We want to say what we mean and mean what we say.
But what do some of our words mean?
The language of startup finance can be new and unfamiliar and we want to make sure we are all speaking the same language, so to speak. We aim for clarity and common understanding, so here are some definitions for the terms that may be unfamiliar. Let us know if there are other things we need to clear up !
Similar to incubator but likely to have a shorter time period of support, targeted to more mature startups, and more focused on raising financing for the startups
A situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.
A convertible debt is a type of debt security that can be converted into a predetermined amount of the underlying company’s equity at certain times during the bond’s life, usually at the discretion of the bondholder.
The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.
A person who founds or establishes business or organization.
Business incubation programs help create and grow young businesses by providing them with necessary support and financial and technical services.
A pitch typically takes the form of an entrepreneur or group of entrepreneurs presenting or describing their ideas to prospective investors.
Seed capital is the initial capital used when starting a business, often coming from the founders’ personal assets, friends or family, for covering initial operating expenses and attracting venture capitalists.
Valuation is the process of determining the current worth of an asset or a company. An analyst placing a value on a company looks at the company’s management, the composition of its capital structure, the prospect of future earnings and market value of assets.
Startup company is an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing or offering an innovative product, process or service.
An angel investor or angel (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
The use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas, and knowledge: ‘the whole idea of co-working is to bring bright, creative people together and let the ideas collide’
A form of financing that gives investors the right to preferred stock based on a specified triggering event.
A stock or any other security representing an ownership interest. This may be in a private company (not publicly traded), in which case it is called private equity.
A place where things happen faster, people are smarter and meeting investors is easier.
A venture round is a type of funding round used for venture capital financing, by which startup companies obtain investment, generally from venture capitalists and other institutional investors.
A preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders,
Capital invested in a project in which there is a substantial element of risk, typically a new or expanding business, also called risk capital.
Series A round is the name typically given to a company’s first significant round of venture capital financing.
Term sheet is a nonbinding agreement setting forth the basic terms and conditions under which an investment will be made. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is then drawn up.