38) Venture capital firms are ________ of money managers who raise money in “funds” to
invest in startups and growing firms.
A) limited partnerships
B) finance associations
C) consortiums
D) collations
E) strategic partnerships
39) In 2015, venture capital firms funded nearly ________ deals.
A) 800
B) 2,600
C) 3,700
D) 6,200
E) 8,000
40) Once a venture capitalist makes an investment in a firm, subsequent investments are made in
rounds and are referred to as ________.
A) later funding
B) successive funding
C) subsequent backing
D) follow-on funding
E) ensuing backing
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41) An important part of obtaining venture capital funding is going through ________ diligence,
which refers to the process of investigating the merits of a potential venture and verifying the key
claims made by the business plan.
A) appropriate
B) fit
C) due
D) prior
E) responsible
42) In regard to the stages (or rounds) of venture capital funding, the stage of funding that occurs
when an investment is made very early in a venture’s life to fund the development of a prototype
and feasibility analysis is referred to as ________ funding.
A) seed
B) second-stage
C) first-stage
D) mezzanine
43) The first sale of stock by a firm to the public is referred to as a(n) ________.
A) original public submission
B) first unrestricted offering
C) preemptive initial offering
D) original open offering
E) initial public offering
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44) The What Went Wrong? feature in Chapter 10 focuses on DrawQuest. DrawQuest captured
the attention of venture capitalists, gained 25,000 users, and still failed. According to the feature,
the main reason DrawQuest failed is that the founders ________.
A) couldn’t work together effectively
B) were ineffective in managing their investment capital
C) never figured out the business side of the venture
D) fell out of favor with their investors
E) were ineffective in raising follow-on rounds of funding
45) A(n) ________ bank is an institution, such as Credit Suisse First Boston, that acts as an
underwriter or agent for a firm engaged in an initial public offering.
A) venture
B) statutory
C) fiduciary
D) investment
46) Angel investors, private placement, venture capital, and initial public offerings are the most
common sources of equity funding.
47) The number of angel investors in the United States has decreased dramatically over the past
decade.
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48) Most business angels remain fairly anonymous and are matched up with entrepreneurs
through referrals.
49) Venture capitalists are individuals who invest their personal capital directly in startups.
50) Venture capital is money that is invested by venture capital firms in startups and small
51) The percentage of the profits the venture capitalist gets is called the “carry.”
52) Venture capital involves getting a loan or selling corporate bonds.
53) What is a business angel? Describe the prototypical business angel. How much money do
business angels typically invest in a single company?
54) Debt financing involves ________.
A) raising venture capital or securing a private placement
B) selling corporate bonds or selling stock via an IPO
C) getting a grant or selling corporate bonds
D) getting a loan or raising venture capital
E) getting a loan or selling corporate bonds
55) Historically, commercial banks ________.
A) have been a good source of funds for startup firms
B) have not funded startup firms at all
C) have been a good source of funds for manufacturing firm startups but not for service firm
startups
D) have been a good source of funds for service firm startups but not for manufacturing firm
startups
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56) The two major advantages of getting a loan versus investment capital are ________.
A) the money doesn’t have to be paid back and lenders typically take an active interest in their
borrowers
B) banks are reliable sources of funding for startups and interest payments are tax deductible
C) the money doesn’t have to be paid back and no ownership in the firm is surrendered
D) no ownership in the firm is surrendered and interest payments are tax deductible
E) banks are reliable sources of funding for startups and lenders typically take an active interest
in borrowers
57) The most notable SBA program available to small businesses is the ________.
A) SBA 1060 Guaranty
B) Code 604 Guaranty Program
C) 7(A) Guaranty Program
D) SBA 101 Program
E) Small Business 401 Program
58) ________ is a financial transaction whereby a business sells its accounts receivable to a third
party at a discount in exchange for cash.
A) Factoring
B) Vendor credit
C) Peer-to-peer lending
D) Crowdfunding
E) Leasing
59) Historically, commercial banks have been viewed as an excellent source of financing for
startup firms.
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60) The average SBA 7(A) loan amount in 2015 was $371,628.
61) Kickstarter and Indiegogo are examples of ________ crowdfunding sites.
A) equity-based
B) vendor-based
C) peer-based
D) debt-based
E) reward-based
62) The two types of crowdfunding sites are ________-based and ________-based.
A) rewards; equity
B) equity; debt
C) expectations; performance
D) private; nonprivate
E) domestic; international
63) Fundable and Crowdfunder are examples of ________-based crowdfunding sites.
A) debt
B) reward
C) government
D) equity
E) industry
64) A(n) ________ is a written agreement in which the owner of a piece of property allows an
individual or business to use the property for a specified period of time in exchange for
payments.
A) assurance
B) loan
C) guarantee
D) warranty
E) lease
65) The major advantage of leasing is that ________.
A) it enables a company to have access to average or above average facilities and equipment
B) it enables a company to acquire the use of assets with little or no down payment
C) it is cheaper in the long run than purchasing
D) a lease agreement is easier to negotiate than a purchase agreement
E) it is easier to obtain credit on a lease than a purchase
66) The ________ Program is a competitive grant program that provides over $2.5 billion per
year to small businesses for early-state and development projects.
A) SBTA
B) SBIR
C) SBAP
D) SAIR
E) SBTR
67) Which “phase” of the SBIR Program is a six-month feasibility study in which the recipient
must demonstrate the technical feasibility of the proposed innovation?
A) Phase I
B) Phase II
C) Phase III
D) Phase V
E) Phase X
68) The SBIR is a ________-phase program, meaning that firms that qualify have the potential to
receive more than one grant to fund a particular proposal.
A) two
B) three
C) six
D) nine
E) twelve
69) The main difference between the SBIR and the STTR programs is that the STTR program
requires the participation of ________.
A) an attorney
B) a venture capitalist
C) researchers working at universities or other research institutions
D) a certified public accountant
E) a government agency in conducting the research
70) Which of the following statements is incorrect about grant programs?
A) Granting agencies are very visible and well-known, so it’s normally not hard to find one.
B) The federal government has grant programs beyond the SBIR and STTR programs.
C) It’s important to avoid grant-related scams.
D) There is a limited number of organizations that offer new businesses grants.
E) There are private foundations that grant money to both existing and startup firms.
71) The Savvy Entrepreneurial Firm feature in Chapter 10 focuses on the manner in which
biotech firms and large drug companies work together to bring pharmaceutical products to
market. According to the feature, the most compelling partnerships are those that help
entrepreneurial firms focus on what they do best, which is typically ________, and that allow
them to tap their partners’ complementary strengths and resources.
A) innovation
B) marketing
C) project management
D) fundraising
E) product distribution
72) Factoring is a financial transaction whereby a business sells its accounts receivable to a third
party at a discount in exchange for cash.
73) Kickstarter, Indiegogo and RocketHub are examples of equity-based crowdfunding sites.
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74) A lease is a written agreement in which the owner of a piece of property allows an individual
or business to use the property for a specified period of time in exchange for payments.
75) The SBIR and STTR programs provide entrepreneurs access to mentors, advisors and
potential investors rather than cash.