Course Content

Funding: Assessment Answers

Course Overview

Needs and Markets

Intellectual Property

Regulatory and Reimbursement

Company Formation

• Funding

Video
Slides
Questions
Example
Worksheet

Financials

Summary

Provide FEEDBACK

Answer the following questions regarding the important topics covered in this section of the CD. The correct answers can be accessed through the link at the bottom of the page.

1. What is a venture capitalist's primary concern when making decisions whether to fund a new startup?
   • Correct Answer: C. The company's ability to provide a significant return on their investment
   • While all of the listed items are elements of the venture capitalist's decision, their primary responsibility is in returning a profit to their limited-partner investors.
2. As a "rule of thumb" for deciding whether a concept is fundable by venture capitalists, it must have the potential to generate:
   • Correct Answer: A. More than $100-$500 million per year in gross revenue
   • The two speakers in this section each made this point, though their exact cutoff for the minimum fundable opportunity differed somewhat. At the low end, a potential opportunity of $100 to $500 million in sales revenue is required yearly. A company's potential net profit is considered a less reliable metric because of the number of unknown variables involved in calculating it.
3. From the venture capitalist's perspective, a company should produce a return within how many years of their initial investment, approximately?
   • Correct Answer: C. 3 years
   • Typical venture funds look for returns within about 3 years, though this number may vary based upon the specific goals of the venture fund.
4. Which of the following is NOT a method by which venture capitalists might determine the value of a private company?
   • Correct Answer: D. Its value should be similar to the valuations earned by members of the company's management team in their prior successful ventures
   • Past performance is an element of a company's fundability, but the specific valuations of their prior companies are not used to determine valuation for their current venture.
5. In what areas can venture capitalists provide valuable assistance to the companies they fund?
   • Correct Answer: D. All of the above
   • Once they fund a company, venture capitalists are financially committed to the success of the company and should be willing to help in any way they can.