VENTURE CAPITAL FINAL – Flashcards
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Entrepreneurship does not occur in not-for-profit companies. T or F
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False
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One of the biggest mistakes aspiring entrepreneurs make is that they think too small. T or F
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True
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The entrepreneurial process starts with the ________. strategy networks team opportunity
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oppurtunity
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______ strategies encourage a discipline of leanness, where everyone knows that every dollar counts. Cost Accounting Bootstrapping Venture Financing Opportunity Awareness
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bootstrapping
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What are the three driving forces of the Timmons Model? cash, opportunity, resources team, opportunity, resources team, cash, resources opportunity, market, team
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team, opportunity, resources
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The vast majority of startup entrepreneurs spend inordinate amounts of time chasing the wrong funding sources for their venture. T or F
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True
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Successful entrepreneurs stick with the business plan and do not adjust to evolving opportunities. T or F
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False
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Which of the following is NOT a reality of new ventures? It's best to avoid large solo projects. The key to success is failing quickly. Success is highly situational. Venture Capital is readily available for R;D (Research and Development) stage companies with a business plan.
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Venture Capital is readily available for R;D (Research and Development) stage companies with a business plan.
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What is the best source of funding for a startup company looking to raise $75,000 for Research and Development? Venture Capital Friends and Family IPO (Initial Public Offering) Strategic Acquirer
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Friends and Family
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When screening business ideas, entrepreneurs should focus first on ________. strategy opportunity financial analysis company valuation
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oppurtunity
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Successful entrepreneurs say "no" to lots of opportunities. T or F
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true
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Completing the Venture Opportunity Screening Exercise will remove all of the uncertainties and risks associated with a venture concept.
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false
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Typical investors have to weed through _____ ideas before finding one that meets their investing criteria. 1 to 2 3 to 4 5 to 6 countless
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countless
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The Venture Opportunity Screening Exercise creates the foundation for the development of the __________. quick screen complete business plan term sheet Timmons Model
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complete business plan
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Seasoned entrepreneurs know that a series of _______ is the key to success, allowing them to figure out if an idea is viable in months rather than years. fast failures board meetings investor presentations VC funding
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fast failures
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If a team is starting a venture that will not need outside capital, then it is appropriate to not prepare a business plan. T or F
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false
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When speaking with venture capitalists, the entrepreneurial team should be vague when describing other potential venture capitalists. T or F
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true
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Which of the following does not accurately describe a business plan? Work in progress Easy to prepare Never truly finished Obsolete at the printer
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Easy to prepare
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When is it a good idea to hire an outside professional to write the business plan? When no one on the team knows how to write a business plan When the lead entrepreneurs are deeply involved with other pursuits It is not a good idea to hire an outside professional to write the business plan When no one on the team is willing to take the lead in writing the business plan
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It is not a good idea to hire an outside professional to write the business plan
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A dehydrated business plan usually runs from _____ pages. 4 to 10 10 to 15 15 to 20 20 to 25
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4 to 10
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The originator of the business idea should not receive equity in the new venture. T or F
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False
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It is in the high-growth stage that new ventures tend to exhibit a failure rate exceeding 60 percent. T or F
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True
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The ultimate goal of any venture capital-backed company is to realize a harvest at a price at least _____ times the original investment. 1 to 2 3 to 5 5 to 10 20 to 25
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5 to 10
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Regarding rewards and equity, which of the following is NOT a fundamental reality with nearly any new venture? Founders should keep most of the company to themselves. Cash is King. You will be out of cash much sooner than you think. Talent is the key to success.
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Founders should keep most of the company to themselves.
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Which of the following is NOT a worthwhile principle to guide the approach to rewards and equity sharing in creating a successful venture? Share the wealth with the high performers who contribute to its creation. Sweat equity does not matter much. Treat other people as you would want to be treated. Reward results, and especially those who create revenue, and attract and grow key talent.
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Sweat equity does not matter much.
