Podcast
Questions and Answers
What is the market to book ratio used to measure?
What is the market to book ratio used to measure?
- Equity value (correct)
- Enterprise value
- Shareholder's equity on balance sheet
- Total firm value
Why is it more difficult to valuate start-up companies compared to big companies using comparables?
Why is it more difficult to valuate start-up companies compared to big companies using comparables?
- Big companies have more public information available for valuation
- Start-up companies often have unique characteristics that are hard to find in comparables (correct)
- Start-up companies have lower risk and growth rate
- Big companies have more complex capital structure
What makes it difficult to obtain share price for private companies?
What makes it difficult to obtain share price for private companies?
- Low earnings per share
- High market to book ratio
- Lack of public information (correct)
- Complex capital structure
What is the typical percentage of debt and equity used to highly leverage a holding in an LBO?
What is the typical percentage of debt and equity used to highly leverage a holding in an LBO?
How long does the holding company usually have to pay back the debt it issued to acquire the target in an LBO?
How long does the holding company usually have to pay back the debt it issued to acquire the target in an LBO?
After the holding company has paid back the debt, what percentage of the target do the shareholders typically own?
After the holding company has paid back the debt, what percentage of the target do the shareholders typically own?
How can an LBO fund exit an investment?
How can an LBO fund exit an investment?
What is the measure of success in an LBO investment that calculates the value at which shares are sold divided by the value at which they were bought?
What is the measure of success in an LBO investment that calculates the value at which shares are sold divided by the value at which they were bought?
What is the formula for calculating the Internal Rate of Return (IRR) in an LBO investment?
What is the formula for calculating the Internal Rate of Return (IRR) in an LBO investment?
What is the typical percentage range for management fees charged by GP's in LBO?
What is the typical percentage range for management fees charged by GP's in LBO?
What is the typical percentage of carried interest charged by GP's in LBO?
What is the typical percentage of carried interest charged by GP's in LBO?
What is the hurdle return typically set at for LP's in an LBO investment?
What is the hurdle return typically set at for LP's in an LBO investment?
What is the primary method used to ensure the success of an LBO investment?
What is the primary method used to ensure the success of an LBO investment?
What is the typical duration of the initial due diligence process in an LBO investment?
What is the typical duration of the initial due diligence process in an LBO investment?
What happens when more debt is used in an LBO?
What happens when more debt is used in an LBO?
What are General Partners (GPs) responsible for in Private Equity (PE) funds?
What are General Partners (GPs) responsible for in Private Equity (PE) funds?
Why are start-ups usually financed with equity?
Why are start-ups usually financed with equity?
What is the primary purpose of the comparable method in company valuation?
What is the primary purpose of the comparable method in company valuation?
What does the discounted cash flows method involve?
What does the discounted cash flows method involve?
Why is sensitivity analysis required for terminal value computation?
Why is sensitivity analysis required for terminal value computation?
What is the primary purpose of Private Equity (PE)?
What is the primary purpose of Private Equity (PE)?
What is the role of Limited Partners (LPs) in Private Equity (PE) funds?
What is the role of Limited Partners (LPs) in Private Equity (PE) funds?
What is the purpose of General Partners (GPs) taking management fees and carried interest?
What is the purpose of General Partners (GPs) taking management fees and carried interest?
Why do General Partners (GPs) invest only a small percentage but receive a significant portion of the profits?
Why do General Partners (GPs) invest only a small percentage but receive a significant portion of the profits?
Which company is cited as the largest IPO VC-backed company?
Which company is cited as the largest IPO VC-backed company?
When was the first VC fund founded?
When was the first VC fund founded?
What was the significant return from an investment in the Digital Equipment Company?
What was the significant return from an investment in the Digital Equipment Company?
What are the direct costs of legal fees associated with debt restructuring for large companies?
What are the direct costs of legal fees associated with debt restructuring for large companies?
What are the advantages of private workouts in debt restructuring?
What are the advantages of private workouts in debt restructuring?
