16 Which of the following statements about business plans is most TRUE?

1. It serves as a strategic guide forcing founders to think of key elements of business drivers.
2. Usually a business model canvas precedes the formulation of a business plan
3. Financial projections can be used for predicting financial needs for next milestone
4. Most projections in business plans will not materialize
5. All of the above are true

17. Regarding the pitch deck presentation to investors, which statement is most TRUE?

1. The purpose of the presentation is to be very detailed and to tell everything there is to know about the business.

B. In a pitch, founders need to convince investors that (1) the business opportunity is attractive, and (2) it solves an unmet need. Other issues are not that relevant.

C. In a pitch, founders need to show their business model with projections about how they will make money and that the firm has a high probability of success

D. Longer and detailed elevator pitches tend to get more funding from VCs

18. In a business plan, you need to make sure you provide

1. The market opportunity and how big it is
2. Describe the problem you are trying to solve
3. Who are the primary competitors and how your product/service is superior
4. All of the above

19. Which of the following statements is FALSE?

1. Venture capital is a form of equity capital
2. Gatekeepers are investment advisors to venture capital
3. A potential downside to a large inflow of funds from pension funds into venture capital is investment bubbles
4. VCs get a large portion of their funding from pension funds and endowments.

20. Which of the following statements is FALSE?

1. VC funds are referred to as patient capital
2. VC portfolio of companies is illiquid
3. Earlier stage ventures are riskier than later stages
4. Ventures that are at a later stage command lower valuation
5. A & D

21. Which of the following statements is FALSE?

1. Carried interest incentivizes LPs to create profits
2. Standard split between LP and GP is usually 80% for LP and 20% for GP
3. Changes in 1979 to rules regulating pension funds allowed pension funds to invest in venture capital firms and increasing funding available to VCs
4. VC firms raise capital for a new fund every 2-3 years
5. B & C

. Which of the following statements is FALSE?

1. About 40% of VCs portfolio becomes 10x
2. Staged financing allows the investor to monitor the firm and to shut it down if the success probabilities are poor
3. Accepting staged financing signals to VCs that the entrepreneur is confident about startup prospects
4. Staged financing leads to less favorable valuation for the entrepreneur
5. Most VC firms specialize by industry, geography, and the stage of the start-up
6. A & D

23. Which of the following statements is FALSE?

1. VC partnership agreement defines relationship between GP and LPs and defines compensation structure for GPs and covenants
2. LPs are legally liable for actions of the fund
3. Institutional investors who invest in VC firms monitor funds progress but do not get involved in day-to-day management
4. VC partnership agreement with investors can be changed any time during the life of the fund
5. B & D

24. Which statement is TRUE?

1. Carried interest is not shared equally within the VC firm
2. Venture funds are designed to be self-liquidating which imposes healthy discipline on VCs to terminate underperforming firms
3. VC receives two forms of payments, fixed and varied
4. Management fees are varied interest component that the VC receives
5. A, B & C are true.

25. Which of these statements is FALSE?

1. It takes a long time to discover or identify opportunistic behavior of a VC firm
2. LPs are restricted from selling their partnership interests
3. Once a fund has been raised, LPs can renegotiate the terms of the partnership
4. The more reputation capital a VC has, the less likely they are to engage in opportunistic behavior that might destroy future returns

26. Which of the following statements are FALSE?

1. Annual management fees are always a percent of invested capital
2. Gatekeepers have clout which allows them to insert restrictions that otherwise would not be included in the partnership agreement between LPs and GPs
3. Committed capital is the total amount of capital provided by GPs
4. A & C are false

Which of the following statements is FALSE?

1. VCs management fees usually remain constant during the first 5 years of the fund but could drop slightly thereafter.
2. Management fees are structured in a way to get VC to invest all committed capital right away.
3. Management fees are usually between 1.5% and 3% annually.
4. It is common for management fee base to change from committed capital to net invested capital after a number of years.
5. None of the above

28. Which of the following statements is FALSE?

1. The contract between VC and founders defines cash flow and control rights
2. The term sheet is a legal binding document between VC and founders
3. The term sheet spells out valuation, VC investment and mechanisms to protect the VC
4. VCs insist on preferred stock to remove the take-the-money-and-run problem
5. B and D

29. A VC deal is 20 on 30. What are: pre-money, post-money and percent owned by VC, respectively?

1. $20M, $30M; 60%
2. $20M, $50M; 60%
3. $30M; $50M; 60%
4. $30M; $50M; 40%
5. $20M; $30M; 66.7%

30. Which of the following statements is FALSE?

A. VCs evaluate the risk, viability and scalability of the venture as well as the management team when screening

B. The state of economy and particularly the stock market are key for the success of VCs

C. The elevator pitch should be anywhere between 30-90 seconds

D. The business plans only objective is to pitch your startup for VCs

E. The business plan is a living document that changes