10. Which of the following statements is false?

a. In most partnership agreements between LPs and GPs, a priority return is expected.

b. When GPs are expected to receive carry before all committed capital is returned, a clawback provision can alleviate problems if the funds performance weakens later.

c. LPs include covenants in the partnership agreement such as limiting investing in other asset classes, limiting debt use and size of single investments in VCs portfolio.

d. LPs may limit investments made personally by GPs in the fund

11. Which of the following statements is true?

a. The broad primary functions of VCs are raising funds, performing due diligence, staging investments, abandoning badly performing firms, and exit strategy

b. About half of VC capital comes from endowment funds who have long term horizons.

c. Generally, a larger proportion of VC portfolio exits through IPO than M&A.

d. Recent development in VC industry is committing to more investments in the seed stage.

e. Both A and D are true.

12. Jane received $3.2M in financing from a VC who now owns 40% of the company. Shortly thereafter, she meets Joanne who is willing to buy the company for $6M. Without a liquidation preference, VC gets _________ but with a liquidation preference VC gets _____.

1. $3.2M; $2.8M
2. $2.4M; $3.2M
3. $0; $2.8M
4. $0; $3.2M
5. None of the above