Test Bank Chapter 11 Pitching The Venture To Investors

Chapter 11: Pitching the Venture to Investors

True / False

1. A well-written executive summary, or “teaser” gains the attention of the targeted audience.
2. An executive summary document should be given with a short personal cover letter.
3. An elevator pitch should be a lengthy pitch to an investor that details every aspect of your business.
4. The verbal equivalent of the teaser is called an elevator pitch.
5. It is recommended to hand out a copy of your PowerPoint when giving a presentation to potential investors.
6. Fortunately, most investors read business plans in detail.
7. In preparing a teaser, you should avoid using words such as “should, might, could, etc.”
8. When presenting, it is recommended to use catchy words such as “revolutionary, cutting edge, and best-of breed.”
9. Personal chemistry does not affect how investors see your business plan.
10. Fewer slides are better than too many.
11. Every communication should be tailored to fit the targeted audience.

Fill in the blank

1. __________ refers to the terms and timing of the deal.
2. __________ is the stock, cash, or debt that will complete the transaction.
3. The final financing agreement that includes ownership, control, and financial objectives is called a ____________.
4. Another alternative to finding active investors is to pursue _____, or arm’s-length, investors, who will have little or no involvement in the business.
5. A(n)_________ is a teaser or document short, clear compelling document that must be impeccable in its appearance.
6. Letting an independent third party review an invention and comment on its status, viability and originality is called ____________.
7. ____________ should be at the end of your PowerPoint to cover more detail to address anticipated questions.
8. Entrepreneurs should use a(n) __________ rather than a “shotgun” strategy for engaging in potential investors.
9. Good ____________ is vital throughout the life of the investor-company relationship.

21. If a small business loan is sought, there are probably several local _______ that may participate in federal lending programs to support small companies.

Multiple Choice

1. Angel investment can best be found by:
   1. Networking within your local business community.
   2. Asking for referrals from your accountant and attorney.
   3. Talking to other companies in your region that have received angel investors.
   4. All of the above.
2. Which of the following is NOT an appropriate way to identify a Venture Capitalist?
3. Searching the Internet for VC firms that have invested in companies like yours
4. Talking to law firms that specialize in patents and early stage company formation
5. Looking through the phonebook
6. Talking to companies like yours that have received investments from VCs
7. A teaser is typically:
8. A short written document.
9. A long written document.
10. A short verbal pitch.
11. A long verbal pitch.
12. An elevator pitch is typically:
13. Less than 2 minutes long, highly targeted, and prepared.
14. Unrehearsed and spontaneous.
15. Longer than five minutes.
16. The length of an elevator ride.
17. When making an investors’ presentation you should:
18. Use 10-16 Slides.
19. Read the content carefully to the audience.
20. Have at least four persons present the information.
21. Not tell them your name.
22. An investors’ presentation must cover the following topics:
23. Your personal financial status.
24. The size of the market.
25. Detailed 10-year financial predictions.
26. The résumés of the people you intend to bring on board.
27. How are back-up slides used in an investors’ presentation?
28. address pertinent detailed questions
29. Never used in a presentation
30. To fill in time if you finish early
31. To disarm difficult questions
32. You should follow these guidelines when making a presentation:
33. Do not over rehearse as you will lose your spontaneity.
34. Keep to the script and avoid interruptions.
35. Listen carefully to the audience.
36. Avoid small talk before the formal presentation.
37. Why is it a bad idea to hand out copies of your presentation?
38. They will look ahead and may engage in side conversations
39. It is a waste of paper
40. You are suggesting your investors have poor eye sight
41. It is a good idea to hand out copies of your presentation

1. When wrapping up your presentation, you should:
2. Refuse to answer any questions.
3. Leave as quickly as possible.
4. Finish on an up note.
5. Give candy to the investor as a gesture of goodwill.

1. After you have made an investors’ presentation you should NOT:
2. Look too eager by following up within 1-2 days on any outstanding factual issues.
3. Wait for a month before calling them.
4. Call them after a few days.
5. Set up another date for a follow up meeting.
6. If a potential investor indicates that they are not interested in investing in your company you should NOT:
7. Ask for the reasons.
8. Suggest that you stay in contact.
9. Ask for referrals to other investors.
10. Bad-mouth them to other investors.

34. The preliminary financial summary portion of the presentation could include all of the following except:

a. Forecasted revenues, expenses and gross profit.

b. Forecasted hours of operation.

c. Forecasted EBIT margin.

d. Forecasted direct labor costs.

1. After making three presentations to the partners of a VC firm, you are asked to submit a detailed business plan. The firm will not sign a confidentiality agreement. You:
2. Decline to submit the plan.
3. Modify the plan to take out the highly confidential items.
4. Submit the plan with all the confidential information.
5. Accuse them of trying to steal your business plan.
6. It is usually possible to remove how much text between the first and the final version of the teaser?
7. 2-4 percent
8. 10-15 percent
9. 30-50 percent
10. 85-95 percent

1. When presenting to an audience, you should:
2. Be enthusiastic.
3. Overact.
4. Primarily focus on the nonverbal behavior.
5. Be abrupt.
6. Which of the following should you NOT do when presenting to an audience?
7. Use no more than two speakers
8. Face the audience
9. Read from the slides
10. Use less than 16 slides
11. If investors have expressed any degree of interest, the entrepreneur should:
12. Move into action.
13. Wait a few days to build anticipation.
14. Never call back, wait for investors to move on the opportunity.
15. Force them to invest immediately.
16. Which of the following is NOT a fundamental section of the evaluation period?
17. The Deal
18. Context
19. Investment
20. Business Model
21. The term sheet is between:
22. The company and the investor.
23. The shareholders and the company.
24. The issuer and the investor.
25. The issuer and the shareholders.
26. In preparation for making a presentation to investors, you should:
27. Present in front of several people.
28. Ask investors if you can do a trial presentation to them.
29. Send each investor a videotaped version of your presentation.
30. Act and not prepare.
31. Context refers to:
32. The detail of your presentation.
33. The intelligence level of your management team.
34. The market size of the potential company.
35. Internal and external factors that affect the business.
36. Which of the following is NOT a proper way to locate an appropriate investor?
37. Look within the industry
38. Use the internet
39. Speak with other entrepreneurs
40. Advertise in the newspaper
41. Which is NOT a category that a VC firm focuses on?
42. Location
43. Stage of Fund
44. Employee potential
45. Stage of Company
46. Which of the following is true about promotional videos:
    1. Promotional videos should not exceed 10-20 minutes in length.
    2. Promotional videos are good options for raising start-up funds via crowdfunding.
    3. Although high-end audio video equipment is required, promotional videos can engage potential investors and stakeholders.
    4. All of the above are true.
47. Components of a presentation include all of the following, except:
    1. Funding requirements.
    2. Exit strategy.
    3. Confidentiality agreement.
    4. Operating summary.