Chapter 18 Exam Prep Sources of Capital

Technology Ventures (Byers), 5e

Chapter 18 Sources of Capital

1) SoundCloud is valued at $200 million, but is having trouble generating revenue and paying its employees. SoundCloud is in a shortage of:

A) Current capital

B) Valuation

C) Profits

D) Working capital

2) Helen has a meeting with a venture capitalist for a Series A round at a $10 million valuation. She has proprietary patents for the latest advancements in facial recognition, a team of five Stanford grads, and seed money from Andreessen Horowitz and Union Square Ventures. She has two enterprise customers. The VC has her interest piqued but declines to invest at this stage. Why?

A) Helen needs more customers

B) Helen should be raising a Series B, not A

C) Helen needs to further build out her team

D) Helen needs better venture capitalists funding her project

3) If an entrepreneur is raising money and a top tier investor is intrigued, she should spend her time convincing this investor instead of taking on meetings from others.

4) In an effort to expand quickly, Uber spends a large amount of revenue on opening in international markets. Uber would have a high ________ rate.

A) Churn

B) Burn

C) Loss

D) Cost

5) What is defined as the right but not obligation to take some action in the future?

A) Invest

B) Put

C) Plan

D) Option

6) The value of a real option decreases with the discount rate.

7) Which of the following is not a way for a startup to exit?

A) IPO

B) Acquisition

C) Down round

D) Secondary offering

8) Greg is a founder who needs more money to continue operating his company. The company has a path to profitability and Greg does not want to dilute his equity. He borrows $100 million from the Silicon Valley Bank. What is this an example of?

A) Debt capital

B) Equity capital

C) Private equity

D) Venture capital

9) What is one difference between angels and venture capitalists?

A) Angels write bigger check sizes

B) Angels are more ethical

C) Venture capitalists cause more dilution

D) Venture capitalists are less professional

10) Of the following, which is not a way venture capitalists get the money they deploy?

A) Corporations

B) Pension funds

C) High net worth individuals

D) Investment bankers

11) Amy decides to fund her startup with $100,000 of her personal money, and makes her business profitable in a year with no outside funding. This is an example of:

A) Crowdfunding

B) Debt capital

C) Bootstrapping

D) Auctioning

12) When eBay was first started, it was crowdfunded.

13) Who was an angel investor in Apple?

A) Andy Bechtolsheim

B) Steve Wozniak

C) Mike Markkula

D) Steve Jobs

14) A venture capitalist would prefer a couple big wins and a lot of failures instead of a fair amount of moderate successes.

15) A company is looking to expand internationally. What stage of investment would it typically be at?

A) Seed

B) Series A

C) IPO

D) Series C

16) Which company has an established corporate venture capital arm?

A) Facebook

B) Palantir

C) Google

D) PayPal

17) Why is it difficult to value an early stage company?

A) Uncertain cash flow

B) Low number of employees

C) Growing quickly

D) No revenue multiples

18) What does the PE in PE ratio stand for? 

A) Profit, earnings

B) Price, earnings

C) Profit, estimate

D) Price, estimate

19) What is a disadvantage of an IPO?

A) Liquidity

B) Visibility

C) Loss of control

D) New capital

20) Tesla received a loan for over $400 million from the U.S Department of Energy.