Angel and VC funding
Master Angel and VC Funding
Test your knowledge about the world of angel and venture capital funding with this engaging quiz! Whether you're a startup founder, an aspiring investor, or simply curious about the financing landscape, this quiz will challenge your understanding and deepen your insights.
- 10 questions covering key concepts
- Mix of multiple choice and checkbox formats
- Learn about common pitfalls and strategic insights
Mix and match the term and its correct definition [Check all that apply]
Angel investors - raise money from institutional investors
VC - Experienced, accredited investors that invest their own money
Valuation - worth assigned to a company
Equity - share of ownership in the business received by an investor in exchange for money
Pro rata or preemptive rights - Option to keep the same % of ownership when new shares are issued at a subsequent round of financing
Vesting - process by which you “earn” your stock over time, much like you earn your salary
Term sheet - Non-binding outline of the terms and conditions in which an investment is to be made
Select the statement that is FALSE
The higher the probability of the success scenario, the higher the valuation of the startup
With every round of equity financing, new shares are issued
With every round, ownership stake of existing shareholders is reduced
Founders are the only ones that sell equity at each financing round
What is the average return that VCs need before they can see any carry (GP profit)?
20%
25%
33%
40%
Which of the following statements about convertible notes are true? [Check all that apply]
Convertible note is a type of debt
VCs use unpriced rounds aka convertible notes, almost exclusively
Converts to equity when any small amount of money is raised
Has a mandatory interest rate
Valuation cap guarantees minimum % of company if things go well
Have to close investors at the same time
Matures in 18-24 months
Which of the following statements about different term sheet elements is TRUE? [Check all that apply]
Anti-dilution provisions are designed to protect the investor from a situation where the company’s value drops post-investment, and more money is raised at a lower price than he paid
If the firm raises additional funding at a price below the VC’s price, the VC’s conversion price is increased to protect against dilution
Anti- Dilution protection comes out of founders shares
Reserved shares are the pool of shares reserved to be given to employees for incentives/compensation reasons
Option pool can be used to top off founder ownership to keep them incentivized if their original stake gets too diluted out
VCs often let founders own their share of the common stock in the company free and clear
Which of the following statements is FALSE? [Check all that apply]
Often friends and family rounds are common stock deals
VCs care the most about option pool and investment amounts
SAFE deals have no maturity dates or interest
SAFE deals are a type of debt
VCs care the most about pro rata rights, board control and liquidation preferences
Which of the following statements about angel funding are TRUE? [Check all that apply]
Angel funding is generally, pre-seed, seed or Series A
Typical angel deal size is $1-2M
Most angel investors seek 3-5X and 22% IRR at the very minimum
Angel investors prefer SAFE deals
Typical exit time frame is 2-3 years
They need pre-money valuation of $3-5M (typically less than 10)
What are common angel deal mistakes/ red flags? [Check all that apply]
Too small or too early
Misunderstanding target market
Regulatory hurdles
Low valuation cap
IP not clearly owned/licensed
No competitive advantage
Inexperienced team
Which of the following is a difference between angel and VC financing?
Angel funding has more complicated terms
Angel funding is more expensive than VC funding
Angels are willing to take on more risk than VCs
Angels are likely to invest in multiple rounds of financing unlike VCs
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