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Date: Name/Student ID: QUIZ 1 - Technology & Entrepreneurship IENG421 Spring 2020 Directions: Save file to one that has your name in it, answer questions in the word document, and submit the file via blackboard during the class. Question 1 A friend of yours tells you about the company that she is starting. She is very excited about the business and wants to know if you are interested in making an investment in the friends and family round. Assuming you can allocate a small amount of your portfolio to a high risk investment, what three key questions would you need answered before writing her a check to make an investment in the firm? ni 111 mi Question 2 What are two ways that entrepreneurs generate business opportunities? Question 3 Please describe two factors that you would like to see in a founding team before you write a check to invest in their start-up. Question 4 Briefly explain the difference between an idea and an opportunity Question 5 A diagram of the Company Development Lifecycle is shown below. Place the letter on the blank line below next to the corresponding stage of the firm on the chart below. A, B, C, D, & E. B C D E Development Start-up Growth Maturity Cash Flow Idea Question 6: The figure to the right is a diagram that shows how Venture Capital funds work. The arrow show how the money flows among the groups. Private Investors Place the letters A, B, & Con the lines below to show where on the diagram the term belongs. Venture Capital Entrepreneur Investment Bankers Pension Fund + Public Markets Private Investors Corporations Question 7 Statistically speaking, out of 4 venture capital investments made by top-tier VCs, how many companies will still be in business after the first 4 years of operation? (How many survive?) (Place an X to the left of the letter.) A. All 4 of the investments should be in business B. 3 of the investment should be in business C 2 of the investments should be in business D. 1 of the investments should be in business Question 8 What type of return would a Venture Capital Fund expect if they invest $1 million into a venture? (Place an X to the left of the letter.) 40% Return or $0.4 million gain B. 1000% Return or $10 million C. D. 200% Return or $ 2 million 100% Return or $1 million gain Question 9 As an entrepreneur, you need to understand what your investors are looking for in an investment List 3 items that investors such as Venture Capital investors will want in the investment. (Hint: wish list) Question 10 List three items that would be in a good business plan. / / 1 / / / / / / / / / / / / / TIT / / / / / / / TI / / / / / / / / / / / / / / 111 / / / Question 11 When compared to VC investments, Private Equity investments are: (Place an X to the left of your selection.) 1. More risky therefore providing a larger return to the investor. 2. The same amount of risk as VC investments 3. Less risk in the investments because firms are more established companies. Question 12 In the Harvard Business Review article we read, according to Marc Andreessen which is (Place an X to the left of your selection.) 1. Turning a CEO into an Entrepreneur 2. Turning an Entrepreneur into a CEO Question 13 True or False: Does having a founder bring an idea to a prototype stage translate to a successful startup? Question 14: Match the Intellectual Property terms with their correct definition by placing the corresponding letter on the blank line. Copyrights Trademarks Trade Secrets Patents A. Protect the original works of authors, composers, screenwriters, computer programmers, and other developers of creative works. B. Established a temporary legal monopoly on the concept C. Information such as formulas, patterns, devices, etc. that derive value from not being known and are not readily ascertainable D. Symbol, logo, word, sound, color, design, or other device used to identify a business or product pro Question 15 A strategic investor offers you $200,000 for 10% of your firm. What is the premoney and post money valuation of your company? Pre-money valuation Post money valuation Question 16 AVC offers you $3,000,000 for 51% of your firm. What is the pre-money valuation and post money valuation of the firm? Premoney valuation Post money valuation Question 17 You are forming a startup and are reaching out to friends and family to invest money in your company. You circled up $200,000 for 10% of your firm. What is pre-money and post money valuation of your firm? Pre-money valuation Post money valuation Question 18 You want to purchase a low growth, cash flowing company for 5X EBITDA. Last year's EBITDA was $1,500,000. You will be purchasing the firm with the help from an entrepreneur and continue to grow the revenue and EBITDA at 15% per year because the historical growth of these figures has been over 30% growth. You want to be conservative in our estimations and believe that 15% is a reasonable growth figure considering lower growth rates due to the COVID-19 effect on the economy. What would be the purchase price of the company? What would you sell the company for in 5 years assuming your growth figures are attained? (Assume a 5x EBITDA exit multiple.) Question 19 You want to purchase a high growth, cash flowing company for 10X EBITDA. Last year's EBITDA was $500,000. You purchase the firm with the help from a Private Equity company and continue to grow the revenue and EBITDA at 30% per year. Unfortunately, during the following 5 years after you and the PE firm purchased the firm, the revenue and EBITDA growth was only 10% per year. What would you purchase the company for? Assuming that you only grew the EBITDA by 10% per year, what would you sell the company for in 5 years assuming that you will be able to sell it for 10X EBITDA? Question 20 You are selling the company that you started in your entrepreneurship class to a well-known Venture Capital fund. You got an offer of $1,000,000 for 51% of your company. Pre-money valuation Post money valuation Assuming the VC grows your firm and increases the valuation by 6x over the next 5 years. How much would you expect them to sell the firm 5 years from now? In 5 years, how much will your remaining 49% be worth when the VC firm your startup? Question 21 Name three types of US patents. Question 22 What two items do you need in order to get a loan (debt)? Date: