity financing within the time horizon e. All of the above

a reasonable time horizon on an equity financing and a forced conversion at a low floor if that time horizon is not met

An entrepreneur is defined as a. an investor b. a creator c. an individual who assumes the risk of starting and/or running a business d. an individual that has mastered the art of leveraging resources e. all of the above

all of the above

Entrepreneurial Fatal Flaws include which of the following? a. married or family related to co-founders b. lawsuits filed against the company c. complex capital structures with many unqualified investors d. not following regulatory requirements e. All of the above

all of the above

For High Potential Venture investment opportunities a. series a investors look for a 20x or higher COIC b. series b investors look for a 10x or higher COIC c. series c investors look for a 5x or higher COIC d. IPO investors are looking for a continued high growth investment opportunity e. All of the above

all of the above

For a High Potential Venture investment opportunity, which of the following indicates "high potential" for the complete management team? a. led by an industry superstar b. proven entrepreneurial, general management, and P&L experience c. possess time-tested complementary and compatible skills d. have unusual tenacity, imagination, and commitment e. All of the above

all of the above

From a venture capital investor's perspective, the rationale for "Redemption Rights" are a. to provide a guaranteed exit path b. to provide guaranteed liquidity before the end of a fund's life cycle c. to provide a control lever if necessary to implement change d. All of the above

all of the above

The problem(s) with using Convertible Debt is(are) that a. the investor in convertible debt could be giving up substantial upside in terms of ROI b. later stage venture capital firms might ask the convertible debt investors to drop their discount upon conversion c. later stage venture capital firms might lower their pre-money valuation to be under the valuation cap on the convertible debt d. with convertible debt, the company might easily become insolvent e. All of the above

all of the above

Transaction costs consist of a. time and money associated with creating a relationship between the parties b. legal costs of the investor c. legal costs of the entrepreneur d. time and money involved in completing due diligence e. All of the above

all of the above

Venture Capital and Private Equity firms raise money from a variety of entities including which of the following? a. corporate pension funds b. institutional investors c. educational endowments d. family offices and high net worth individuals e. all of the above

all of the above

Which of the following are "Control" provisions? a. board of directors b. protective provisions c. drag-along rights d. registration rights e. all of the above

all of the above

Which of the following are one of the four documents that should be communicated to an investor in an Angel Round of financing? a. financial projections b. private placement memorandum c. management presentation d. subscription agreement e. all of the above

all of the above

Which of the following is normally included in the capital structure of a Leveraged Buyout? a. revolving line of credit b. senior secured term debt c. mezzanine or subordinated debt d. equity e. all of the above

all of the above

Which leg of the "Three-Legged stool" is the most important for a startup business that has High Potential Venture characteristics? a. market b. product c. legal form d. people e. investor

people

Which of the following represents how Private Equity firms make money in a Leveraged Buyout investment opportunity? a. deleveraging over the holding period b. increase financial margins, most likely EBITDA c. increase valuation multiple (multiple expansion) d. all of the above

all of the above

One of the benefits of having a successful (higher than average) Internal Rate of Return (IRR) on a Venture Capital or Private Equity fund is that the general partners a. can become very wealthy from the carried interest on the fund b. have the option of raising new funds with higher capital commitments c. all of the above adequately complete this sentence

all of the above adequately complete this sentence

The future for Private Equity involves a. industry and sector focus b. the emergence of deal sourcing partners c. the emergence of operating partners d. focus on operational improvements rather than financial engineering e. all of the above adequately completes this sentence

all of the above adequately completes this sentence

A Management Buyout is a. normally a leveraged buyout b. normally sponsored by a private equity firm c. when the current management team acquires the business from the current owners of the business d. all of the above adequately completes this sentences

all of the above adequately completes this sentences

In terms of managing the capitalization of a business, which of the following is true? a. as long as the pre-money valuation of the current round of financing is higher than the post-money value of the prior round of financing, all shareholders are happy b. as long as the price per share increases each round, dilution should not be perceived as a problem and all shareholders are happy c. Series A investors generally expect to make at least 20x MOIC d. Series B investors generally expect to make at least 10x MOIC e. All of the above are true

all of the above are true

Which of the following is TRUE regarding the "Official Start" of a business? a. prior to the official start of a business, the entrepreneurs likely will have months of prior thinking, out of pocket expenses, sweat equity, etc. b. an official start also could begin with a pivot from a predecessor company, a current employer, or even when purchasing an existing business c. when the entrepreneurs make an "all in" decision to work in 24x7 d. form a legal entity (the company shell) to house the business e. All of the above are true

