Old Midterm

Question 1

Local groups

Answer 1

Cintrifuse
KY Innovation Network
VonAllmen Center

Question 2

What types of funds should Sally approach about this investment:  Angel fund
Mutual fund
Venture capital fund
Private equity fund
State development fund

Answer 2

Angel fund
VC Fund
State Development Fund

Question 3

What type of instrument might Bill and Ted use to raise money if they have an investor ready to fund now, but they want to wait to set a price when they raise additional money, which is expected to occur in the next several months?

Answer 3

Convertible Note

Question 4

What is a reason why this start-up would issue equity rather than debt?

a. Because the dividends are deductible for tax purposes
b. Because investors like the certainty of equity
c. Because they can’t raise debt

Answer 4

c. Because they can’t raise debt

Question 5

Consenser does very well and obtains a $500 million valuation in two years. What types of investor may be interested in investing at this stage?

Answer 5

Private Equity Fund

Strategic Investor

Question 6

Requirements for an accredited investor

Answer 6

Income - 200k or 300k with spouse

Net Worth - 1,000,000 excluding home

Question 7

A public issuance of shares normally must be registered with the SEC. What is the common name for the type of securities offering that is exempt from registration requirements:

a. Primary Placement
b. Private Placement
c. Privileged Placement
d. Preemptive Placement

Answer 7

b. Private Placement

Question 8

You are interviewing for a position at a start-up. You expect to receive options as part of your compensation package. If you receive options on 100 shares, how many of these shares would you expect to vest after one year based on the market standard vesting schedule

Answer 8

25

Question 9

What do you call the compensation that a VC fund manager receives as a percentage of positive returns on the investments?

a. Carried Interest
b. Kicker Interest
c. Bonus Interest
d. Gravy Interest

Answer 9

a. Carried Interest

Question 10

What is the difference between a strategic investor and a financial investor?

Answer 10

Strategic investors consider synergies with another business.

Question 11

Sometimes investors in corporations may still be found liable for the actions of the company. What is it called when this happens

Answer 11

Piercing the corporate veil

Question 12

If you own 100% of a single member LLC, is it possible for this LLC to be disregarded for U.S. Federal income tax purposes?

Answer 12

Yes

Question 13

What is a market standard dividend rate on preferred stock?

a. 2%
b. 6%
c. 15%

Answer 13

b. 6%

Question 14

What is the term that requires an event to occur prior to funding?

a. Conditional President
b. Contractual Prefect
c. Condition Precedent
d. Confrontational Precept

Answer 14

c. Condition Precedent

Question 15

What does it mean for a FC to “lead” a round?

Answer 15

To negotiate the termsheet, conduct due diligence and likely take a board seat. Other more passive investors look to the lead investor for a stamp of approval.