Question 1

Early stage companies, owing to the lack of history and collateral, rarely raise money via debt with one notable exception, which is:

1) Common stock
2) Convertible notes, which are a hybrid, more closely related to equity
3) Preferred stock, with a dividend that acts like an interest rate
4) Shareholder loans

Question 2

Which of the following is TRUE regarding intermediary sources of capital (check all that apply)

1) This category includes investment bankers.
2) They are a prime source of early-stage capital
3) They may charge a fee for their services
4) They can introduce you to other financing sources.

Question 3

Strategic or corporate venture capital firms make investments:

1) Within their core businesses to achieve financial and strategic returns
2) To build risk portfolios with excess cash of the corporation
3) Primarily outside of their core businesses to diversify their risk
4) Only to achieve financial returns

Question 4

The primary sources of seed and early stage capital include the following: (select all that apply)

1) Founders
2) Angel investors
3) Management team
4) IPO's (initial public offerings)

Question 5

Which of the following statements is CORRECT about friends and family investors? (select all that apply)

1) Only equity investments are allowed given the relationship to the founder
2) When discussing an investment with a friends or family investor, the entrepreneur should clearly discuss risk versus reward
3) They invest because of the relationship(s) to the founder
4) Terms should always be put into writing

Question 6

According to the U.S. Federal Reserve, what percentage of all startups are bootstrapped?

1) More than 70%
2) Less than 20%
3) About 50%
4) Almost 90%

Question 7

What is the primary benefit to the entrepreneur of bootstrapping his/her company:

1) It allows the entrepreneur to be creative in finding ways to achieve progress without money
2) If successful, the entrepreneur retains a greater share of the exit value (or a higher valuation during fundraising)
3) Bartering with established companies develops lasting relationship that would not otherwise be developed
4) The longer time it takes to get to market, the more time the entrepreneur has to make sure the product works perfectly

Question 8

One of the disadvantages of an entrepreneur going into an accelerator program is that the entrepreneur:

1) Often must give up equity to participate
2) Spends a lot of time meeting with investors interested in future financing rounds
3) Spends too much time receiving training that strengthens his/her business expertise
4) Is often provided new office space

Question 9

Which of the following is true about angel investors:

1) The are often motivated by factors other than financial return
2) They invest twice as much as venture capital funds do each year
3) They provide critical seed capital that other funding sources do not focus on
4) All of the above

Question 10

Seed or early stage investors typically invest in companies that have all of the following attributes: (select all that apply)

1) Is seeking funding of $5M or less
2) Is at cash flow break even
3) Early customer validation
4) A promising product concept