all of the above are true

Which of the following statements is TRUE about Venture Capital and Private Equity funds? a. as a general rule, capital does not recycle b. the annual management fee is charged on committed capital c. the limited partners put up the majority of the capital d. capital calls are made to partners as deals are made e. all of the above are true

all of the above are true

Venture Debt lenders make money from a. the interest rate b. loan fees c. warrants d. all the above completes this sentence e. none of the above completes this sentence

all the above completes this sentence

Private Equity has become an ________ capital market relative to the public capital markets a. international b. canadian-based c. alternative d. technology-based e. public-sector based

alternative

"Automatic Conversion" generally applies when a company completes a. a merger b. a sale of a majority of its assets c. an IPO d. a later stage investment from another venture capital firm e. All of the above

an IPO

A "Principal" can be which of the following? a. an employee of a mid-sized or large corporation b. an investor in an entrepreneurial venture c. a student with goals of becoming the headmaster of a high school d. a government employee e. none of the above

an investor in an entrepreneurial venture

Which of the following is a TRUE statement regarding "Anti-dilution" provisions? a. compared to weighted average provisions, full ratchet provisions operate in the best interest of the entrepreneurs b. compared to the full ratchet provisions, weighted average provisions operate in the best interest of the investors c. anti-dilution provisions are only triggered when there is a down round d. anti-dilution provisions normally mean an investor's ownership can never be diluted by later stage investments e. None of the above statements are true

anti-dilution provisions are only triggered when there is a down round

A Full-Stack Venture Capital Firm has Operating Partners that help portfolio companies across a variety of dimensions, including recruiting, operations, technology, sales, and marketing, but (and) these Partners a. are not decision makers in the investment process b. are owners of the firm c. are academics that specialize in their field d. are politicians with government ties e. None of the above

are not decision makers in the investment process

"Term Sheets" a. are a binding investment commitment on the part of the investor b. are a binding commitment by the entrepreneurial company to accept investment from an investor c. are partially binding for both parties on issues such as no-shop clauses governing law, and who pays legal fees d. are long legal documents that fully document the terms and conditions of an investment e. None of the above

are partially binding for both parties on issues such as no-shop clauses governing law, and who pays legal fees

Venture Debt is a loan to high growth businesses and is normally made by a. venture capital firms b. depository institutions and commercial banks c. business development companies and small business investment companies d. angel investors and equity crowdfunding platforms e. all of the above

business development companies and small business investment companies

Venture Debt is a loan to high-growth businesses and is normally made by? a. venture capital firms b. depository institutions and commercial banks c. business development companies and small business investment companies d. angel investors and equity crowdfunding platforms e. All of the above

business development companies and small business investment companies

Characteristics of a strong Private Equity LBO investment include which of the following? a. businesses with low EBITDA margins b. businesses with seasonal business models c. businesses with recession proof business models d. high revenue growth businesses with little or no free cash flow e. none of the above

businesses with recession proof business models

The use of leverage in an investment transaction a. can magnify positive equity returns b. can magnify negative equity returns c. does not affect equity returns due to the costs of capital differences d. does not affect equity returns due to the costs of debt and equity are normally the same e. none of the above adequately completes this sentence

can magnify positive equity returns does not affect equity returns due to the costs of debt and equity are normally the same

In terms of organizational development and corporate culture, things that entrepreneurs may NOT want all employees to know about the business include which of the following? a. short-term vision b. current business problems to solve c. checkbook balance d. all of the above

checkbook balance

In terms of Entrepreneurial Team Compensation System, which of the following is a DISADVANTAGE of a Stock Option Plan? a. complicates the capitalization table b. consumes cash of the business c. creates new cash for the business d. vests out when an employee is terminated as an employee of the business e. none of the above

complicates the capitalization table

A _______ is defined as when an investor in a preferred stock has the right to redemption or conversion into common stock a. preferred stock b. convertible preferred stock c. participating preferred stock d. subordinated debt with warrants e. convertible debt

convertible preferred stock

Venture Debt a. is designed for mature steady revenue growth businesses b. relies on the borrowers' ability to generate free cash flow c. could take the form of preferred stock d. could be underwritten based on recurring revenue such as software and media subscriptions e. all the above completes this sentence

could be underwritten based on recurring revenue such as software and media subscriptions

