Quiz 2 – Valuation and Term Sheets | Guru Startups VC Course 2025

1. Pre-money valuation means:

After investmentBefore investmentTotal valuation post exitInvestor returns

2. Post-money valuation equals:

Pre-money valuation + new investmentRevenue multipleEquity after IPOTax-adjusted value

3. A 1x liquidation preference means:

Investor gets 1x invested capital before othersInvestor doubles returnInvestor owns boardFounder gets priority

4. Anti-dilution protects:

EmployeesInvestors during down roundsFoundersCustomers

5. A cap table lists:

Company employeesEquity ownership structureTax liabilitiesLoan repayments

6. A down round occurs when:

New valuation is lower than the previous roundStartup raises debtCompany mergesIPO happens

7. Vesting schedules encourage:

Founder retentionShort-term exitInvestor exitsFaster IPO

8. Fully diluted ownership includes:

All potential shares from options, convertibles, and warrantsOnly existing sharesOnly investor equityOnly founder equity

9. An option pool is created to:

Attract and retain employeesPay taxesFinance IPORepay loans

10. Carried interest is paid to:

General PartnersFoundersLimited PartnersBankers

11. The standard carry percentage is:

10%15%20%30%

12. Term sheets are usually:

Non-bindingLegally bindingRegulatory filingsAuditor documents

13. Valuation caps are relevant to:

Convertible notes or SAFEsIPO filingsBank loansRevenue projections

14. Pro-rata rights allow investors to:

Maintain ownership by investing in future roundsSell shares earlyReceive dividendsBlock new investors

15. Drag-along rights let:

Majority shareholders force a saleFounders prevent exitLPs exit the fund earlyInvestors change valuation

16. Tag-along rights protect:

Minority shareholders to sell under same terms as majorityFoundersAuditorsBank lenders

17. A participating preferred share means investors:

Get liquidation preference plus equity upsideReceive only dividendsGet voting rights onlyForego liquidation

18. A convertible note converts into equity:

At next funding roundImmediatelyDuring IPOOnly after exit

19. Valuation in early-stage startups is mostly based on:

Market potential and team qualityHistorical revenueAudited assetsTax returns

20. A SAFE stands for:

Simple Agreement for Future EquitySecured Asset Funding ExchangeShareholder Annual Fund EstimateStructured Agreement for Founders’ Equity

21. Preferred stock provides:

Priority over common stock in liquidationNo voting rightsGuaranteed dividendsUnlimited liability

22. Anti-dilution can be:

Full ratchet or weighted averageLinear or quadraticDiscounted or premiumConvertible or fixed

23. Weighted-average anti-dilution adjusts price:

Based on number of new shares issuedLinearly by roundRandomlyPer founder discretion

24. The post-money valuation formula is:

Pre-money valuation + investment amountEquity % × revenueGross profit × multiplierPre-money − expenses

25. The ESOP pool usually ranges between:

5–20% of total equity50%1%70%

26. Convertible notes are popular because:

They delay valuation negotiationThey increase taxesThey eliminate investor rightsThey prevent future investment

27. In a liquidation event, investors with preference:

Get paid before common shareholdersShare equallyWait till founders are paidReceive only dividends

28. Information rights in term sheets provide:

Access to company performance reportsHiring rightsBoard seatsLegal immunity

29. A valuation multiple is typically based on:

Revenue, EBITDA, or user baseNumber of employeesMarketing budgetOffice rent

30. A founder’s vesting cliff usually lasts:

1 year6 months3 years5 years

31. Vesting duration for startup founders is commonly:

4 years1 year8 years10 years

32. Down rounds impact founders by:

Diluting ownershipIncreasing salariesReducing debtBoosting morale

33. The purpose of a data room is:

Provide documents for due diligenceHost marketing videosStore customer emailsPublish blogs

34. A board observer right allows:

Non-voting attendance at board meetingsFull control of the boardEmployee accessRegulator participation

35. In VC negotiations, valuation is a function of:

Market, traction, and comparable dealsRandom choiceTax rebatesFounder preference

36. Convertible instruments convert typically at a:

Discount to next round pricePremiumEqual priceVariable yield

37. Full ratchet anti-dilution favors:

Investors completelyFoundersEmployeesCustomers

38. Weighted-average anti-dilution favors:

Both founders and investors proportionallyOnly foundersOnly angelsRegulators

39. In cap tables, ownership % is calculated as:

Shares owned / total shares outstandingRevenue / valuationInvestment / assetsProfit / loss

40. Preferred shares often convert into common stock:

During IPO or saleImmediately after issueAt founder discretionAfter 10 years

41. Founder-friendly terms typically include:

Single liquidation preference, broad-based anti-dilutionMultiple preferencesHigh board control by investorsExcessive vesting

42. Investor-friendly terms often include:

Participating preferred and multiple liquidation preferencesShort vesting and no board controlNo anti-dilutionFounder bonuses

43. Board composition negotiations determine:

Decision-making power between founders and investorsSalariesESOP pool sizeRevenue split

44. Governance clauses protect:

Investor reporting and complianceFounder salariesTax optimizationBrand marketing

45. A pre-emptive right allows:

Existing investors to maintain ownership during new issuesNew investors priorityFounders to skip approvalEmployees to join board

46. A bridge round valuation is often:

Based on last round valuation or discountHigher than IPO priceGovernment-setRandomly fixed

47. A no-shop clause ensures:

Founders cannot seek other investors during term sheet negotiationInvestors cannot talk to LPsBoard cannot change membersLPs cannot exit

48. A closing condition in term sheets refers to:

Requirements before finalizing investmentIPO timingMarketing conditionEmployment terms

49. Liquidation preferences primarily protect:

Investor downside riskFounder dilutionEmployee optionsCustomer deposits

50. Term sheets help in:

Setting expectations and alignment before legal draftingReplacing legal contractsAvoiding negotiationSkipping due diligence

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