What are the bankruptcy filing options under the US Bankruptcy code?
What are the bankruptcy filing options under the US Bankruptcy code?
What do public workouts involve in debt restructuring?
What do public workouts involve in debt restructuring?
What does asset value depend on in debt restructuring?
What does asset value depend on in debt restructuring?
What are the challenges of implementing private restructuring with multiple lenders?
What are the challenges of implementing private restructuring with multiple lenders?
What is the outcome of debt for equity swaps?
What is the outcome of debt for equity swaps?
What does time inconsistency lead to in debt restructuring?
What does time inconsistency lead to in debt restructuring?
What do leveraged buyouts (LBO) involve?
What do leveraged buyouts (LBO) involve?
What percentage of all transactions do LBO transactions represent?
What percentage of all transactions do LBO transactions represent?
Who conducted the largest LBO ever?
Who conducted the largest LBO ever?
What is the largest source of venture capital investment in the US?
What is the largest source of venture capital investment in the US?
What is the maximum investment of Business Angels?
What is the maximum investment of Business Angels?
Who typically invests in early-stage ventures due to the higher risk involved?
Who typically invests in early-stage ventures due to the higher risk involved?
What are the different types of venture capitalists mentioned in the text?
What are the different types of venture capitalists mentioned in the text?
What do gatekeepers, such as investment advisors, do in facilitating venture investments?
What do gatekeepers, such as investment advisors, do in facilitating venture investments?
What is the role of venture capital in high-growth companies?
What is the role of venture capital in high-growth companies?
What is the percentage of corporate investors in venture capital in Europe?
What is the percentage of corporate investors in venture capital in Europe?
What is the significance of the close date in venture capital?
What is the significance of the close date in venture capital?
What is the primary reason for governments to invest in early-stage ventures?
What is the primary reason for governments to invest in early-stage ventures?
What exists between VCs and entrepreneurs, with VCs having more market information and entrepreneurs having better product knowledge?
What exists between VCs and entrepreneurs, with VCs having more market information and entrepreneurs having better product knowledge?
What are the limitations of valuation methods like DCF and comparables, as mentioned in the text?
What are the limitations of valuation methods like DCF and comparables, as mentioned in the text?
What does debt restructuring involve?
What does debt restructuring involve?
What is the primary role of gatekeepers in facilitating venture investments?
What is the primary role of gatekeepers in facilitating venture investments?
What is the maximum investment amount of Business Angels?
What is the maximum investment amount of Business Angels?
What is the main reason governments usually invest in early-stage ventures?
What is the main reason governments usually invest in early-stage ventures?
What is the primary reason for the existence of asymmetric information between VCs and entrepreneurs?
What is the primary reason for the existence of asymmetric information between VCs and entrepreneurs?
What are the limitations of valuation methods like DCF and comparables?
What are the limitations of valuation methods like DCF and comparables?
What does debt restructuring involve?
What does debt restructuring involve?
What is the typical investment focus of independent VCs?
What is the typical investment focus of independent VCs?
What is the significance of the close date of a venture capital fund?
What is the significance of the close date of a venture capital fund?
What is the largest source of venture capital investment in Europe?
What is the largest source of venture capital investment in Europe?
Who are the largest investors in the US venture capital industry?
Who are the largest investors in the US venture capital industry?
What was the initial prohibition on pension funds regarding high-risk asset classes?
What was the initial prohibition on pension funds regarding high-risk asset classes?
What are the different types of venture capitalists mentioned in the text?
What are the different types of venture capitalists mentioned in the text?
What is the typical percentage range for management fees charged by General Partners (GPs) in Private Equity (PE) funds?
What is the typical percentage range for management fees charged by General Partners (GPs) in Private Equity (PE) funds?
What is the primary purpose of sensitivity analysis in terminal value computation?
What is the primary purpose of sensitivity analysis in terminal value computation?
What is the measure of success in an LBO investment that calculates the value at which shares are sold divided by the value at which they were bought?
What is the measure of success in an LBO investment that calculates the value at which shares are sold divided by the value at which they were bought?