_____ is when a later stage venture capital firm proposes changes to the terms of early round investors as a condition of their investment a. claw-back b. down-round c. cramdown d. full ratchet e. keg stand

cramdown

Problems of cross funding include which of the following? a. cross fund investing is rarely done from the beginning of an investment, so the later rounds are done at a different price than earlier rounds b. cross fund investing allows a venture capital or private equity firm to continue to support a portfolio company with capital from later younger funds c. there is no conflict of interest between the general partners of two different funds that cross fund invest d. all of the above

cross fund investing is rarely done from the beginning of an investment, so the later rounds are done at a different price than earlier rounds

Equity Crowd Funding is a. typically used to develop intellectual property b. rarely relies on marketing and promotion c. similar to pre-order campaign d. dilutive to shareholders of the company e. None of the above

dilutive to shareholders of the company

In terms of Entrepreneurial Team Compensation System, which of the following is an ADVANTAGE of a Phantom Equity (Stock Appreciation) Plan? a. does not complicate the capitalization table b. consumes cash of the business c. can be a disincentive if there is no appreciation of the equity of the business d. subject to deferred compensation laws e. None of the above

does not complicate the capitalization table

Anti-dilution provisions are generally only applicable when there is a a. down-round b. claw-back c. cramdown d. participating preferred stock e. convertible preferred stock

down-round

Which is the best market entry point for an investment in a high potential venture? a. early adopter phase b. early majority phase c. late majority phase d. dinosaurs or late adopters e. None of the above

early majority phase

The only two things that matter (Key Concepts) in a Term Sheet are a. status and press release b. economics and historical financial statements c. economics and control d. control and the number of board seats e. control and historical financial statements

economics and control

Private Equity firms is also referred to as a(an) _____________ a. venture capital firms b. pension fund c. mutual fund d. financial sponsor e. angel investor

financial sponsor

When pitching investors an investment opportunity, entrepreneurs should a. focus on the length of time necessary to get to the next meaningful milestone b. focus on detailed financial projections and grand harvest events c. focus on how high their salary will be and why this justifies their importance to maintaining high ownership interest in their venture d. play "hard to get" and suggest that their business does not really need any new money as a capital investment e. None of the above

focus on the length of time necessary to get to the next meaningful milestone

Which of the following is a FALSE statement? a. from the entrepreneur's perspective, negotiating a high valuation is more important than negotiating other economic and control terms b. from the investor's perspective, a participating preferred stock is more appealing than a convertible preferred stock c. from the investor's perspective, extensive control terms are more appealing than few if any control terms d. from the entrepreneur's perspective, a lower cumulative dividend rate is more appealing than a higher cumulative dividend rate e. from the investor's perspective, a 2x liquidation preference is better than a 1x liquidation preference

from the entrepreneur's perspective, negotiating a high valuation is more important than negotiating other economic and control terms

When an entrepreneur accepts an investment from a Venture Capital Firm they almost always a. give up control b. give up their job c. give up majority ownership d. give up their first-born child e. None of the above

give up control

From Tom Cole's lecture, there is a market shift of PE firms investing in which type of companies? a. value companies b. growth companies c. stable companies d. seasonal companies e. none of the above

growth companies

In terms of the criteria for Evaluation Venture Opportunities, venture capital firms a. have specific and individualized criteria lists for each investment opportunity that they consider b. have a generic criteria list that they apply to each investment opportunity that they consider c. rarely use the criteria for evaluation of venture opportunities as startup companies have no historical track record to analyze d. hire investment bankers to analyze their investment opportunities for them utilizing the criteria for evaluation of venture opportunities e. None of the above

have specific and individualized criteria lists for each investment opportunity that they consider

Venture Partners, Operating Partners, and Entrepreneurs in Residence a. have very similar roles and responsibilities within a venture capital firm b. are always owners within a venture capital firm c. rarely make co-investments in portfolio companies of the venture capital firm d. specializes in Bitcoin e. None of the above

have very similar roles and responsibilities within a venture capital firm

Which of the following is usually the best solution to the Entrepreneurial Plateau? a. hiring a small business manager to run the business b. hiring an investment bank to sell the business c. turning the business into a not for profit business d. changing the legal form of the business from a corporation to a limited liability company e. hiring a professional manager to run the business

hiring a professional manager to run the business

For Due Diligence, entrepreneurs should be prepared to establish a data site (data room) that consolidates business, financial, and legal records of the business located a. in the entrepreneur's home in case the business's offices are ruined due to a natural disaster b. in the business's location and contain hard copies to avoid data breaches c. in the business's capitalization table d. in an enterprise grade cloud storage site, or a Dropbox, Box, Google, or Carta Folder e. None of the above

in an enterprise grade cloud storage site, or a Dropbox, Box, Google, or Carta Folder

