Venture Capital

1. In contrast to an entrepreneur, a venture capitalist is a professional money manager who makes risk investments from a ..... of capital to obtain a high rate of return.

• pool

• stock

• portfolio

• stream

2. In a venture capital deal, ________________ownership chunks of a company are created and sold to ____________________ investors

• very small / many

• large / a few

• substantial / all

• small / most of the

3. Venture capital is not just about money

• it also provides high returns on investment

• it ensures bank secrecy

• it provides companies and entrepreneurs with technical and managerial advice

• it allows the venture capitalist to have a say in the company decisions as investors get equity in the company

4. Venture capital is invested in

• early stage firms which do not plan for growth

• late stage and bigger firms

• early stage firms with short-term growth potential

• early stage firms with long-term growth potential

5. Why do firms need VC (venture capital)?

• because they're in their early stage and need cash to invest

• because they are too small or risky for banks to give them loans

• because they do not have access to capital markets

• All of them

6. Venture capital capitalists can earn

• a portion of the firm's equity

• high returns

• small returns but influence on the company direction

• high returns, a chunk of the company's equity as well as influence on the company decisions

7. A company with a limited operating history means that

• it is no more than 2 years old

• it was set up at least 10 years before

• it is generally limited in its operations because it is not innovative enough

• it has limited start-up costs

8. True or false : venture capitalists cannot pull out the company until the company has gone public

• true

• false

9. Why can big VC firms risk losing money in their deals?

• because they will get high ROI

• because investing in a successful start-up will make up for their loss

• because they can be covered by the big banks

• because sometimes you win, sometimes you lose

10. In a typical venture capital portfolio, most of the returns are from 20% of the investments. This means that

• Statistically, if a venture capital makes ten investments, two will be winners and create most of the gains in the fund

• 1 in 5 venture capital funds will succeed in its investments

• 95% of investments made by venture capitalists fail, but 5 % make such spectacular returns that they subsidize the failures

• the venture capital will always have one fifth of the votes in the companies' decisions