Venture Capital, Finance And Accounting

Question: Why would a venture capitalist prefer equity to debt?
A
Because it is less risky

B
Because it offers a higher interest rate

C
Because it is easier to liquidate

D
Because it allows the venture capitalist to participate in the growth of the company as the value grows

Note: Answer not sure
1. Report
Question: Why don't the investors in venture capital firms invest directly in the target companies rather than investing in a venture capital firm as an intermediary?
A
Because less paperwork is involved

B
Because it mitigates their costs

C
Because it gives better returns

D
Because it diversifies risk as the money is invested in several target companies via the venture capitalist

Note: Answer not sure
1. Report
Question: Why does corporate structure matter when the investment is for equity?
A
Because equity can only be invested in when the company is structured as a corporation

B
Because, depending on the structure, the agreement has to be handled differently to be legally binding

C
Because there are better returns on investment if the company is a corporation as compared with a limited liability corporation

D
It ultimately doesn't matter as much as the amount invested matters.

Note: Answer not sure
1. Report
Question: Why would specialized consultants be hired for the final stage of the due diligence process?
A
Because it creates billable hours which are charged to the target company

B
To verify and confirm the venture capitalist's findings arrived at during their preliminary due diligence

C
Because it is part of the contract of services to be rendered

D
Because it allows the venture capitalist to ask for additional equity

Note: Answer not sure
1. Report
Question: Why is the venture capitalist in charge of the drawing up of the term sheet and not the target company?
A
Because it is stipulated by law that the venture capitalist gets to draw up all legal documents.

B
They are not. It can go either way. Both sides can draw it up.

C
Because the venture capitalist is the one who is investing, and gets to state under what terms they are willing to invest. The target company can either accept or reject them.

D
Because the venture capitalist has a lawyer and the target company does not.

Note: Answer not sure
1. Report
Question: Why would a merger with another company also be considered an investment exit?
A
Because it is mandatory for investors not to be involved post merger

B
Because it was laid down in the legal documents at the time of merging that the venture capitalist can be bought out

C
Because the merging company will typically force the venture capitalist out

D
Because the management will always want to buy out the venture capitalist so they can no longer participate

Note: Answer not sure
1. Report
Question: Would a venture capitalist want to have majority control of the board even without majority stock ownership?
A
No, the board make up reflects the ownership make up

B
No, it would rather have company officers be in charge

C
Yes, if the management is inexperienced

D
Definitely, they want to be able to control the decisions made and guide the company

Note: Answer not sure
1. Report
Question: Why is Pre-money value important to a venture capitalist?
A
Because it shows how reasonable the target company is

B
Because it determines how profitable the company will be

C
Because it shows how much investment the founders have put into the venture

D
Because it determines the value of the target company before investing, which will in turn determine how much equity the venture capitalist will be given for their investment

Note: Answer not sure
1. Report
Question: Why are share transfers tightly restricted by the venture capitalist?
A
To maintain control of who is involved in the company and can exert control

B
Because they want the right to buy up more equity given the chance

C
It is a power play between the management and the venture capitalist

D
Because it is required by the Securities & Exchange Commission

Note: Answer not sure
1. Report
Question: Why do venture capital firms focus on three to five industry sectors in their portfolios?
A
There is a five industry limit by the Securities and Exchange Commission.

B
It enables them to become experts in the few industries they invest in.

C
There is less risk involved if they invest in fewer industries.

D
There are a limited number of investors and thus a limited number of industries.

Note: Answer not sure
1. Report

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Question: Why would a venture capitalist prefer equity to debt?

Question: Why don't the investors in venture capital firms invest directly in the target companies rather than investing in a venture capital firm as an intermediary?

Question: Why does corporate structure matter when the investment is for equity?

Question: Why would specialized consultants be hired for the final stage of the due diligence process?

Question: Why is the venture capitalist in charge of the drawing up of the term sheet and not the target company?

Question: Why would a merger with another company also be considered an investment exit?

Question: Would a venture capitalist want to have majority control of the board even without majority stock ownership?

Question: Why is Pre-money value important to a venture capitalist?

Question: Why are share transfers tightly restricted by the venture capitalist?

Question: Why do venture capital firms focus on three to five industry sectors in their portfolios?