Exam 14: Obtaining Venture and Growth Capital

Most venture capital funds are organized as limited partnerships,in which the fund managers are the general partners and the investors are the limited partners.

What is the standard form of organization's for a venture capital fund?

ESOPs are a potential source of funding used by existing companies that have low to moderate confidence in the stability of their future earnings and cash flow.

A private placement may not be offered after a company has already gone public.

Name three non-monetary capabilities a venture capitalist brings to an investment.

Jill has bootstrapped her business that helps large bakeries increase the efficiency of their deliveries.After a recent spotlight in a trade magazine explaining how her customers can quickly lower their costs,her sales have doubled in three months.Since her system is a combination of proprietary software and hardware,this dramatic increase in installs has created a severe and unexpected cash flow challenge.Which of the following sources would be her best choice of immediate funds?

Bootstrapping an early stage company is a means of retaining equity.

What is the biggest difference between an IPO and a Private placement?

With mezzanine financing,the principle amount may be converted into equity.

Interest from a venture capitalist can be predicted by the amount needed and the required rate of return expected.

An ESOP is a program in which the employees create an internal source of funding by becoming investors in the company.

Private companies that get into financial trouble can opt to raise funds through a private placement.

In the majority of the high-technology startups and early-stage companies,debt is normally secured to fund research and development,prototype development and product marketing,launch,and cover early losses.

Capital that is between senior debt financing and common stock is called _________ financing.

Whether or not the outcome of a presentation is continued investment interest,the entrepreneur needs to try to obtain the names of other potential investors from this meeting.

What is the best way for an entrepreneur to learn about the reputation of a particular venture capital firm?

Which of the following industry would be least likely to attract mezzanine financing?

John Savage was an engineer with an idea for a flexible solar-energy material that would have a wide-range of military and civilian apparel applications.He estimates that he will need approximately $300,000 to develop a prototype.Friends and family could provide about $75,000.What would be the best source for the balance?

Describe the stages in the venture capital fund investing process,including fund formation and adding value to investments.

Angels or wealthy individuals are often sought because they are more easily sold than formal investors (i.e. ,venture capitalists and private placements).