Module 1: Introduction to Venture Capital

Question 1

Year of Birth of Modern Venture Capital

Answer 1

1946

Question 2

1946 was a pivotal moment for modern venture capital with the establishment of the _________

Answer 2

American Research and Development Corporation (ARDC)

Question 3

American Research and Development Corporation was founded by MIT president

Answer 3

Karl Compton

Question 4

It was in the 1960s and 70s that the VC industry truly found its footing, with VC firms foucing on starting and expanding companies instead of investing in exisitin ones.

Answer 4

Notable Public Policy for VC and formation of NVCA

Question 5

With the growth and maturation of VC in the 1970s, it became clear that the industry would need a lobbying voice… Venture forward’s supporting organization _________

Answer 5

National Venture Capital Association

Question 6

The rise in personal computer usage and internet becoming more mainstream led to a boom cycle in the 1990s.

Answer 6

Dot-com Boom and Bust

Question 6

Although a lot of money was lost, VCs were still excited about the tech sector as innovation was booming. There was also a shift in the way VCs invested, as they now focused their portfolios and funds on stages and industries.

Answer 6

The Era of Apps and Accelerators

Question 7

what year brought new types of VC investors to the mix, diversifying the sources of capital available to startups. (creation of micro VC firms, almost as a sub-asset class of VC)

Answer 7

2010s - present

Question 8

is equity support to fund new concepts that involve a higher risk and at the same time, have a high growth and profit.

Answer 8

Venture capital

Question 9

Stages in Venture Capital Funding

Answer 9

(1) Seed - seek funding
(2) Startup Stage, Series A - Sample products are available
(3) Early Stage, Series B&C - Products have been developed and sold
(4) Expansion Stage, Series D&Beyond - Company is well established
(5) Bridge Stage, Exit - Impressive sales, eliminate competitors

Question 10

Roles Within a Venture Capital

Answer 10

(1) Principals
(2) Associates
(3) Analysts
(4) Intern
(5) Venture partners
(6) General partners
(7) Managing partners

Question 11

Play a critical role in evaluating potential investments. Their role requires a deep understanding of markets, industries, and technologies.

Answer 11

Principals

Question 12

Their role is a mix of human judgment and analytics. Often serving as the initial filter through which potential investment must pass.

Answer 12

Associates

Question 13

They form the backbone of the venture capital firm’s operation. Their work is instrumental in shaping the firm’s understanding of market dynamics and investment opportunities.

They play a vital role in analyzing potential investments, conducting market research, and preparing investment memos.

Answer 13

Analysts

Question 14

Are usually budding professionals looking to learn the ropes of venture capital. They assist with various tasks, including conducting research, preparing presentations, and supporting other team members.

Answer 14

Intern

Question 15

aid the firm in souring and assessing new investment oppoprtunities. They typically have domain expertise that they could bring to the firm. They play a significant role in connecting the firm to a broader network of startups and investors.

Answer 15

Venture partners

Question 16

typically involved in high level decision making. They are resposible for making significant investment decisions and developing relationships with entrepreneurs and investors.

Answer 16

General partners

Question 17

They lead the strategic vision and overall operations of the company. They play a pivotal role in shaping the investment portfolio and fundraising for the firm.

Answer 17

Managing partners

Question 18

Main Features of Venture Capital

Answer 18

(1) Long-Time Horizon
(2) Lack of Liquidity
(3) High tech
(4) High risk
(5) Equity participation and capital gains
(6) Participation in Management

Question 19

Advantages of Venture Capital

Answer 19

(1) Provides early companies with capital to bootstrap operations
(2) Companies don’t need cash flows or assets to secure venture capital funding
(3) VC-back mentoring and networking services help new companies secure talent and growth

Question 20

Disadvantages of Venture Capital

Answer 20

(1) Demand a large share of Company Equity
(2) Companies may find themeselves loosing creative control as investors demand immediate returns
(3) VCs may pressure companies to exit investments rather than pursue long term growth.

Question 21

Method of Venture Capital

Answer 21

(1) Financing
(2) Equity Financing
(3) Conditional loans
(4) Income Note
(5) Debentures

Question 22

To raise funds to survive and grow a profitable venture

Answer 22

Financing

Question 23

To finance the start-up’s huge capital requirement, companies may offer a percentage of business or the company to the investors, in exchange for capital. The investors who buy the share of any company have a voting right.

Answer 23

Equity Financing

Question 24

Unlike bank loans, _________ have neither pre-determined repayment schedule nor any fixed interest rate on the borrowed capital.

Answer 24

Conditional loans

Question 25

In the case of conditional loans, an entrepreneur needs to pay the lender in the form of _______

Answer 25

Royalty

Question 26

The royalty rate varies between ___ and ____ on the basis of revenue, profit percentage, cash flow of the venture.

Answer 26

2% and 15%

Question 26

This is the combination of both the traditional loans from banks and conditional loans.

Answer 26

Income note

Question 27

The start-up companies raise funds by issuing _______ with a guarantee to repay the amount of the invested money when the security is matured. Then the company pays out the interest on the money invested at the fixed maturity date.

Answer 27

debenture

Question 28

Interest on debentures is payable at three various rates in accordance with the phase of operation or business

Answer 28

(1) Before the commencement of operation
(2) Commencement of operation
(3) After reaching a particular level of sales or profit

Question 29

Two types of debentures

Answer 29

(1) Convertible debentures
(2) Non-convertible debentures

Question 30

debentures that can convert the debt to the equity shares

Answer 30

Convertible debentures

Question 31

Process of Venture Capital

Answer 31

(1) Sourcing - identify potential investment opportunities
(2) Due diligence - evaluate the company’s financials, business model, products, and history.
(3) Investment - venture capitalists will proceed to make an investment after passing the due diligence stage.
(4) Exit - selling the equity back to the company or other investors.

Question 32

Founded in 1834, is one of the oldest and largest conglomerates in the Philippines with core interests in real estate, banking, telecommunications, and power.

Answer 32

Ayala Corporation

Question 33

is Ayala’s platform for peeking into new technologies and business models that are relevant to the group.

Answer 33

AC Ventures

Question 34

Four elements of Ayala

Answer 34

(1) Strategic Business Development
(2) Capital Allocation
(3) Portfolio Management
(4) Balance Sheet Management

Question 34

is the largest venture capital fund to come out of the Philippines. The fund is backed by Ayala Corporation, the first business house in the Philippines.

Answer 34

Ayala Corporation Technology Innovation Venture Fund (ACTIVE)