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Whenever possible, effective entrepreneurs seek to control rather than own the resources they need. T or F
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True
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A board of advisors is an especially good alternative to a board of directors because a board of advisors is authorized to make legal decisions. T or F
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False
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Extending _________ is one of the primary sources of working capital for many start-up and growing firms. board terms accounts receivable accounts payable notes receivable
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accounts payable
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________ of a company can be held personally liable for its actions and those of its officers. Directors Advisors Common Shareholders Customers
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Directors
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________ is defined as a multistage commitment of resources with a minimum commitment at each stage or decision point. Venture Capital Angel Capital Mezzanine Funding Bootstrapping
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Bootstrapping
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Strategies that maximize the amount of money raised can be counter-productive for new and emerging companies. T or F
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true
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Short-term debt is most often used by a business for working capital and is repaid out of the proceeds of its sales. T or F
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true
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What leads and drives the financial strategy framework? Financial requirements Opportunity Availability of funding sources Deal structures
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Opportunity
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An entrepreneur should calculate __________ to determine the external financing requirements of a new venture. revenue profitability earnings per share free cash flow
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free cash flow
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What is the most likely source for early-stage equity capital of $100,000. Informal Investors (Angels) Venture Capital Banks Public Equity Markets
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Informal Investors (Angels)
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One of the toughest trade-offs for any young company is to balance the need for start-up and growth capital with preservation of equity. T or F
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true
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When raising equity investment capital it is important for an entrepreneur to remember that owning a smaller percentage of a larger pie is preferred to a larger percentage of a smaller pie. T or F
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true
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A typical informal investor (Angel) will invest ________ in any one deal. $5,000 to $10,000 $10,000 to $250,000 $100,000 to $500,000 $500,000 to $1 million
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$10,000 to $250,000
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When pushed by a promising investor to discuss what other firms/angels you are talking to, you should: Respectfully decline Reveal only the strongest other prospects Reveal only the weakest prospects Be up-front and tell them what they want to know
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Respectfully decline
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Most venture capital funds prefer to invest ________ or more. $500,000 to $1 million $1 million to $2 million $2 million to $5 million $10 million to $20 million
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$2 million to $5 million
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The goal of valuation techniques for a start-up company is to be able to arrive at a single number. T or F
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False
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Investors stage their capital commitments as a way to incentivize the entrepreneurial team. T or F
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true
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How long is the typical expected holding period for a second stage venture capital investment? 3-4 years 4-7 years 8-10 years 20 years
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4-7 years
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By ______ their capital contributions, venture capitalists preserve the right to abandon a project whose prospects look dim. staging maximizing leveraging factoring
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staging
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Which valuation method looks at different multiples (such as earnings, free cash flow, and revenue) of recent investments in similar firms? Venture Capital Method Fundamental Method First Chicago Method Rule-of-Thumb Methods
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Rule-of-Thumb Methods
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Unlike equity investors, banks place very little weight on the quality of the management team. T or F
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false
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Leasing enables a young company to conserve cash and can reduce its requirements for equity capital. T or F
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True
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What is the primary source of DEBT capital for existing (not new) businesses? Commercial banks Venture capitalists Angel (informal) investors Initial Public Offering (IPO)
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Commercial banks
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Which of the following is the most expensive source of DEBT financing? Commercial banks Angel (informal) investors Venture capital Factors
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Factors
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Commercial finance companies lend against the _______ of assets. liquidation value book value inflation adjusted price purchase price
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liquidation value
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Families comprise the dominant form of business organization worldwide, and provide more resources for the entrepreneurial economy than any other source. T or F
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true
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Most often, family cash investments are given based on altruistic family sentiments rather than having more formal investment criteria. T or F
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true
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The financial mindset for enterprising does NOT include which of the following characteristics: A commitment to generating next-generation entrepreneurship. A willingness to stick with the existing business model. An assumption that a percentage of the business will become obsolete. A willingness to sell and redeploy assets to seek higher returns.
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A willingness to stick with the existing business model.
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Between ________ of all informal (or non- venture capital) funding comes from family. 5% -10% 10% - 20% 20% - 30% 30% - 80%
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30% - 80%
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Families who intend to act entrepreneurially must be focused on _______. operational efficeincy safeguarding their brands maintaining the existing business model opportunity
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opportunity
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Shaping a harvest strategy is an enormously complicated and difficult task. T or F
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true
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Most advisors view outright sale as the ideal route to harvest because up-front cash is preferred over most stock. T or F
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true
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Which of the following harvest options is viewed as a positive motivational device because it usually creates widespread ownership of stock among employees? Initial Public Offering (IPO) Employee Stock Ownership Plan (ESOP) Outright Sale Strategic Alliance
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Employee Stock Ownership Plan (ESOP)
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Which harvest option can have the negative attribute of forcing the leadership team to focus on short-term profits and performance results? Public Offering Management Buyout (MBO) Employee Stock Ownership Plan (ESOP) Capital Cow
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Public Offering
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A(n) ______ is when a founder can gain liquidity from a business by selling it to existing partners or to other key managers in the business. Initial Public Offering (IPO) Management Buyout (MBO) Capital Cow Merger
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Management Buyout (MBO)
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A(n) ______ is when a founder can gain liquidity from a business by selling it to existing partners or to other key managers in the business. Initial Public Offering (IPO) Management Buyout (MBO) Capital Cow Merger
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Management Buyout (MBO)
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A(n) ______ is when a founder can gain liquidity from a business by selling it to existing partners or to other key managers in the business. Initial Public Offering (IPO) Management Buyout (MBO) Capital Cow Merger
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Management Buyout (MBO)
