Quizzes Flashcards
(15 cards)
What is the common name given to the process of reducing risk to increase valuation for a start-up?
a. De-risking
b. Un-risking
c. Ex-risking
a. De-risking
Name three reasons a start-up is different from a mature company from a financial perspective:
no cash flow no earnings lower liquidity higher risk higher return no assets no history no trust no analysts no financials
What form of company do VCs prefer?
a. LLC
b. Corporation
c. Joint Venture
d. Partnership
b. Corporation
What state is most favored the its corporate legal system?
a. New York
b. California
c. Delaware
d. Maryland
c. Delaware
In which type of for-profit company is an officer allowed to make decisions that favor constituents such as employees or the environment in addition to shareholders?
a. Charitable Intent Organization
b. Civic Operations Corporation
c. Public Works Company
d. Public Benefit Corporation
d. Public Benefit Corporation
What is “piercing the corporate veil”
a. Sharing corporate secrets with competitors
b. Finding shareholders liable for corporate actions
c. Marriage of C-level executives
d. Starting a new company as a start-up
b. Finding shareholders liable for corporate actions
Which of these is true about convertible debt in a start-up?
a. It coverts at a discounted price
b. It coverts at a premium price
c. It is not used for bridge funding
a. It coverts at a discounted price
Name one organization (that we talked about in class) where start-ups can go for assistance in raising money (not an angel group).
Von Almen Center
Awsome Inc
Cintrifuse
What is the name for the compensation that a VC manager gets based on the return of the investments?
a. Profits interest
b. Follow-on interest
c. Pulled interest
d. Carried interest
d. Carried interest
What is the name of the money that VCs keep to make a second investment in a start-up?
a. Reserve
b. Hold back
c. Dry powder
d. Secondary funds
a. Reserve
Over how many years does the typical startup option vest?
- First year cliff vesting (nothing until end of first year), then three more years with monthly or quarterly vesting.
Who usually offers a term sheet – the investor or the company raising money?
Investor
Company B has 10,000,000 shares before their Series A round. They raise $10,000,000 for a 25% post-money interest. They also need to set aside 10% for an option pool. How many shares will the Series A investors receive?
The 10,000,000 shares will be 65% of the total shares after the round (25% to Series A investors and 10% to option pool), so the total shares will be 15,384,615 (10,000,000/65%). So the Series A gets 3,846,154 (25% * 15,384,615)
Why is it important to know what is “market” when negotiating a term sheet?
So that you have bargaining power with the ability to say that a term is not normal.
Why would a lead investor want to set a minimum total amount for the round?
So that company is assured of getting an adequate amount of funding to execute its plan. Or this might require a second investor to come in to corroborate the lead investors view.