What is the significance of the close date in venture capital?
What is the significance of the close date in venture capital?
What is the typical percentage of carried interest charged by General Partners (GPs) in LBO?
What is the typical percentage of carried interest charged by General Partners (GPs) in LBO?
What is the primary reason for governments to invest in early-stage ventures?
What is the primary reason for governments to invest in early-stage ventures?
What do valuation methods like DCF and comparables have limitations in considering?
What do valuation methods like DCF and comparables have limitations in considering?
What is the maximum investment of Business Angels?
What is the maximum investment of Business Angels?
What exists between Venture Capitalists (VCs) and entrepreneurs?
What exists between Venture Capitalists (VCs) and entrepreneurs?
What is the typical percentage of corporate investors in venture capital in Europe?
What is the typical percentage of corporate investors in venture capital in Europe?
What do gatekeepers, such as investment advisors, do in facilitating venture investments?
What do gatekeepers, such as investment advisors, do in facilitating venture investments?
What is the biggest source of venture capital investment in the US?
What is the biggest source of venture capital investment in the US?
Study Notes
Venture Capital and Investment Fundamentals
- In 2017, pension funds in the US invested about $33 billion in venture capital, significantly aiding its development.
- The biggest investors of venture capital in Europe are government agencies (20%), corporate investors (14%), pensions funds (12%), insurance companies (11%), and private individuals (12%).
- In the US, pension funds are the largest investors in the venture capital industry.
- A rule in 1979 prohibited pension funds from investing substantial amounts in high-risk asset classes like private equity, but this was later relaxed.
- Gatekeepers, such as investment advisors, played a key role in facilitating venture investments.
- Venture capital involves fundraising from limited partners (LPs), investing in high-growth companies, providing guidance for company growth, and eventually exiting via acquisition or IPO.
- Different types of venture capitalists include independent VCs, corporate VCs, and banks VCs.
- The close date refers to the date of creation of the fund, while the maximum investment of Business Angels is $1,000,000.
- Governments usually invest in early-stage ventures due to the higher risk involved.
- Asymmetric information exists between VCs and entrepreneurs, with VCs having more market information and entrepreneurs having better product knowledge.
- Valuation methods like DCF and comparables have limitations in considering flexibility and follow-on investments.
- Debt restructuring involves changes in the characteristics of the debt contract, such as interest rate, maturity, covenant waiver, increase in collateral, etc.
Venture Capital and Investment Fundamentals
- In 2017, pension funds in the US invested about $33 billion in venture capital, significantly aiding its development.
- The biggest investors of venture capital in Europe are government agencies (20%), corporate investors (14%), pensions funds (12%), insurance companies (11%), and private individuals (12%).
- In the US, pension funds are the largest investors in the venture capital industry.
- A rule in 1979 prohibited pension funds from investing substantial amounts in high-risk asset classes like private equity, but this was later relaxed.
- Gatekeepers, such as investment advisors, played a key role in facilitating venture investments.
- Venture capital involves fundraising from limited partners (LPs), investing in high-growth companies, providing guidance for company growth, and eventually exiting via acquisition or IPO.
- Different types of venture capitalists include independent VCs, corporate VCs, and banks VCs.
- The close date refers to the date of creation of the fund, while the maximum investment of Business Angels is $1,000,000.
- Governments usually invest in early-stage ventures due to the higher risk involved.
- Asymmetric information exists between VCs and entrepreneurs, with VCs having more market information and entrepreneurs having better product knowledge.
- Valuation methods like DCF and comparables have limitations in considering flexibility and follow-on investments.
- Debt restructuring involves changes in the characteristics of the debt contract, such as interest rate, maturity, covenant waiver, increase in collateral, etc.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of venture capital and investment fundamentals with this quiz. Explore topics such as pension fund investments, types of venture capitalists, valuation methods, and debt restructuring. Learn about the role of gatekeepers, asymmetric information between VCs and entrepreneurs, and the stages of venture investments.
