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BU403 Q&A
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Exam of 11 pages for the course BU403 at BU403 (BU403 Q&A)
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BU403 Q&AWhich of the following statements is true of angel investors?
I) They normally seek control of the companies in which they invest
II) They are longtime friends of the founders of the companies in which they invest.
III) They rely on investment banks to secure deal flow.
IV) They need to be patient investors. - =IV) They need to be patient investors.
Highly successful venture capitalists make more money in carried interest than in management fees. -
=true
Both revenues and margins are affected by a company's product cycle. - =True
Which of the following is true about early stage financing?
I) It is important for companies that their early investors participate in follow-on rounds of financing?
II) Founders will keep a larger percentage of their companies if there is an up round versus a down
round.
III) The IAF and the BDC provide early stage funding. - =I), II) and III)
In the case, DermaCare: Zapping Zits Directly, the angel financing would leave founders' post-money
valuation higher than venture capital financing. - =True
For venture capital partnerships, the limited partners earn carried interest when significant returns are
generated on investments. - =False
The term down rounds means that the next round of financing is a smaller total dollar amount than the
size of the previous round of financing. - =False
Which of the following is true about due diligence for early stage investing?
I) Due diligence requires that the analyst understand the perspective of the company's intended
customer.
, II) Due diligence requires that the analyst understand the expected exit strategy for the investment.
III) Due diligence requires that the analyst understand the founder's motivation and commitment to the
company. - =I), II) and III)
Based on the experience of the Golden Triangle Angel Network, which of the following statements is
true of angel investors?
I) Up rounds are more common than down rounds.
II) In one case, after a convertible promissory note reached maturity, the conditions of conversion were
not met and the holders of the note received a return of principal.
III) Angel investing is suitable for investors with a 3 year investment horizon.
IV) Half of the companies failed. - =I) and II) Only
Which of the following statements is normally true of lead investors in seed rounds of financing?
I) They ask for a seat on the board of directors of the company.
II) They negotiate the terms of the deal on behalf of other investors in the financing round.
III) They want a majority interest in the voting equity of the company. - =I) and II) Only
Which is the following is true?
Due diligence is the process whereby prospecitve investors investigate a company and its offering of
securities.
Some angel investors focus mainly on the background and qualities of the founders during their due
diligence.
Institutional investors like the Investment Accelerator Fund have a structured approach to due diligence.
All of the above.
None of the above. - =All of the above.
Light automobile production is expected to drop by 7% in 2020 because of a decline in demand due to
COVID 19. How much do you expect growth capex spending to be affected? - =A decline of more than
7%
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