What is the main difference between a Term Sheet and a Letter of Intent? a. in the business life cycle the early investors issue entrepreneurs a Term Sheet and in the entrepreneur's harvest/exit event involves a Letter of Intent from the buyers of their business b. in the business life cycle the early investors issue entrepreneurs a Letter of Intent and in the entrepreneur's harvest/exit event involves a Term Sheet from the buyers of their business c. A Letter of Intent describes investor interest in making an investment while the Term Sheet describes the terms under which an investor is willing to make the investment d. There is no difference between Term Sheets and Letters of Intent e. None of the above

in the business life cycle the early investors issue entrepreneurs a Term Sheet and in the entrepreneur's harvest/exit event involves a Letter of Intent from the buyers of their business

If possible, why should an entrepreneur seek to obtain multiple term sheets from venture capital firms? a. supply of capital is low and entrepreneurs have few options to raise venture capital b. there are usually multiple options for venture capital and raising funds for a venture is easy c. increased competition allows entrepreneurs to negotiate the best terms d. valuation is usually lower on a financing when there is competition e. None of the above

increased competition allows entrepreneurs to negotiate the best terms

From Tom Cole's lecture, traditional Private Equity firms that initially bought ___________-based companies have now shifted towards hot spot industries such as ________________ a. consumer retail, chemicals b. industrials, technology c. fintech, financial institutions d. metals & mining, healthcare e. business services, energy

industrials, technology

Participating Preferred Stock a. provides a return on investment equal to convertible preferred stock b. provides a return on investment that is lower than convertible preferred stock c. is generally the preferred choice by entrepreneurs d. is generally the preferred choice by venture capital investors e. None of the above

is generally the preferred choice by venture capital investors

From Tom Cole's lecture, since 2018, what has happened to the equity contribution in proportion to debt in LBOs? a. it has increased b. it has decreased c. it has remained constant d. it has varied

it has remained constant

From Tom Cole's lecture, which of the following is NOT an advantage of LBOs? a. selected companies are able to be managed more aggressively than public companies which allows private equity firms to cut costs and restructure quickly b. liquidity is a key feature that investors look for in these types of investments c. private equity firms are able to "time the market," meaning they can decide when to purchase and sell LBO companies d. the LBO structure can exacerbate (magnify) up-side returns

liquidity is a key feature that investors look for in these types of investments

From Phil Funk's lecture, what is the most important driver of investment performance? a. asset allocation b. market c. security selection & fees d. cryptocurrency e. none of the above

market

Which leg of the "Three-Legged stool" is the most important for a large mature enterprise? a. market b. product c. legal form d. people e. investor

market

In his presentation, Phil Funk covered three large topic areas which were: a. personal finance, personal investing, and wealth creation b. personal finance, public market investing, and wealth distribution c. personal budgeting, maximizing stock market returns, and philanthropy d. personal budgeting, personal investing, and wealth distribution

personal finance, personal investing, and wealth creation

For an Attractive Small Business investment opportunity, which of the following do investors look for? a. will accommodate a $100M+ entrant in five years b. market currently at $500M and more, growing at 25% per year c. has no dominant competitor now d. prefer fragmented market, and #2-#5 market position is acceptable e. All of the above

prefer fragmented market, and #2-#5 market position is acceptable

Which of the following is a TRUE statement? a. private equity firms normally include control provisions in investment agreements like venture capital firms do because private equity firms take majority positions in portfolio companies that they invest in b. private equity funds normally do NOT include control provisions in investment agreements like venture capital firms do because private equity firms take majority positions in portfolio companies that they invest in c. private equity firms normally include control provisions in investment agreements like venture capital firms do because private equity firms take minority positions in portfolio companies that they invest in d. private equity firms normally do NOT include control provisions in investment agreements like venture capital firms do because private equity firms take minority positions in portfolio companies that they invest in e. none of the above is a true statement

private equity funds normally do NOT include control provisions in investment agreements like venture capital firms do because private equity firms take majority positions in portfolio companies that they invest in

