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| Term | Definition |
| Angel Investor | A high-net-worth individual (wealthy individual or family) who invests in one or more early-stage startup companies; angels (a.k.a. angel investors) typically make equity (stock) investments, although variations occur. An angel can be thought of as an individual who makes very early-stage venture capital investments, often before the business has developed to the point at which institutional venture capital investors are interested in investing. Because of the extraordinary risk associated with such early-stage investments, angels will usually look for a low valuation - that is, a large ownership share given the amount of their investment. |
| Disbursement | (also referred to as a distribution) A distribution of money or capital, such as a disbursement of capital from a venture capital fund to its limited partner investors when one of the fund's portfolio companies' stock becomes liquid through a company sale or IPO. |
| Financial investor | An investor (individual or firm) who makes investment decisions primarily based on the prospect for financial gain; financial investors tend to uses financial skills and methods to increase returns and manage risks. (By contrast, strategic investors -- typically companies -- make investment decisions based on the prospect of strategic benefit for their organization, such as future access to a key new technology, product or market). |
| Financial risk | Also financing risk; one of the four categories of venture risk; the likelihood that a new venture or young business will fail to raise the capital financing (all rounds) sufficient to fund the startup to a self-financing, self-sustaining operating state. |
| Financing round | A discrete fund-raising event for a company, usually occurring over the course of several weeks to no more than a few months, during which the company raises financing with a specific series of stock or security, at a set price or valuation. Each time a company raises money, it completes a financing round. A company typically sets a goal to raise a set amount of capital in each round at a certain valuation or price per share. Once that amount of money is raised, the round is closed. In the case of preferred stock, each financing round is referred to as a series (e.g., Series A, or Series B). |
| Friends and family financing | A form of startup funding in which the entrepreneur asks friends and family members for investments in an early-stage business. This is frequently the first financing round for young companies -- often when a company is just being launched and is still far from producing a product and generating revenue -- and typically precedes financing by angels, venture capitalists and/or banks. (These types of financings are referred to by some cynics as the "friends, family and fools round," implying that very-early-stage companies will often raise money from anyone willing to give them money, sometimes including individuals lacking financial acumen or venture-investing experience.) |
| Fund | A pool of committed capital dedicated to investment in a specific asset class; also (in the verb usage), to provide capital or money to financially enable a business entity. |
| Grant | A type of funding typically provided by government agencies or non-profit foundations. Grants are typically accounted for as revenue to the receiving company or grantee.
Also, in its verb usage, to give (such as a company granting stock options to its employees). |
| Illiquid | Describing stock, typically in a private company, for which there is no market in which shareholders can achieve liquidity by trading or selling their shares. |
| Initial public offering (IPO) | The event of first listing the stock of a formerly private company on a public stock exchange (e.g., LSE, AIM, etc.) so that the company’s shares can be freely traded, bought and sold by the investing public; commonly referred to by its abbreviation, IPO. Going through the process of an IPO is often referred to as going public. |
| Investment round | A financing round from the perspective of the investor. |
| Management risk | One of the four categories of venture risk; the likelihood that a new venture will fail to meet its business and financial targets due to inadequate and/or inappropriate management, or due to poor teamwork. |
| Over-subscribed | Describing a new financing round or stock issue for which there is more demand for shares than there are shares available. |
| Portfolio company | Term used by venture capitalists and private equity firms to describe companies in which they own equity; a company in an investor’s investment portfolio. |
| Pre-money valuation | Financial value or worth established for a company immediately prior to a financing round. The pre-money valuation plus the amount in pounds raised in the financing round equals the post-money valuation. |
| Private Equity | Equity capital invested in a private company. The three primary sectors of the private equity market are traditional private equity, or leveraged buy-out (LBO), venture capital and real estate. In its most common usage, private equity refers to the field of leveraged buy-out or management buy-out (MBO) financing in which private equity firms buy private companies or buy public companies and take them private (i.e., purchase the company's publicly-traded shares so that the company's stock is no longer traded on a public exchange). The business purpose of LBO and MBO transactions is to improve the financial performance of the acquired company with the goal of providing a positive return for the private equity investors. |
| Return on cash equity (contributed or in | Indicator of profitability of a company. Net income less preferred dividends over cash equity (contributed or invested equity) equity, expressed as a percentage. Cash equity equals the sum of all cash equity invested in the company in all of its financing rounds. |
| Return on Equity | Often abbreviated ROE; indicator of profitability of a company. Net income less preferred dividends over common equity, expressed as a percentage. |
| Seed financing | Financing to fund an early-stage company, generally provided by either angel investors and/or a venture capital firm, to fund the early stages of a company’s business plan. Seed financing typically occurs before a company has commercially released its product or service, and therefore before the business is generating revenue. |
| Venture Capital | Often referred to by its acronym, VC; a general term for money that is invested in equity securities (stock) of early-stage, high-growth and/or high-potential companies that are privatelyheld (i.e., their stock is not publicly traded on an exchange).Venture capital is a high-risk asset class, and consequently venture capital investors seek high rates of return on investment. Sources of venture capital include friends and family, angel investors, venture capital firms, corporate venture capitalgroups, as well as corporate strategic investors. |
| Venture capital fund | Also VC fund or simply VC; a closed-end, private pool of capital dedicated to investments in the equity securities of privately-held, early-stage or high-growth companies. A venture capital firm (the “general partner”) raises a VC fund from institutional investors and/or high-net-worth individual investors (so-called “limited partners”). A successful VC firm will typically raise, manage and invest multiple VC funds over time. |
| Venture capitalist | Often referred to as by its acronym, VC; institutional investment firm, or an investment professional working for that firm, that specializes in making equity (stock) investments in privately-held, early-stage or high-growth companies. venture communication pyramid TM - The venture communication pyramidTM is a tool designed to help startups better communicate their business message to investors, customers, partners and employees. By providing a simple, coherent communications model with cascading levels of detail, the Pyramid helps simplify and improve the impact of companies’ marketing and fund-raising efforts. At the top of the pyramid (least detail) is the company’s brand, and at the bottom is the company’s domain knowledge (greatest level of detail). Each cascading level of detail builds logically on the one before and enables the company to present its messages clearly, compellingly, concisely and consistently. Greater Detail Less Detail venture investor - an individual or institution who invests in early-stage companies; typically, people or organizations who purchase the privately-held, illiquid equity (stock) of startup companies. Venture investors may include angels (high-net-worth individuals), private venture capital firms, or corporate venture capital groups. |
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