Q&A Hero

Q: Factoring is the sale of payables to a third party at a discount from their face value. a. True b. False

Q: A foreign national may seek Lawful Permanent Resident (LPR) status by investing $1 million in the United States that will preserve or create at least 100 jobs for U.S. workers. a. True b. False

Q: The Immigration and Nationality Act (INA) of 1990 provided an opportunity for foreign nationals to obtain a "green card" through the EB-5 immigrant visas program. a. True b. False

Q: With venture leasing, one component of the return to the lessor is the opportunity to take an equity interest in the venture. a. True b. False

Q: Because investors and commercial lenders both seek returns on the funds given to startup firms, entrepreneurs can obtain financing as easily from either source. a. True b. False

Q: Receivables lending is the use of receivables as collateral for an equity issue. a. True b. False

Q: Warrants are a debt instrument frequently used by commercial banks when financing entrepreneurial ventures. a. True b. False

Q: Despite the high risk and costs of using a facilitator or up-front fee solicitor to obtain financing, many startups nevertheless seek them as a source of funds due to the length of time it takes to raise new funds. a. True b. False

Q: The 7(a) loan traditionally has been the SBA's primary loan program. a. True b. False

Q: Compensation received by commercial loan officers makes them more likely to finance early-stage ventures. a. True b. False

Q: Warrants allow lenders to buy equity at a specified price. a. True b. False

Q: Most business incubator organizations make equity investments in their client firms. a. True b. False

Q: Congress created the Treasury Department's Community Development Financial Institutions (CDFI) Fund in 1954. a. True b. False

Q: Unlike traditional commercial banks, venture banks typically provide debt to startups that have already received equity financing from professional venture capital firms. a. True b. False

Q: The SBA's role in its microloan credit program is to approve the loans and guarantee up to 85% of the loan value. a. True b. False

Q: Pay-after-delivery is a common model for obtaining funds from customers to help finance startups. a. True b. False

Q: The SBA approves the standard 7(a) loan and guarantees up to 85% of the loan value. a. True b. False

Q: Collateral plays an important role in determining the willingness to lend and the amount and terms of the loan, making it the most important factor in the lending process. a. True b. False

Q: Commercial loan officers have the expertise to project new ventures' business successes, and thus are as willing to make funds available to entrepreneurs on the same basis as other businesses. a. True b. False

Q: Indicate whether the statement is true or false.Because of loan restrictions, obtaining funding from commercial lenders is prohibitive for entrepreneurs.a. Trueb. False

Q: Which of the following is not one of the likely outcomes of the venture firm's screening process? a. seek the lead investor position b. seek a nonlead investor position c. close the capital fund d. issue a standard letter of rejection

Q: The beginning of professional venture capitalists is considered to have occurred: a. prior to World War II b. in 1946 c. in 1956 d. after the Vietnam War

Q: Term sheets are usually drafted by: a. the mangers of the venture seeking VC funding b. the VC fund seeking to fund the venture c. management and founders d. a third party, in order to ensure the fair treatment of both parties

Q: Which of the following is the smallest percentage supplier of venture capital? a. financial and insurance b. public pension funds c. endowments and foundations d. funds of funds

Q: A summary of the investment terms and conditions accompanying an investment is referred to as: a. a term sheet b. a business plan c. a fund created by professional venture capitalists d. due diligence in venture investing

Q: The beginning of professional venture capitalists is considered to have begun with the establishment or formation of: a. the Small Business Administration b. Small Business Investment Companies c. the American Research and Development organization d. the Professional Venture Capitalists organization

Q: In a syndicate of venture investors, the investor who is responsible for governing the process of due diligence is: a. the primary investor b. the lead investor c. a small group of secondary investors d. none of these choices; it is a democratic process that is shared by all investors in the group

Q: When screening prospective new ventures, venture capital firms must consider the nature of the proposed industry. Which of the following is not part of the screening of the proposed industry? a. market attractiveness b. managerial references c. potential size d. technology

Q: In a venture capital fund placement memorandum, which of the following is not a front-matter declaration? a. description of limited manner of the offering b. targeted fund size c. imposition of confidentiality d. notice of lack of SEC registration

Q: If an investment management firm is known to be a two and twenty shop, this implies that the firm receives an annual: a. 2% fee on invested capital and 20% carried interest b. 20% fee on invested capital and 2% carried interest c. 2% fee on gross operating profits and 20% carried interest d. 20% fee on gross operating profits and 2% carried interest

Q: The term "carried interest" refers to: a. interest not currently paid but which must be paid in the future by a b. professional venture capitalist c. interest transported directly to a bank d. interest owed on a loan in default e. the portion of profits paid to a professional venture capitalist as incentive compensation

Q: All of the following are typical issues addressed in a term sheet except: a. valuation b. employment contracts c. registration rights d. management fees

Q: All of the following are typically part of a venture fund's typical compensation and incentive structure except a. some percent annual fee on invested capital b. a percent share of any profits to the managing general partner c. carried interest d. a salary for the general partners

Q: After a new professional venture capital fund is organized, the fund managers: a. conduct due diligence and actively invest b. solicit investments and obtain commitments c. arrange harvest or liquidation d. identify prospective venture investments and then solicit investments

Q: A venture fund calls upon its investors to deliver their investment funds. This is known as: a. carried interest b. a deal flow c. a capital call d. a SLOR

Q: When screening possible investments, a venture capital firm might issue a SLOR, which stands for: a. "standard letter of rejection" b. "standing letter of reconciliation" c. "standard letter of reassessment" d. "senior letter of reference"

