Question 1

Which stage of Venture Capital financing is provided to companies that have a product prototype but haven't started commercial sales yet?

Expansion FinancingBridge FinancingSeed CapitalStart-up/Early Stage Financing

View Explanation

Seed capital is for the idea stage. Start-up financing supports product development and initial marketing. Expansion is for scaling up. Bridge is for pre-IPO.

Question 2

An "Angel Investor" is typically:

A government agency providing grants.A high-net-worth individual providing capital to startups in exchange for equity.A mutual fund scheme.A commercial bank providing loans.

View Explanation

Angel Investors invest their personal funds into early-stage companies (startups) that have high growth potential but high risk, often providing mentorship as well.

Question 3

Which of the following is the most preferred "Exit Route" for a Venture Capitalist to realize maximum returns?

Buyback by PromotersWrite-offInitial Public Offering (IPO)Sale to another VC

View Explanation

An IPO allows the VC firm to sell its shares to the public at a market valuation, often yielding significantly higher returns compared to other exit strategies like buybacks or secondary sales.

Question 4

Under SEBI AIF Regulations, "Category I AIFs" include funds that:

Invest primarily in listed equities (Private Equity).Invest in startups, SMEs, social ventures, or infrastructure (Socially/Economically desirable).Undertake complex trading strategies (Hedge Funds).Are purely debt funds.

View Explanation

Category I AIFs are those which invest in sectors which the government or regulators consider as socially or economically desirable (Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds).

Question 5

Which statement correctly distinguishes an "Angel Investor" from a "Venture Capitalist"?

Angels are regulated by RBI; VCs are not.Angels use their own personal funds; VCs manage pooled money from others.Angels invest in late-stage companies; VCs invest in early-stage.Angels always take majority stakes; VCs take minority stakes.

View Explanation

Angel investors are typically high-net-worth individuals investing their own money. Venture Capitalists are professional firms that invest money pooled from institutional investors (LPs).

Question 6

"Mezzanine Financing" in the context of Venture Capital refers to:

Loans from friends and family.Funding provided just before the IPO (Pre-IPO) to scale up.Government grants for research.Seed funding for idea generation.

View Explanation

Mezzanine Financing is a late-stage financing round, typically used by companies that are already generating revenue and looking to scale up significantly before going public (IPO). It often combines debt and equity features.

Question 7

The main difference between Venture Capital (VC) and Private Equity (PE) is:

VC invests in mature companies; PE invests in startups.VC is regulated by RBI; PE is regulated by SEBI.VC uses debt; PE uses equity.VC invests in early-stage startups; PE invests in established/mature companies.

View Explanation

Venture Capital focuses on high-risk, early-stage companies with growth potential. Private Equity typically invests larger amounts in mature companies to restructure or expand them.

Question 8

"Sweat Equity" shares are issued by a company to its directors or employees for:

Buying machinery.Providing cash capital.Providing know-how, intellectual property rights, or value addition.Repaying company loans.

View Explanation

Sweat Equity acknowledges the non-monetary contribution (hard work, skills, IP) of founders and key employees. It is issued at a discount or for consideration other than cash.

Question 9

What does the acronym "PIPE" stand for in the context of Private Equity deals?

Primary Investment in Preferred EquityPrivate Investment in Public EquityPrivate Institutional Placement ExchangePublic Investment in Private Equity

View Explanation

PIPE involves the selling of publicly traded common shares or some form of preferred stock or convertible security to private investors (usually institutional investors) at a discount to the market price.

Question 10

The term "Angel Tax" refers to income tax payable on:

Capital raised by unlisted startups via share issue in excess of Fair Market Value.Salaries of startup founders.Profits made by Angel Investors on exit.Dividends received by Angel Investors.

View Explanation

Under Section 56(2)(viib), if a startup raises capital at a valuation higher than its Fair Market Value, the excess amount is treated as income and taxed. (Note: Recent budgets have eased this for DPIIT registered startups).

Question 11

Venture Capital Funds (VCFs) in India are regulated under which SEBI regulation?

SEBI (Foreign Venture Capital Investors) Regulations, 2000SEBI (Portfolio Managers) Regulations, 2020SEBI (Alternative Investment Funds) Regulations, 2012SEBI (Mutual Funds) Regulations, 1996

View Explanation

VCFs are now classified as Category I Alternative Investment Funds (AIFs) under the SEBI (AIF) Regulations, 2012. The older VCF regulations were repealed.

Question 12

Venture Capital Funds in India are essentially closed-ended funds. What is the minimum tenure (life) of a VCF scheme as per SEBI norms?

1 Year3 Years5 Years10 Years

View Explanation

SEBI AIF Regulations stipulate that Category I and II AIFs (including VCFs) shall be close-ended and have a minimum tenure of 3 years.

Question 13

The "Startup India Seed Fund Scheme" (SISFS) provides financial assistance to startups for:

Debt repayment.IPO listing.Acquiring other companies.Proof of concept, prototype development, and product trials.

View Explanation

SISFS aims to provide capital at the earliest stage to help startups validate their ideas and reach a level where they can raise angel/VC funding.

JAIIB Quiz

Quiz Finished!