General Venture Capital MCQs

1. What level of involvement will a venture capital firm typically have?

2. How are the investments in a venture capital firm structured typically?

3. What is a sweeper clause?

4. When investigating the target market of the potential investment, what will the venture capitalists focus on specifically?

5. What do veto rights allow the venture capitalist to do?

6. What are the 'conversion rights', typically stated on a term sheet?

7. What is meant by the right to 'observer rights'?

8. What purpose do milestones serve in the term sheet?

9. Main reason why a venture capitalist does its own evaluation of a target company's projected financials?

10. How often do venture capital firms change the investments within their portfolios, on an average?

11. What role do the investors play in a venture capital firm?

12. Importance of the intellectual property (IP) which venture capitalists focus heavily on?

13. When was the largest burst of activity in the venture capital industry witnessed?

14. What does an exit effectively do?

15. What is meant by Post-money valuation?

16. When will the venture capitalist show the most active involvement with the company post funding?

17. What does 'deal syndication' on the term sheet address?

18. Purpose of having portfolios?

19. What has been the largest area which venture capitalists have been actively investing in for the last decade?

20. What are the typical returns a venture capital firm expects when exiting from a successful investment?

21. What is meant when a venture capitalist talks about the 'burn rate'?

22. What role do committees play?

23. What would be the attraction of offering a debt round to a target company?

24. Which would be a possible portfolio for a venture capital firm?

25. What protection do investors in a venture capital fund have?

26. What is meant by 'exit strategy'?

27. What options does a venture capitalist have when holding convertible debt?

28. How much in funding, in general, will an investor want to invest?

29. What is a 'first round' investment?

30. What is the term sheet used for once it is agreed upon and signed?

31. Which one would be considered an exit strategy?

32. What is the primary source of a venture capital firm's funding?

33. What is the overall venture capital portfolio expectation?

34. When is the due diligence process done?

35. Main difference between equity and debt?

36. What does a venture capitalist look like to its investors, based on the way it operates?

37. What role does 'valuation' play in selecting the most appropriate investment areas?

38. What is the typical process overview?

39. What is meant by the 'anti-dilution rights', often found on a term sheet?

40. First step in the process between the target company and the venture capitalist?

41. How long does the initial due diligence process last?

42. When does the target company actually receive the investment?

43. Minimum that a venture capitalist would expect at the monthly board meeting?

44. Does a venture capital exit have any negative impact on the original founders of the company?

45. What is meant by 'screening' in the investment process?

46. What is the attraction of convertible debt to a venture capitalist?

47. Average size of a venture capitalist's investment in a target company?

48. What is a Term Sheet?

49. Which one would be a red flag for a venture capitalist?

50. Why is personal rapport important?

51. Why would a venture capitalist prefer equity to debt?

52. Why don't the investors in venture capital firms invest directly in the target companies rather than investing in a venture capital firm as an intermediary?

53. Why does corporate structure matter when the investment is for equity?

54. Why would specialized consultants be hired for the final stage of the due diligence process?

55. Why is the venture capitalist in charge of the drawing up of the term sheet and not the target company?

56. Why would a merger with another company also be considered an investment exit?

57. Would a venture capitalist want to have majority control of the board even without majority stock ownership?

58. Why is Pre-money value important to a venture capitalist?

59. Why are share transfers tightly restricted by the venture capitalist?

60. Why do venture capital firms focus on three to five industry sectors in their portfolios?

61. Why would a teachers' pension fund, a seemingly conservative pool of capital, invest in a venture capital firm?

62. Approximate size of the venture capital industry in 2009?

63. Why do venture capitalists invest in multiple industries instead of focusing on one specific industry?

64. Why do few target companies make it past the initial screening?

65. Why is the corporate structure important to the venture capital firm and part of the due diligence process?

66. Which one would be done in the final stage of the due diligence process, once the company has passed the first round of due diligence?

67. Why do venture capitalists typically involve themselves in an equity base rather than debt?

68. Why is an experienced management team critical for a new company?

69. Who ultimately decides to progress through the evaluation process?

70. Which one would be done in the preliminary due diligence?

71. Top priority for a venture capitalist in a target company?

72. Who would be a possible investor in a venture capital firm?

73. Why do venture capitalists tend to focus on riskier investments?

74. Why would a venture capital firm require they be on the board of directors if they choose to invest in a target company?

75. Why would a venture capitalist want to exit a growing company?

76. Why does a venture capital firm require a substantial amount of equity for the investment?

77. Which one is encouraging for a venture capitalist to see when screening a company?

78. Why do venture capitalists typically not sign 'non disclosure agreements' which protect the target companies from the venture capitalists stealing their idea?

79. Who is incharge of the investment process?

80. Which one is not an exit strategy?