Business Studies
1. Define the two types of ways that VC Firms make money
a. Management Fees
b. Carried Interest
2. Which should generally be larger, management fees or carried interest?
3. If a $100M fund is successful, and returns 4x the capital, or $400M, how much goes to the LPs in total? How much to the GPs/VCs in total? Assume standard carried interest. Show your work.
4. What tool is used to summarize who owns what part of the company before and after financing.
5. Which has more rights, common stock or preferred stock?
6. If your pre-money valuation is $10M, and an investor makes a $2M investment, what is the post-money valuation? What percentage does the investor own?
7. Are the majority of acquisitions paid by stock, cash and stock, or all stock?
8. Short paragraph: What are the issues around being paid by stock vs cash and stock vs all stock.
9. What is the purpose of escrow payouts in an acquisition?
10. List three reasons that capitalization tables are important.
