ENT 3003 Exam 4 Questions Answered Correctly Latest Update 2026/2027
equity financing - Answers raising money by selling shares of stock in the venture; provides the
capital to help the business grow, but it requires the entrepreneur to give up a portion of his or
her ownership of the business
3 stages of equity financing - Answers seed stage financing, startup financing, early-stage
financing
seed stage financing - Answers the business receives a small amount of capital in order to
prove a concept
startup financing - Answers entrepreneurs receive money to implement the idea by funding
research and development
early stage financing - Answers funds are provided to companies with a team and a tested
product or service, but little or no revenue
angel investors - Answers use their money to help startups run by individuals who are not their
friends or family
venture capitalists - Answers professional investors who invest in early-stage companies, late-
stage companies, and startups in order to take advantage of the perceived potential for long
term growth; most likely to invest in early-to late-stage companies than startups (but do both)
important factors for investors - Answers team, users, distribution channels, and industry type
the team - Answers investors want to know what experience your team has, and what team
members' track records have been in the past
users - Answers investors are interested in how many people currently use your company's
product or service; a company with a lot of users may be attractive to investors, even if it's not
profitable yet
pre money valuaqtion - Answers valuation of the company before receiving financing
post money valuation - Answers valuation of the company after receiving financing
unicorns - Answers tech startups that are valued at more than $1 billion, as determined by
private or public investment; rare but common
convertible debt (convertible bonds or convertible notes) - Answers short term loan that is
converted to equity upon the occurrence of a future event, such as the issuance of future
funding or the achievement of certain sales goals
benefits of using convertible bonds - Answers entrepreneur doesn't immediately have to value
the company; if the company is successful, investors usually enjoy a discount off the share
, price; they still have control over the company
drawbacks of using convertible bonds - Answers early lenders face the risk that the conversion
event does not happen or that the company will file for bankruptcy; entrepreneurs may be
hesitant to take on a lot of debt in the beginning of the business; a layer is needed to issue
convertible debt (can be costly)
accredited investors - Answers investors who can only invest in entrepreneurial ventures if they
have a net worth more than $1 million or earn an annual income of more than $200,000
4 types of business angels - Answers entrepreneurial angels, corporate angels, professional
angels, enthusiast angels
entrepreneurial angels - Answers have already started their own businesses and have a steady
flow of income that allows them to take on risks on investments in other businesses
advantages of entrepreneurial angels - Answers most valuable to early ventures because they
have personal experience and knowledge that make them great mentors and advisors
corporate angels - Answers typically former business executives who want to invest using their
current income or savings; want to play a role in the business and seek a paid posiition
drawbacks of corporate angels - Answers they can be controlling that can lead to friction
between them and the entrepreneur
professional angels - Answers professionals who want to invest in entrepreneurial ventures
using their income and savings; usually silent investors
enthusiast angels - Answers independently wealth individuals who invest in startups as a hobby
valley of death - Answers period during which cash flow is negative because the company has
no revenue, but it is still burning through cash
SBICs - Answers small business investment companies
ARD - Answers American Research and Development
DEC - Answers Digital Equipment Company
what venture capitalists are looking for - Answers great teams, big markets, and unique and
innovative ideas
2 common reasons why venture capitalists refuse to invest - Answers the opportunity doesn't
meet the fund's criteria; the opportunity didn't come as a referral
debt financing - Answers borrowing money that must be paid back with interest
what you need to secure a loan - Answers capital, collateral, capacity, credit rating
equity financing - Answers raising money by selling shares of stock in the venture; provides the
capital to help the business grow, but it requires the entrepreneur to give up a portion of his or
her ownership of the business
3 stages of equity financing - Answers seed stage financing, startup financing, early-stage
financing
seed stage financing - Answers the business receives a small amount of capital in order to
prove a concept
startup financing - Answers entrepreneurs receive money to implement the idea by funding
research and development
early stage financing - Answers funds are provided to companies with a team and a tested
product or service, but little or no revenue
angel investors - Answers use their money to help startups run by individuals who are not their
friends or family
venture capitalists - Answers professional investors who invest in early-stage companies, late-
stage companies, and startups in order to take advantage of the perceived potential for long
term growth; most likely to invest in early-to late-stage companies than startups (but do both)
important factors for investors - Answers team, users, distribution channels, and industry type
the team - Answers investors want to know what experience your team has, and what team
members' track records have been in the past
users - Answers investors are interested in how many people currently use your company's
product or service; a company with a lot of users may be attractive to investors, even if it's not
profitable yet
pre money valuaqtion - Answers valuation of the company before receiving financing
post money valuation - Answers valuation of the company after receiving financing
unicorns - Answers tech startups that are valued at more than $1 billion, as determined by
private or public investment; rare but common
convertible debt (convertible bonds or convertible notes) - Answers short term loan that is
converted to equity upon the occurrence of a future event, such as the issuance of future
funding or the achievement of certain sales goals
benefits of using convertible bonds - Answers entrepreneur doesn't immediately have to value
the company; if the company is successful, investors usually enjoy a discount off the share
, price; they still have control over the company
drawbacks of using convertible bonds - Answers early lenders face the risk that the conversion
event does not happen or that the company will file for bankruptcy; entrepreneurs may be
hesitant to take on a lot of debt in the beginning of the business; a layer is needed to issue
convertible debt (can be costly)
accredited investors - Answers investors who can only invest in entrepreneurial ventures if they
have a net worth more than $1 million or earn an annual income of more than $200,000
4 types of business angels - Answers entrepreneurial angels, corporate angels, professional
angels, enthusiast angels
entrepreneurial angels - Answers have already started their own businesses and have a steady
flow of income that allows them to take on risks on investments in other businesses
advantages of entrepreneurial angels - Answers most valuable to early ventures because they
have personal experience and knowledge that make them great mentors and advisors
corporate angels - Answers typically former business executives who want to invest using their
current income or savings; want to play a role in the business and seek a paid posiition
drawbacks of corporate angels - Answers they can be controlling that can lead to friction
between them and the entrepreneur
professional angels - Answers professionals who want to invest in entrepreneurial ventures
using their income and savings; usually silent investors
enthusiast angels - Answers independently wealth individuals who invest in startups as a hobby
valley of death - Answers period during which cash flow is negative because the company has
no revenue, but it is still burning through cash
SBICs - Answers small business investment companies
ARD - Answers American Research and Development
DEC - Answers Digital Equipment Company
what venture capitalists are looking for - Answers great teams, big markets, and unique and
innovative ideas
2 common reasons why venture capitalists refuse to invest - Answers the opportunity doesn't
meet the fund's criteria; the opportunity didn't come as a referral
debt financing - Answers borrowing money that must be paid back with interest
what you need to secure a loan - Answers capital, collateral, capacity, credit rating
