Exam 16: Sources of Equity Financing

Locating "angels" to finance a business is essentially a matter of networking-finding the right contacts.

Angels often finance deals that venture capitalists would also consider.

One of the reasons for the significant drop in the number of public offerings since 2001 is:

The purpose of the road show coordinated by the underwriter of an initial public offering (IPO)is to promote interest in the IPO among potential syndicate members.

An entrepreneur should not take advantage of offers from family and friends to lend or invest money for the business venture.

Once a small business goes for a public stock offering,information that the owner used to keep private is now public information.

The money Bert uses to build inventory for the upcoming Christmas season would be classified as ________ capital.

A lock-up agreement prevents sale of insider shares for 12 to 36 months.

Most venture capitalists look for:

These ________ are wealthy individuals,often entrepreneurs themselves,who invest in business start-ups in exchange for equity stakes in the companies.

Choosing the right source of capital is as important as choosing the right form of ownership for the small business owner.

One of the characteristics that investment bankers who underwrite public stock offerings typically look for is consistently high growth rates.

In a public stock offering,the underwriter's primary role is in selling stock through an underwriting syndicate it assembles.

The document outlining the details of the agreement between the entrepreneur and the stock underwriter is called:

A lock-up agreement prevents the sale of "insider" shares for a specific time period-often 12 to 36 months-after an initial public offering.

In an IPO the purpose of the road show is to sell shares.

Briefly review the steps involved in the IPO process.

Typically,the entire process of going public takes about 21 days.

Explain the advantages and disadvantages of a small company "going public."

The primary disadvantage of equity capital is that the entrepreneur must give up some-perhaps most-of the ownership in the business to outsiders.