Q: In a venture capital fund placement memorandum, all of the following are part of the executive summary except: a. general partners' capital contributions b. limitation of liability c. allocation of gains and losses d. imposition of confidentiality

Q: When evaluating the prospects of a new venture, venture capital firms consider which of the following? a. characteristics of the proposal, characteristics of the entrepreneur/team, and nature of the proposed industry b. characteristics of the proposal and the entrepreneur/team c. characteristics of the entrepreneur/team and nature of the proposed industry d. characteristics of the proposal and nature of the proposed industry

Q: Which of the following is the largest percentage supplier of venture capital? a. public pension funds b. family offices c. endowments and foundations d. financial and insurance

Q: As venture firms attract money from investors, it is placed in a fund. Important issues that must be put in place with the establishment of the fund include all of the following except: a. determining the general partners b. establishing a fee structure c. establishing a profit sharing arrangement d. assigning the management team to each borrower

Q: After determining the next fund's objectives and policies, the professional venture investing cycle's next step is to: a. solicit investments in new fund b. organize the new fund c. obtain commitments for a series of capital calls d. arrange harvest or liquidation

Q: When screening prospective new ventures, venture capital firms consider their own funds' requirements. Which of the following is not one of the venture firm's requirements relating to its own funds? a. investor control b. rate of return c. size of investment d. probable stock listing exchange for the mature venture

Q: Venture capital firms tend to specialize in publicly identified niches because of the potential for value-added investing by venture capitalists. Which of the following is not one of these niches? a. industry type b. venture stage c. management style d. size of investment

Q: Professional venture investing usually involves setting up a venture capital firm as a(n): a. proprietorship b. corporation c. partnership d. S corporation

Q: In addition to having personal financial stakes in their portfolio of investments, professional venture capitalists have raised funds from other investors to invest in the portfolio.a. Trueb. False

Q: Created by the Small Business Administration, Small Business Investment Companies possess important tax advantages and are eligible to borrow amounts up to four times their equity base from the government. a. True b. False

Q: SLOR stands for "standard letter of rejection." a. True b. False

Q: Pension funds are the largest percentage source of venture capital. a. True b. False

Q: When a syndicate of VCs invests in a venture, the investor in charge of organizing the due diligence process is known as the lead investor. a. True b. False

Q: Due diligence (in venture investing context) is the process of ascertaining the viability of a business plan. a. True b. False

Q: The American Research and Development (ARD) organization was formed in 1946. a. True b. False

Q: Endowments and foundations are the smallest percentage source of venture capital. a. True b. False

Q: Individuals and families are more important suppliers of venture capital relative to finance and insurance firms. a. True b. False

Q: Annual VC investments reached an all-time high in the year 1990. a. True b. False

Q: The deal flow reflects the flow of business plans and term sheets involved in the venture capital investing process. a. True b. False

Q: In venture investing context, due diligence describes the process of investigating a potentially worthy concept or plan. a. True b. False

Q: The beginning of professional venture capitalists began with the formation of American Research and Development in 1966. a. True b. False

Q: Initially, Small Business Investment Companies' access to borrowed funds appeared attractive. This was because venture investing and debt service commitments are an ideal mixture of financing for startups. a. True b. False

Q: The phrase "two and twenty shops" refers to investment management firms having a contract that gives them two percent carried interest and a 20 percent of assets annual management fee. a. True b. False

Q: Two typical issues addressed in a term sheet are valuation and the size and staging of financing. a. True b. False

Q: The first major government foray into venture investing came with the formation of the Small Business Administration (SBA) in 1947. a. True b. False

Q: Professional venture capital, as we know it today, did not exist before World War II. a. True b. False

Q: Public pension funds supply about 20 percent of venture capital funds. a. True b. False

Q: The professional venture investing cycle begins with the obtaining of commitments for a series of capital calls. a. True b. False

Q: Endowments and foundations are more important suppliers of venture capital relative to individuals and families. a. True b. False

Q: When the venture fund calls upon the investors to deliver their investment funds, it reflects the deal flow. a. True b. False

Q: A term sheet is a summary of the investment terms and conditions accompanying an investment by venture capitalists. a. True b. False

Q: Term sheets may contain demands regarding the voting rights of shares issued to venture investors. a. True b. False

Q: Family offices are the largest supplier of venture capital. a. True b. False

Q: Once the venture capital firm has received exit proceeds from a venture in the form of cash or securities, some method of returning the proceeds (less the carried interest) must be determined. a. True b. False

Q: The initial stage in the professional venture investing cycle begins with determining the objectives and policies for the next fund. a. True b. False

Q: The term "capital call" refers to the flow of business plans and term sheets involved in the venture capital investing process. a. True b. False

Q: Internet financing led the record level of venture investing in the 19992000 time period. a. True b. False

Q: Term sheets consist of the terms and conditions accompanying an investment, as stipulated by the founders of the venture. a. True b. False

Q: SLOR stands for "standard letter of recognition." a. True b. False

Q: In 1958, the Small Business Administration created Small Business Investment Companies. a. True b. False

Q: Carried interest is the portion of profits paid to the professional venture capitalist as incentive compensation. a. True b. False

Q: The summary of the investment terms and conditions accompanying an investment proposed by the venture capitalist is known as the statement of strengths and weaknesses. a. True b. False

Q: Indicate whether the statement is true or false.Most venture investing came from wealthy individuals and families prior to World War II.a. Trueb. False

Q: The return to venture investors directly depends on the: a. venture's ability to generate cash flows b. ability to convince a debtholder to buy the venture c. amount of the venture's short-term liabilities d. sum of past retained earnings