Name/Student ID: QUIZ 1 - Technology & Entrepreneurship IENG421 Spring 2020 Directions: Save file to one that has your name in it, answer questions in the word document, and submit the file via blackboard during the class. Question 1 A friend of yours tells you about the company that she is starting. She is very excited about the business and wants to know if you are interested in making an investment in the friends and family round. Assuming you can allocate a small amount of your portfolio to a high risk investment, what three key questions would you need answered before writing her a check to make an investment in the firm? ni 111 mi Question 2 What are two ways that entrepreneurs generate business opportunities? Question 3 Please describe two factors that you would like to see in a founding team before you write a check to invest in their start-up. Question 4 Briefly explain the difference between an idea and an opportunity Question 5 A diagram of the Company Development Lifecycle is shown below. Place the letter on the blank line below next to the corresponding stage of the firm on the chart below. A, B, C, D, & E. B C D E Development Start-up Growth Maturity Cash Flow Idea Question 6: The figure to the right is a diagram that shows how Venture Capital funds work. The arrow show how the money flows among the groups. Private Investors Place the letters A, B, & Con the lines below to show where on the diagram the term belongs. Venture Capital Entrepreneur Investment Bankers Pension Fund + Public Markets Private Investors Corporations Question 7 Statistically speaking, out of 4 venture capital investments made by top-tier VCs, how many companies will still be in business after the first 4 years of operation? (How many survive?) (Place an X to the left of the letter.) A. All 4 of the investments should be in business B. 3 of the investment should be in business C 2 of the investments should be in business D. 1 of the investments should be in business Question 8 What type of return would a Venture Capital Fund expect if they invest $1 million into a venture? (Place an X to the left of the letter.) 40% Return or $0.4 million gain B. 1000% Return or $10 million C. D. 200% Return or $ 2 million 100% Return or $1 million gain Question 9 As an entrepreneur, you need to understand what your investors are looking for in an investment List 3 items that investors such as Venture Capital investors will want in the investment. (Hint: wish list) Question 10 List three items that would be in a good business plan. / / 1 / / / / / / / / / / / / / TIT / / / / / / / TI / / / / / / / / / / / / / / 111 / / / Question 11 When compared to VC investments, Private Equity investments are: (Place an X to the left of your selection.) 1. More risky therefore providing a larger return to the investor. 2. The same amount of risk as VC investments 3. Less risk in the investments because firms are more established companies. Question 12 In the Harvard Business Review article we read, according to Marc Andreessen which is (Place an X to the left of your selection.) 1. Turning a CEO into an Entrepreneur 2. Turning an Entrepreneur into a CEO Question 13 True or False: Does having a founder bring an idea to a prototype stage translate to a successful startup? Question 14: Match the Intellectual Property terms with their correct definition by placing the corresponding letter on the blank line. Copyrights Trademarks Trade Secrets Patents A. Protect the original works of authors, composers, screenwriters, computer programmers, and other developers of creative works. B. Established a temporary legal monopoly on the concept C. Information such as formulas, patterns, devices, etc. that derive value from not being known and are not readily ascertainable D. Symbol, logo, word, sound, color, design, or other device used to identify a business or product pro Question 15 A strategic investor offers you $200,000 for 10% of your firm. What is the premoney and post money valuation of your company? Pre-money valuation Post money valuation Question 16 AVC offers you $3,000,000 for 51% of your firm. What is the pre-money valuation and post money valuation of the firm? Premoney valuation Post money valuation Question 17 You are forming a startup and are reaching out to friends and family to invest money in your company. You circled up $200,000 for 10% of your firm. What is pre-money and post money valuation of your firm? Pre-money valuation Post money valuation Question 18 You want to purchase a low growth, cash flowing company for 5X EBITDA. Last year's EBITDA was $1,500,000. You will be purchasing the firm with the help from an entrepreneur and continue to grow the revenue and EBITDA at 15% per year because the historical growth of these figures has been over 30% growth. You want to be conservative in our estimations and believe that 15% is a reasonable growth figure considering lower growth rates due to the COVID-19 effect on the economy. What would be the purchase price of the company? What would you sell the company for in 5 years assuming your growth figures are attained? (Assume a 5x EBITDA exit multiple.) Question 19 You want to purchase a high growth, cash flowing company for 10X EBITDA. Last year's EBITDA was $500,000. You purchase the firm with the help from a Private Equity company and continue to grow the revenue and EBITDA at 30% per year. Unfortunately, during the following 5 years after you and the PE firm purchased the firm, the revenue and EBITDA growth was only 10% per year. What would you purchase the company for? Assuming that you only grew the EBITDA by 10% per year, what would you sell the company for in 5 years assuming that you will be able to sell it for 10X EBITDA? Question 20 You are selling the company that you started in your entrepreneurship class to a well-known Venture Capital fund. You got an offer of $1,000,000 for 51% of your company. Pre-money valuation Post money valuation Assuming the VC grows your firm and increases the valuation by 6x over the next 5 years. How much would you expect them to sell the firm 5 years from now? In 5 years, how much will your remaining 49% be worth when the VC firm your startup? Question 21 Name three types of US patents. Question 22 What two items do you need in order to get a loan (debt)

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