venture capital glossary
The amount of committed capital that has been transferred from the limited partner to the general partner. An analysis of a target company that accounts for all one-off or non-recurring items to determine how working capital normally operates. The investment gains achieved by increasing the sales multiple relative to the original investment multiple. For example, buying a company at 4x EBITDA and selling it at 7x EBITDA. A financial institution that serves as an agent or underwriter for security issuances. Some investment banks also act as brokers/dealers and provide advisory services for mergers, acquisitions, restructurings and other transactions.

Startup Glossary

The act outlaws misrepresentation, manipulation, and other abusive practices in the issuance of securities. It provides for full disclosure of pertinent information relating to the new issue and also contains antifraud provisions. A credit limit at a specified interest rate that is readily available to a company for immediate borrowing. Public securities that are not freely tradable due to SEC regulations. Technological innovations or processes that are unique and legally owned by a company.

  • Similar to share options and often offered to investors as a bonus for cash investment or to service providers in exchange for fees.
  • Private Placement – The sale of shares, bonds or other investments not to the public, sometimes directly to institutional or accredited investors.
  • Example — capital invested for growth funds has a higher exit velocity than capital invested by accelerators in startups because the ventures are less mature and have a longer time to exit.
  • In venture it refers to the speed between investment and exit, immediately when the investment is made to the liquidity event that allows the investor to cash out.
  • Warrants – Securities that give holders the right, but not the obligation, to subscribe for new shares at a price for a given period of time.
  • A private placement does not require the production of a detailed prospectus, as a public offering does.

In rare cases rounds can go as far as Series F, as was the case with A stock that carries a fixed dividend that is to be paid out before dividends carried by common stock. An agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being shared with outside parties. The process of dissolving a company by selling off all of its assets . A reference to the beginning of a venture, or the earliest point of a startup. A seasoned entrepreneur who is employed by a Venture Capital Firm to help the firm vet potential investments and mentor the firm’s portfolio companies.

Affinity Ventures

venture capital glossary
Debt that can be converted to equity when certain conditions are met, like a specific valuation or date. When a limited partner invests directly in a company alongside a general partner, instead of through a general partner.
Licensed Intellectual Property – Means any Intellectual Property licensed to the company by a third party. Key Men – The term given to specific employees within a company whose value has been identified as being material to the company. Key Men are often the subject of specific company insurance policies and more sophisticated service contract terms. Intellectual venture capital glossary Property – Right or non-physical resource that is presumed to represent an advantage to the firm’s position in the marketplace, including patents, trademarks, trade secrets, copyrights and licenses. FMV – An acceptable selling price to an independent third party. What a willing buyer would pay a willing seller on a transaction negotiated at arm’s length.
Clawback– A clawback provision ensures that a general partner does not receive more than its agreed percentage ofcarried interestover the life of the fund. So, for example, if a general partner receives 21 percent of the partnership’s profits instead of the agreed 20 per cent, limited partners can claw back the extra one per cent. They generally have a fixed interest rate and maturity value, so they’re very low risk – much less risky than buying equity – but their returns are accordingly low. Btcoin TOPS 34000$ This word is used to describe businesses that are in trouble and whose management will cause the business to become profitable so they are no longer in trouble. A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. The Term Sheet is a template that is used to develop more detailed legal documents. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.

Limited Partnership Agreement (lpa)

A defined share of equity (usually around 10%) set aside in the cap table to incentivise future employees. If you associate dilution with chemistry class, cliffs with mountain walks, pitching with baseball and liquidation with your morning smoothie – you may need venture capital glossary some help speaking the language of your investors. The customers, suppliers, inventories and other assets and liabilities required for day-to-day operations of a target company. The debt that takes priority over other securities in the event of liquidation.
Mezzanine Debt – debt that incorporates equity-based options with lower-priority debts . Liquidation – selling off all of a portfolio company’s assets; Binance blocks Users compare to a liquidity event. First-Mover Advantage – FMA – the advantage of getting into a market first and getting a big share of the customers.
The network of investors that are also participating in a given round. The shape of the Internal Rate of Return Btc to USD Bonus curve over the course of the fund’s lifecycle, encompassing both the investment period and the harvest period.
venture capital glossary
A contract that requires one party to transfer the cash proceeds from a liquidation of equity to another party in exchange for cash received prior to the liquidation event. Clause in the LPA that enables the LP to break the agreement if one of the major GPs in the fund leave. If the dividend is not declared during the period venture capital glossary stated in the corporate charter, the dividend accrues and is payable in a later period. If a dividend right isn’t cumulative, the dividend would be lost forever if it’s not declared during the period stated in the corporate charter. Accrued but unpaid dividends are sometimes convertible into shares of Common Stock.
Selling an interest in your business to an outside party to raise money. The practice of a large company taking a minority equity position in a smaller company in a related field. Finally, there is one of the most important pieces of this game, the investors. Among them there are several categories that you should know, to take into account the function and characteristics of each one. First, for a company to raise capital, foundation rounds are necessary. The basic ones that need to be taken into account for these processes are the following. They also have sample SAFE agreements and a very detailed “SAFE Primer” that maps out multiple investment scenarios for SAFE holders.
venture capital glossary

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Lawyers who use the software pay to use the software services and to advertise their legal services and may also receive credit for giving help pro bono or to clients of moderate means. Use of the software services is subject to our Terms of Use. Termination Event – Means any one of the events listed in an agreement, which shall terminate the agreement immediately. Mergers and Acquisitions (M&A) – Transactions as part of corporate strategies involving the buying, selling, merging and dividing of companies.

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