Question

In: Finance

Which of the following statements are true (choose all that apply): a. Vesting involves earning over...

Which of the following statements are true (choose all that apply):

a. Vesting involves earning over time, such as for employee stock

b. Term sheets are binding on the issuer

c. VCs are usually limited partners, and their investors are usually general partners

d. Warrants are like call options companies issue on their own stock

e. Strategic investors generally look for startups with synergies to their core business

Solutions

Expert Solution

a) Vesting involves earning over time, such as for employee stock. : TRUE : Vesting involves making earnings over a period of time. Employee stock options are given to employees where the employees get the stock at a lower rate or for free which has to be earned by the employee after working for a stipulated period.

b) Term sheets are binding on the issuer : FALSE : Terms sheets are non binding agreements which sets conditions and terms of any particular investment.

c) VCs are usually limited partners, and their investors are usually general partners : FALSE : In a VC the investors are the limited partners who bring in the money and the investments are managed by General Partners.

d) Warrants are like call options companies issue on their own stock : TRUE : Warrants gives the investors the right to purcase at a predetermined price and predecided date just like call options which gives right to buy a stock at a predetermined price.

e) Strategic investors generally look for startups with synergies to their core business : TRUE : Strategic investors generally fo rinvestments in the same industry they are in and they generally bring in skills on the table to help in improvingh the business.


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