Question 1

Investors can only derive the benefit of their investment when a ______________ event occurs and an "exit strategy" is fulfilled.

Accepted Answer

The answer of Investors can only derive the benefit of...

Question 2

There are two basic classes of ownership in companies: shares of stock in publicly traded companies and ________________ equity, in which the founders either own common stock, or participate as members in a partnership or in an LLC.

Accepted Answer

The answer of There are two basic classes of ownership...

Question 3

_______________ refers to the investigative process that prospective investors undertake prior to making an investment.

Accepted Answer

The answer of _______________ refers to the investigative process that...

Question 4

______________ financing refers to additional funds to carry a company during the period between identifying the needs for additional funds and actually receiving money from the bank.

Accepted Answer

The answer of ______________ financing refers to additional funds to...

Question 5

____________________ partnerships that include an equity investment usually occur when ventures find that they are rejected from traditional financing methods or are unwilling to accept the equity valuations assigned by potential investors.

Accepted Answer

The answer of ____________________ partnerships that include an equity investment...

Question 6

________ investors invest their own money.

Accepted Answer

The answer of ________ investors invest their own money....

Question 7

Angels are always looking for new deal opportunities, called __________.

Accepted Answer

The answer of Angels are always looking for new deal...

Question 8

The average number of members in an angel group is ____________.

Accepted Answer

The answer of The average number of members in an...

Question 9

The __________valuation is the value that the entrepreneur and the investor agree the company is worth prior to any investment.

Accepted Answer

The answer of The __________valuation is the value that the...

Question 10

______________is the company's valuation immediately after the investment is made.

Accepted Answer

The answer of ______________is the company's valuation immediately after the...

Question 11

The entrepreneur should undertake______________ on the potential investor(s) to make sure that the deal is a good fit to their investment criteria and that the investors have deep knowledge in the business area.

Accepted Answer

The answer of The entrepreneur should undertake______________ on the potential...

Question 12

The terms, conditions and agreements negotiated by investors that provide certain advantages over common shareholders are termed: _______________ and ____________________.

Accepted Answer

The answer of The terms, conditions and agreements negotiated by...

Question 13

__________________ refer rights to purchase a certain number of shares, common or preferred as defined, within a given time period and at a stated price.

Accepted Answer

The answer of __________________ refer rights to purchase a certain...

Question 14

Angels are:

Accepted Answer

Angels, or angel investors, are high-net-worth individuals who provide financial backing for small startups or entrepreneurs, often in exchange for ownership equity in the company. They are willing to risk their funds on these ventures with the hope of earning a return on their investment through the company's growth.

Question 15

Rounds of equity financing can be termed:

Accepted Answer

Rounds of equity financing often start with Pre-seed and Seed rounds, which are early stages of funding to get the company off the ground.

Question 16

Factors to consider when raising funds include all of the following except:

Accepted Answer

Acceptance of a too high valuation of the company by an investor is generally not a concern when raising funds; rather, it is often seen as beneficial for the company.

Question 17

Which statement is true of classes of corporate stock?

Accepted Answer

A professional investor typically requires an LLC or partnership to convert into a corporation with founders and employees owning common shares to facilitate investment and provide a clear equity structure.

Question 18

In the first phase of due diligence, investors perform a quick evaluation on key claims made by the entrepreneur. This includes:

Accepted Answer

In the first phase of due diligence, investors perform a quick evaluation on key claims made by the entrepreneur, which includes background checks on the principals, verifying title/ownership of any intellectual property, and analyzing potential competitors.

Question 19

Which is true of the due diligence process?

Accepted Answer

Due diligence involves thorough investigation by both parties. Entrepreneurs should research investors to ensure alignment with their business goals and values, while investors conduct in-depth analysis of the company's financial health, business model, and market potential. This process is not limited to basic information or conducted hastily due to its critical role in making informed investment decisions.

Question 20

When valuing a business,

Accepted Answer

At the later stages of a company's growth, the valuation of a business is indeed heavily influenced by its cash flow and profit generation in the marketplace. This is because these factors are indicative of the company's financial health and its ability to generate returns for investors.

Quiz 9: Equity Financing for High Growth