January 26, 2021

Glossary Of Investment Terms

venture capital glossary

As used in investment term sheets, any investor who puts in more than a defined amount into a given round, and is therefore entitled to specific information and/or voting rights. A period of time during which certain shareholders are not allowed to sell their stock. A specific classification of worker that is not an employee of the company. A program or shared office center designed to support the successful development of companies venture capital glossary by offering cost effective resources and support. A corporation is divided into shares, which represent a slice of both the company itself and the value the company creates. These shares, once distributed, represent the company ownership . The process of investigation whereby both an investor and an entrepreneur have the opportunity to analyze and assess each other for the potential of an investment opportunity and partnership.

To continuously improve and update a product in the development cycle. Startups tend to aim for rapid iteration, with development priorities based on feedback, and judgements of importance, resources and opportunity cost. venture capital glossary Each cycle of feature prioritisation, development, release and feedback is an iteration. A person in a large organisation who uses entrepreneurial skills to promote innovation in product development and marketing.

venture capital glossary

In this role, he focuses his time on strategic planning and general oversight in the new and growing digital marketplace. With over 8 years of compliance, legal, investing, and sales experience in regulated markets, Jordan understands the need for a single coherent voice in the crowdfunding and blockchain industries. Another word for a group of people, but favoured by the tech industry. Other words for groups include “circles”, for intimate closed-room communities, venture capital glossary or “cohorts”, for a group of companies or company founders who take part of the same accelerator or growth programme intake. They help the team to reach consensus for what can be achieved during a specific period of time, and solve challenges and blockers impeding progress. A moat or economic moat is any competitive advantage that a company has over its competitors that makes the business “defensible”, i.e. an advantage that cannot be easily replicated by others.

This could be intellectual property, or even a strong community built around your brand. Often investors will have payout priority over other shareholders through liquidation preference clauses.

The Startup Glossary: Bootstrapping And Fundraising

Angel investing has grown over the past few decades as the lure of profitability has allowed it to become a primary source of funding for many startups. This, in turn, has fostered innovation which translates into economic growth. Angel investors are normally individuals who have gained “accredited investor” status but this isn’t a prerequisite. Angel investing is often the primary source of funding for many startups who find it more appealing than other, more predatory, forms of funding. The period between a startup’s initial funding and the end of its runway.

Deal Flow- The rate at which investment opportunities are introduced to a funding institution. Capped Notes- This refers to the practice during investment rounds where a cap is placed venture capital glossary on a company’s valuation. Capitalization Table- A table displaying the total amount of securities issued by a company, along with details of the ownership of these securities.

Invest In Venture Capital With A Self

venture capital glossary

By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Convertible Note A form of debt that may convert into equity at some point in the future. If someone’s building a Startup or ramping up on the Investment and business world, chances are they are always out of time. Here we collate a Startup Vocabulary, Venture Capital Glossary, and Business Jargon to get you up to speed about the ecosystem.

Management Fee

Used when accounting for time and assessing how to resource a project with people, BAU time will include any regular meetings, un-project related admin, line management and other responsibilities. The process of acquiring a company for the purpose of hiring the team behind it. Key personnel may be tied in for a period of time after acquisition. Voting Right- A stockholder’s right to vote venture capital glossary on matters of corporate management. Vesting- The act of a company granting stock options to an employee. Tag-Along Rights- Agreed stipulation stating that if a founder decides to sell their shares to a buyer, an existing investor can offer their shares to the buyer for the same amount. Strategic Investors- Investors who add value to their investments via industry ties or experience.

A process run by the vendors of a company, or by an advisor on their behalf, to create optimal shareholder value by marketing the company widely. Such processes can have many interested parties and multiple rounds of bidding. An agreement that outlines the major aspects of an investment to be made in a company. A term sheet sets the groundwork for building out detailed legal documents.

Note that this term does not automatically mean successful businesses; serial entrepreneurs may have a history of failed or not-quite-successful businesses. How long a startup can survive before it goes broke; that is, the amount of cash in the bank divided by the burn rate. The amount of money or net benefit generated by an investment or spend. Companies that are freely traded on the public stock exchanges such as NASDAQ and the New York Stock Exchange. A type of equity ownership of a company that has both a fixed value and priority in liquidation sequence. The value of a company immediately prior to receiving an investment, used to determine what percentage of a company’s ownership will be purchased in exchange for a specified investment amount.

  • Redemption provisions allow investors to require the company to repurchase their preferred stock under certain circumstances, typically for the price originally paid.
  • A formal written offer to sell securities that provides an investor with the necessary information to make an informed decision.
  • A prospectus must be filed with the SEC and be given to all potential investors.
  • A prospectus explains a proposed or existing business enterprise and must disclose any material risks and information according to the securities laws.
  • Redemption rights usually cannot be exercised unless the holders of at least a majority of the preferred stock so request and usually cannot be exercised for four to five years after the financing.
  • In certain circumstances, redemption provisions may provide for a right of exercise more quickly or for a repurchase at more than the original purchase price.

The entrepreneur rents the money for a specific period of time and promises to pay interest on the money for as long as the loan is outstanding. Allows you to conduct business in a name other than your own (or your company’s) legal name, and allows others to identify the person or entity behind the business name you’ve registered. An investment venture capital glossary from one corporation in another, typically at an early stage for strategic reasons. Reconciles the beginning cash balance to the ending cash balance by illustrating the sources and uses of cash from operations, investing, and financing activities. A record of all securities and their shareholders commonly displayed in a fully diluted view.

Investors Who Invest In Investors

The process of contextualizing each transaction in order to present an accurate picture of the company’s financial performance. Accountants go beyond recording a transaction; they interpret how each transaction impacts the financial status of the business. Brian is the author of several articles on capital raising and investor liquidity, and has several clients in the peer-to-peer lending space. Brian is the author of “The Trouble with Crowdfunding” published in Forbes, as well as the Forbes article announcing the SEC’s crowdfunding rules proposal. Prior to joining Pepper, Brian was Head of Equity Capital Markets and Syndicate Compliance at Barclays and was Senior Vice President and Assistant General Counsel for Citigroup Global Markets Inc.

How To Join An Angel Investor Group

An individual providing guidance, connections, advice and support to the entrepreneur, often in return for a small equity stake. One company’s acquisition of another for the primary purpose of hiring its employees, rather than for the intrinsic value of the business itself.