Quiz 3 – Portfolio and Exits | Guru Startups VC Course 2025

1. The power-law distribution implies:

All startups return similar multiplesFew startups generate most returnsEqual ROI across portfolioLinear growth

2. IRR stands for:

Internal Rate of ReturnInvestor Risk RatioInvestment Recovery RateIndexed Revenue Return

3. A secondary sale means:

Investor sells to another investorIPO eventFounder buys back equityMerger transaction

4. Portfolio diversification reduces:

Idiosyncratic riskSystematic market riskCapital gainsFund lifespan

5. A follow-on investment refers to:

Additional capital invested in existing portfolio companiesSeed investmentIPO participationDebt repayment

6. Reserves in VC funds are used for:

Follow-on roundsOffice rentAuditor feesMarketing

7. TVPI measures:

Total Value to Paid-InTotal Valuation Per InvestmentTax Value Percent IndexTime-Value Performance Index

8. DPI stands for:

Distributions to Paid-In CapitalDebt Performance IndexDividends Paid IndividuallyDiscounted Portfolio Index

9. A vintage year indicates:

Fund’s first investment yearExit yearIPO listing yearFund dissolution year

10. Capital recycling refers to:

Reinvesting early distributions into new dealsInvesting in recycling startupsGreen fund strategyTax optimization

11. Portfolio concentration risk arises when:

Few companies dominate fund exposureAll startups are early-stageLPs diversify too muchFund invests in ETFs

12. A fund of funds invests primarily in:

Other venture fundsPublic equitiesBondsReal estate

13. The target number of startups in a typical VC portfolio is around:

15–302–3100+5–7

14. A bridge round is typically:

Interim financing between funding stagesIPO stageM&A eventConvertible loan closure

15. The J-curve effect describes:

Negative early returns turning positive laterConstant returns over timeImmediate profitsLinear IRR growth

16. Portfolio value creation post-investment includes:

Governance, hiring, strategic partnershipsIPO filingExit pricing onlyCash dividend payouts

17. Active ownership means:

VC involvement in board, strategy, and recruitingPassive monitoringNo interaction post fundingFounder independence

18. Gross IRR differs from Net IRR by:

Excluding management fees and carryIncluding inflationUsing only realized gainsIgnoring fund age

19. The most common exit types are:

IPO, M&A, and secondary salesDebt restructuringSpin-offs onlyDividends

20. An IPO provides liquidity by:

Listing shares on public exchangeSelling assets privatelyMerging with competitorSelling to LPs

21. M&A exits are usually:

Acquisitions by larger corporationsStock buybacksEquity dilution eventsTax filings

22. A trade sale refers to:

Sale to strategic corporate buyerSale to LPIPOFounders exit

23. A secondary buyout means:

One fund sells its stake to another fundIPO saleDebt conversionFounder repurchase

24. Exit multiples are calculated based on:

Exit valuation ÷ invested capitalRevenue ÷ profitUsers ÷ valuationAssets ÷ liabilities

25. A DPI > 1 means:

Fund has distributed more than investedLoss-making fundStill unrealizedNo exits yet

26. Clawback provisions ensure:

GPs return excess carry if fund underperforms laterLPs repay distributionsFounders repay ESOPAuditors control fees

27. Cross-fund investing occurs when:

Multiple funds invest in the same portfolio companyLPs exit earlyFounders invest in competitorsFunds merge

28. A DPI of 0.8 means:

Distributions are less than capital investedOverperformanceFund liquidationEqual returns

29. A portfolio company’s exit readiness depends on:

Revenue scale, profitability, and governanceMarket hype onlyBoard votingLP decision

30. Liquidity risk in VC refers to:

Inability to quickly sell holdingsBank defaultIPO successDividend risk

31. The power-law means most portfolio returns come from:

One or two big winnersEqual distributionGovernment incentivesTax credits

32. Portfolio rebalancing in VC is:

Rare due to illiquidityFrequentMandatory yearlyDaily

33. Carry crystallization occurs:

When realized returns trigger GP carry paymentAt fund setupDuring IPO filingAfter tax clearance

34. A DPI of 2.0 implies:

Investors received twice their invested capitalBreak-evenNegative IRRUnrealized losses

35. A GP-led secondary allows:

Restructuring older portfolios and giving liquidity to LPsFounders to exit earlyLPs to invest moreAuditors to change governance

36. The main measure of realized performance is:

DPITVPIIRR unrealizedAUM

37. An unrealized gain affects:

TVPI but not DPIBoth DPI and IRR equallyOnly carry feesTax filings only

38. A distribution waterfall defines:

Sequence of profit allocation between LPs and GPsFund structureTax payment orderFounder payouts

39. A hurdle rate ensures:

GPs earn carry only after LPs achieve a minimum returnFounders hit targetsESOPs are allocatedValuation caps apply

40. Exits via IPOs generally provide:

High liquidity and valuation visibilityDebt repaymentGovernance reductionLow valuations

41. VCs typically hold investments for:

5–10 years1–2 years20 years6 months

42. Portfolio support post-investment focuses on:

Strategy, hiring, and next-round fundraisingAccountingDebt restructuringEquity sales

43. Exit timing depends primarily on:

Market conditions and company readinessGP ageBoard sizeNumber of employees

44. A trade buyer differs from financial buyer because:

Seeks strategic synergy, not just ROIFocuses on passive incomeBuys for resaleAvoids integration

45. IPO lock-up periods prevent:

Early sale of shares by insiders post listingLP exitsBoard changesNew investment

46. A management buyout (MBO) occurs when:

Company’s management purchases controlling stakeVC exits via IPOLPs merge fundsAuditors acquire fund

47. Preferred returns protect:

LPs’ minimum return expectationFounders’ ownershipTax exemptionESOP pool

48. Recycling provisions allow:

Reinvesting early exits within fund lifeLP withdrawalsDebt forgivenessFounder liquidity

49. Exit multiple is defined as:

Exit value ÷ invested capitalRevenue × P/E ratioProfit ÷ costMarket cap ÷ valuation

50. A DPI of less than 1 indicates:

Fund has returned less than invested capitalOutperformanceOver-distributionBreak-even

51. GP carry is typically:

20% of profits after hurdle rate10% flat feeManagement expenseLP contribution

Try Our Pitch Deck Analysis Using AI