Midterm terms part 1

Question 1

Dilutive capital

Answer 1

Equity financing which means the company receives financing in exchange for equity

Question 2

Nondilutive capital

Answer 2

dept financing that includes bank and non-bank landing

Question 3

Cash Runway

Answer 3

represents the amount of cash you have on hand and how long it will last if your expenses exceed your revenue

Question 4

Term sheet

Answer 4

nonbinding agreement that shows the basic terms and conditions of an investment and it serves as a template and basis for more detailed, legally binding documents.

Question 5

Down round

Answer 5

refers to a private company offering additional shares for sale at a lower price than it had been sold for in the previous financing round.

Question 6

Clusters

Answer 6

a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field

Question 7

Venture capital firms

Answer 7

a financial institution that provides funding to early-stage and high-potential startups in exchange for equity ownership, typically with the goal of supporting their growth and development

Question 8

Investment staging

Answer 8

the practice of breaking down the funding of a startup or project into distinct phases, with each stage corresponding to specific development milestones and financing needs

Question 9

Sorting mechanism

Answer 9

the mechanism of the capital market, that ensures that the highest quality investors invest in the highest quality portfolio firms

Question 10

Limited partner

Answer 10

are outside investors who are typically required to invest a certain amount at the outset, but can phase in the remainder of their investment over time

Question 11

General partner

Answer 11

venture capitalists who provide only a small proportion (about1%) of the capital raised by a given fund

Question 12

5 biggest European clusters by VC investment

Answer 12

Paris, London, Berlin, Stockholm, Upper Bavaria

Question 13

5 CEE innovation clusters

Answer 13

Budapest, Poznan, Warsaw, Riga, Tallinn, Gdansk

Question 14

Mentors

Answer 14

provide guidance and support to startups with offering advice on everything from product development to fundraising

Question 15

Accelerator

Answer 15

organizations who provide pre-seed funding and membership to pre-revenue and pre-product concepts

Question 16

Follow-on investment

Answer 16

Investments in an existing portfolio company of a private equity fund that are made to protect or enhance the value of the fund’s investment

Question 17

Unicorn

Answer 17

a privately held startup company with a value of over $1 billion.

Question 18

Decacorn

Answer 18

a privately held company with a valuation that exceeds $10 billion

Question 19

Value-to-capital ratio

Answer 19

the cumulative valuation and cumulative capital raised

Question 20

Pre-seed round

Answer 20

the earliest stage of startup funding, coming before seed funding and other stages for emergent startups receiving the first check from at least one institutional investor

Question 21

Seed round

Answer 21

: the first formal round of venture capital financing for a startup (investors typically want the company to have gained a degree of traction by then)

Question 22

Founder-market fit

Answer 22

the founders building their startup have deep experience in and knowledge of the market that they are targeting

Question 23

Go-to-market fit

Answer 23

a plan that helps businesses position a new product or service for launch, define their ideal customers, and coordinate messaging

Question 24

Investment thesis

Answer 24

the strategy by which a venture capital fund makes money for the fund investors

Question 25

Portfolio diversification

Answer 25

the process of investing your money in different asset classes and securities in order to minimize the overall risk of the portfolio

Question 26

Spray and pray investment strategy

Answer 26

is conducting as many investments as possible

Question 27

MVP (Minimal Viable Product):

Answer 27

a product with enough features to attract early-adopter customers and validate a product idea early in the product development cycle

Question 28

Alpha

Answer 28

abnormal return of a VC – beta: correlation of the average return

Question 29

Investor validation

Answer 29

the process in which investors presence in portfolio firms increase outcome

Question 30

Angel investors

Answer 30

Private individuals, investing in pre-seed, seed and round A startups with common or preferred equity, convertible debt. They seek firms with high growth potential, with a min. expected return >30%, but they go for max 10% of its shares

Question 31

High-net-worth individuals

Answer 31

a person with at least $1 million in liquid financial assets

Question 32

Private venture capital firms

Answer 32

Venture capital firms owned by private individuals or associations

Question 33

Corporate venture capital firms

Answer 33

Venture capital firms that are either subsidiaries of corporations or have corporations as their LPs

Question 34

Government venture capital firms

Answer 34

By default, they are all owned by a government institution (with corporate structures)

Question 35

Early stage fund

Answer 35

the first three stages of a company’s development. It is divided into three distinct funding types: seed funding, startup funding and early-growth funding

Question 36

Later stage fund

Answer 36

any method of generating capital by a business in the later stages of its roll-out. Typically, this type of funding is equity-based. This means that neither you nor your business will incur debt. Instead, you sell partial ownership of your business to an investor or investment firm.

Question 37

Growth fund

Answer 37

a diversified portfolio of stocks that has capital appreciation as its primary goal, with little or no dividend payouts

Question 38

Buyout fund

Answer 38

a fund that buys a majority stake in firms (later stage majority purchase).

Question 39

Corporate (Strategic) Investors

Answer 39

Individual investors or firms who invest with the goal of acquiring strategic advantages rather than simply financial returns

Question 40

Due diligence

Answer 40

an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.

Question 41

Syndicated investment

Answer 41

a group of investors who pool their resources to invest in a startup company. The investors can be individuals, venture capital firms, or other entities

Question 42

Lead investor

Answer 42

the only investor who maintains a relationship with the invested firm, and is entitled to ask for information