ESB - Entrepreneurship and Small Business Startup Funding and Capital Questions and Answers

Question 1

A startup with a pre-money valuation of $4 million secures a $1 million investment from a venture capital firm. What is the company's post-money valuation?

Accepted Answer

$5 million

Answer

$3 million

Answer

$4 million

Answer

$1 million

Question 2

Which of the following funding sources is characterized by an entrepreneur using personal savings and revenue generated by the business to fund growth, thereby retaining full ownership?

Accepted Answer

Bootstrapping

Answer

Venture Capital

Answer

Angel Investing

Answer

Crowdfunding

Question 3

An early-stage startup needs capital to finalize its product and conduct initial market research. Which funding stage is most appropriate for this phase?

Accepted Answer

Seed Funding

Answer

Series B

Answer

Initial Public Offering (IPO)

Answer

Series C

Question 4

A key difference between an angel investor and a venture capitalist (VC) is that an angel investor typically:

Accepted Answer

invests their own personal funds.

Answer

invests money pooled from large institutions.

Answer

requires a board seat and significant control.

Answer

only invests in late-stage, profitable companies.

Question 5

A startup is raising funds through a method that allows them to postpone valuation discussions while still securing capital. They issue a short-term debt instrument that will convert to equity at a later, specified funding round. What is this financing instrument called?

Accepted Answer

Venture Debt

Answer

Initial Public Offering (IPO)

Answer

Small Business Loan

Answer

Convertible Note

Question 6

Which of the following best describes the primary purpose of a term sheet in the startup funding process?

Accepted Answer

A preliminary, non-binding document outlining the basic terms of an investment.

Answer

A legally binding contract that finalizes the investment.

Answer

A marketing document used to attract potential employees.

Answer

A government form required for all new business financing.