Which of the following is a TRUE statement? a. private equity is a consolidating industry b. private equity returns are increasing as there is currently a shortage of capital relative to the number of available quality deals c. private equity is a meritocracy as only the best fund managers with high fund IRRs can raise additional capital for new funds d. private equity as an alternative asset class is shrinking in size as large institutional investors are losing faith in private equity fund managers e. none of the above are true

private equity is a meritocracy as only the best fund managers with high fund IRRs can raise additional capital for new funds

A PIPE stands for which of the following? a. public investment in a private equity b. private investment in a public entity c. preferred investment in a private equity d. private investment in preferred equity

private investment in a public entity

Which of the following are normally important terms of the term sheet? a. financial projections b. the articles of incorporation and bylaws c. resumes of the founding management team d. proprietary information and invention agreement e. none of the above

proprietary information and invention agreement

Which of the following Entrepreneurial Risks is the worst risk (provides the worst hardship) to an entrepreneur's career? a. psychic b. career c. business d. social e. financial

psychic

Which of the following are the characteristics of an entrepreneur? a. risk taker b. pessimistic c. low energy d. poor communicator e. all of the above

risk taker

From Phil Funk's lecture, investing in the market is risky, but not investing in the market is a. smart b. valuable c. typical d. risky

risky

Convertible Debt is most often used in a. seed investments b. series a investments c. series b investments d. series c investments e. None of the above

seed investments

An individual qualifies as an Accredited investor if a. she has earned income of $50,000 or more per year or has joint earned income with her spouse of $75,000 per year b. she has earned income of $100,000 or more per year or has joint earned income with her spouse of $200,000 per year c. she has a net worth exceeding $1 million either alone or jointly with her spouse d. she has a net worth exceeding $5 million either alone or jointly e. None of the above

she has a net worth exceeding $1 million either alone or jointly with her spouse

Product Crowd Funding is a. typically used to develop intellectual property b. rarely relies on marketing and promotion c. similar to pre-order campaign d. dilutive to shareholders of the company e. None of the above

similar to pre-order campaign

A business's "Burn Rate" is defined as a. the amount of money a business spends each month b. the amount of money that a business requires to reach cash flow break-even c. the number of months that a business can operate without additional capital d. the amount of time that it takes an investor to make an investment from the date that a term sheet is signed e. the amount of time that it takes an investor to make an investment from the date that an introduction is originated

the amount of money a business spends each month

A business's "Runway" is defined as a. the amount of money a business spends each month b. the amount of money that a business requires to reach cash flow break-even c. the number of months that a business can operate without additional capital d. the amount of time that it takes an investor to make an investment from the date that a term sheet is signed e. the amount of time that it takes an investor to make an investment from the date that an introduction is originated

the number of months that a business can operate without additional capital

Which of the following is a FALSE statement? a. pre-money valuation is what the company is valued at before the contemplated investment amount b. post-money valuation is the pre-money valuation plus the contemplated investment amount c. the percentage ownership that an investor would purchase is the contemplated investment amount by the pre-money valuation d. pre-money valuation will determine the price per share that an investor pays e. All of the above are true statements

the percentage ownership that an investor would purchase is the contemplated investment amount by the pre-money valuation

In terms of the fee structure paid to the general partner(s) of Venture Capital and Private Equity funds, a. there is normally a 20% annual management fee on assets under management, and a 2% carried interest on capital gains and profits b. there is normally a 2% annual management fee on assets under management, and a 20% carried interest on capital gains and profits c. there is normally a 20% annual management fee on capital committed to the fund, and a 2% carried interest on capital gains and profits d. there is normally a 2% annual management fee on capital committed to the fund, and a 20% carried interest on capital gains and profits e. there is a 2% annual management fee on committed capital and no carried interest on capital gains and profits

there is normally a 2% annual management fee on capital committed to the fund, and a 20% carried interest on capital gains and profits

From an entrepreneur's perspective, it is important to remember that a. once an investment is made from a venture capitalist, there is a very high probability that a high harvest even will take place like an IPO or a merger at a high multiple of EBITDA or revenue b. once a investment is made by a venture capitalist, the risk of business failure is minimized as venture capital investors provide little if any value to the entrepreneur's business c. deal structures with venture capital firms are usually simple and contain primarily only economic terms d. venture capital money is institutional money, and the primary goal of the venture capitalist is to maximize return (ROI or IRR) e. All of the above adequately completes this sentence

venture capital money is institutional money, and the primary goal of the venture capitalist is to maximize return (ROI or IRR)