Venture Capital Glossary Of Terminology

venture capital glossary

Private Equity And Venture Capital Glossary

Seed capital is the money raised to begin developing a business or a new product. It might cover only the essentials such as a business plan and operating expenses. The term “angel” came from the Broadway theater, when wealthy individuals gave money to propel theatrical productions. The term “angel investor” was first used by the University of New Hampshire’s William Wetzel, founder venture capital glossary of the Center for Venture Research. A concept applicable to both stock and options, which prevents the recipient from owning all stock or options outright and instead earn them over time. For stock, vesting typically refers to stock that’s earned over time and, therefore, not re-purchasable by the company. For options, vesting indicates the number of options that become exercisable.

  • Shares of the same series all have the same rights, but shares of different series can have very different rights.
  • Unlike open-end mutual funds, closed-end funds do not stand ready to issue and redeem shares on a continuous basis.
  • After the subscription period is closed, the shares are traded on an exchange between investors, like a regular stock.
  • The market price of a closed-end fund fluctuates in response to investor demand as well as changes in the values of its holdings or its Net Asset Value.
  • When a company raises venture capital in a preferred stock financing, it typically designates the shares of preferred stock sold in that financing with a letter.
  • The shares sold in the first financing are usually designated “Series A”, the second “Series B”, the third “Series C” and so forth.

An initial state of a company’s growth characterized by a founding management team, business plan development, prototype development, and beta testing. Redeemable preferred stock, also known as exploding preferred, at the holder’s option after five years, which in turn gives the holders leverage to induce the company to arrange a liquidity event. The threat of creditor status can move the founders off the dime if a liquidity event is not occurring with sufficient rapidity. Shares of a firm that encompass preferential rights over ordinary common shares, such as the first right to dividends and any capital payments. A situation when a securities underwriter allows existing holdings of shares in a corporation to be sold in combination with an offering of new public shares.

venture capital glossary

Stock

The report must be filed within 90 days after the end of the company’s fiscal year. the sale or exchange of a company ownership for cash, debt, or equity. The process of spreading investments among various different types of securities and various companies in different fields. A stock having a provision that if one or more dividend payments are omitted, the omitted dividends must be paid before dividends may be paid on the company’s common stock. Venture capital provided by [in-house investment funds of] large corporations to further their own strategic interests.

Bull Market

An offering in which the investment banker agrees to distribute as much of the offering as possible, and return any unsold shares to the issuer. performance goals against which startups are measured if they want more investment money. Usually venture capital glossary an outsider hired by a syndicate of angel investors to perform due diligence on investment opportunities and coordinate allotment of investment duties among members. Archangels typically have no financial commitment to the syndicate.

The defined-contribution plan places restrictions that controls when and how each employee can withdraw these funds without penalties. The State Optional Retirement Program is a defined contribution retirement plan (401-k) PEBA administers as another option instead of the defined contribution plan. The RSIC does venture capital glossary not manage the assets of the defined contribution plan. A financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities.

The period begins on the date of purchase and ends on the date of sale, and determines whether a gain or loss is considered short-term or long-term, for capital gains tax purposes. The general shape and form of a chart showing revenue, customers, cash, or some other financial venture capital glossary or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts to impress potential investors. Receipts for shares in a foreign based corporation traded in capital markets around the world.

Glossary Of Investment Terms

The portion of any gains realized by the fund to which the fund managers are entitled, generally without having to contribute capital to the fund. Carried interest payments are customary in the venture capital industry, in order to create a significant economic incentive for venture capital fund managers to achieve capital gains. A venture capital firm owned by a larger financial institution, such as a bank. purchasing a company or a controlling interest of a corporation’s shares, product line, or some business. Means of financing a small firm by employing highly creative ways of using and acquiring resources without raising equity from traditional sources or borrowing money from the bank.

venture capital glossary

Less than 10 percent of all start-ups annually, these entrepreneurial firms are the backbone of the U.S. economy and attractive to business angel investors. The persons who oversee the activities of a venture capital fund. Compensation for the management of a venture fund’s activities, paid from the fund to the general partner or investment advisor.

As a result, VC investing is often high risk but also high reward. Many of the best well-known growth companies of today were financed with VC seed money, including Uber, Stripe and Airbnb. A management fee is charged by an investment manager for managing an investment fund. This is the manager’s compensation for their expertise selecting investment products and managing the portfolio. venture capital glossary Securities representing debt obligations and usually having fixed interest payments and maturities. Different types of fixed income securities include government and corporate bonds, mortgage-backed securities, asset-backed securities, and may also include money market instruments. A security whose price is dependent on, or derived from, one or more underlying assets.

Angel Investing Vs Crowdfunding: How To Raise Money For Your Startup?

corporate VCs are specialized subsidiaries within corporations with a mission to spread their cash around. Some investments are strategic (“Hey, we do similar things, let’s work together…”) or purely financial (“That idea isn’t really in our wheelhouse, venture capital glossary but it looks like it’s going to make money, so we want in”), or a blend. Startups can also profit from the corporation’s experience and other resources . In some cases, a holding company will be created to acquire the new companies.