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Entrepreneur Dictionary for Startups FundingSage

Home (http://fundingsage.com) / Entrepreneur Dictionary for Startups FundingSage

Here is a glossary of terms commonly used by entrepreneurs, investors, accelerators, and

others who interactwith startup ventures and startup nancing:

A (/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=A) | B
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=B) | C
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=C) | D
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=D) | E
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=E) | F
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=F) | G
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=G) | H
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=H) | I
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=I) | J
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=J) | K
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=K) | L
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=L) | M
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=M) | N
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=N) | O
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=O) | P
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=P) | Q
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=Q) | R
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=R) | S
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=S) | T
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=T) | U
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=U) | V
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=V) | W
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=W) | Z
(/Entrepreneur-Dictionary-For-Startups/?Explanatory-Dictionary-Letter=Z)

A Round Financing (http://fundingsage.com/?post_type=explandict&p=368)- "A" Round

Financing - The rst major round of business nancing by private equity investors or venture
capitalists. In private equity investing, an A round, or Series A nancing, is usually in the
form of convertible preferred stock. An A round by external investors generally takes place
after the founders have used their seed money to provide a proof of concept demonstrating
that their business concept is a viable and eventually protableone. 1
Accelerator (http://fundingsage.com/?post_type=explandict&p=485)- In an accelerator, a
Seed investment is made in return for equity and usually between $15K - $50K. Startups are
admitted in classes and work in groups. They are generally given a deadline to complete
intensive training and iteration (typically 1 week to 6 months). Startups end an accelerator
program with a Demo Day in which they pitch to investors.2

Accredited Investor (http://fundingsage.com/?post_type=explandict&p=370)- An individual

with $1,000,000 or more in net worth (assets - liabilities), excluding their primary residence,
or $200,000 in annual income, or $300,000 of income if earned jointly with their spouse, for
the previous two years with a reasonable expectation of continued income for the following
year. Note that separate denitions apply for legal entities.6
- Synonyms: Accredited (Investor)

Accrued Interest (http://fundingsage.com/?post_type=explandict&p=369)- The interest due

on preferred stock or a bond since the last interest payment was made.3
- Synonyms: Accrued Interest

Acqui-hire (http://fundingsage.com/?post_type=explandict&p=2427)- One company's

acquisition of another for the primary purpose of hiring its employees, rather than for the
intrinsic value of the business itself.7

Acquisition (http://fundingsage.com/?post_type=explandict&p=487)- A process under

which a company acquires the controlling interest of another company.6

ACRS (http://fundingsage.com/?post_type=explandict&p=488)- Accelerated Cost Recovery

System. The IRS-approved method of calculating depreciation expense for tax purposes. Also
known as Accelerated Depreciation.3
- Synonyms: Accelerated Cost Recovery System

Add-on Service (http://fundingsage.com/?post_type=explandict&p=1852)- Add-on Services

are the services provided by a venture capitalist that are not monetary in nature, such as
helping to assemble a management team and helping to prepare the company for an IPO.9

ADR (http://fundingsage.com/?post_type=explandict&p=489)- American Depositary

Receipt (ADRs). A security issued by a U.S. bank in place of the foreign shares held in trust by
that bank, thereby facilitating the trading of foreign shares in U.S. markets.3
- Synonyms: American Depositary Receipt
Adventure Capitalist (http://fundingsage.com/?post_type=explandict&p=1853)- An
adventure capitalist is an entrepreneur who helps other entrepreneurs nancially and often
plays an active role in the company's operations such as by occupying a seat on the board of
directors, etc.9

Advisor (http://fundingsage.com/?post_type=explandict&p=3036)- An individual providing

business connections, guidance, advice and support to the entrepreneur as they develop and
grow their startup.6

Advisory Board (http://fundingsage.com/?post_type=explandict&p=490)- A group of

external advisors to a private equity group or portfolio company. Advice provided varies from
overall strategy to portfolio valuation. Less formal than a Board of Directors.3

Allocation (http://fundingsage.com/?post_type=explandict&p=492)- The amount of

securities assigned to an investor, broker, or underwriter in an oering. An allocation can be
equal to or less than the amount indicated by the investor during the subscription process,
depending on market demand for the securities.3

Alpha Test (http://fundingsage.com/?post_type=explandict&p=1956)- Internal testing, of a

pre-production model, typically on a controlled basis, with the objective of identifying
functional deciencies and design aws.6

Amortization (http://fundingsage.com/?post_type=explandict&p=493)- An accounting

procedure that gradually reduces the book value of an intangible asset through periodic
charges to income.3

AMT (http://fundingsage.com/?post_type=explandict&p=494)- Alternative Minimum Tax. A

tax designed to prevent wealthy investors from using tax shelters to avoid income tax. The
calculation of the AMT takes into account tax-preference items.3
- Synonyms: Alternative Minimum Tax

Angel Capital Association (http://fundingsage.com/?post_type=explandict&p=2343)- A

North American association of angel groups, accredited investors and family oces which
promotes public policies for investors and startups. The association provides investors access
to trending ideas and professional knowledge and entrepreneurs insight into how angels think.
See www.angelcapitalassociation.org (http://www.angelcapitalassociation.org) for more

6
information.6
- Synonyms: ACA

Angel Financing (http://fundingsage.com/?post_type=explandict&p=496)- Seed capital

raised from independently wealthy investors, for startup companies.6

Angel Fund (http://fundingsage.com/?post_type=explandict&p=497)- A formal or informal

assemblage of active angel investors who cooperate in some part of the investment process.
Key characteristics of an angel group are: control by member angels (who manage the entity
or have control over the entitys managers), and collaboration by member angels in the
investment process.3

Angel Group (http://fundingsage.com/?post_type=explandict&p=2405)- An organization

composed of accredited investors which serves as a platform for them to coordinate
investments in seed and early stage startup companies. The group members typically work
together consolidating their resources, expertise and capital through informal networks or
formal funds.6

Angel Investor (http://fundingsage.com/?post_type=explandict&p=372)- Once, an unrelated

individual investing monies in a business venture, often later than founders, friends and
family (the 3Fs), but before larger corporate investors such as venture capitalists (VCs).
The term angel arose in the entertainment industry, where investors would bankroll a
production for a share of the prots. Now, with wealthier individuals able to invest signicant
funds throughout the development of a company (so-called super-angels), and venture
capitalists sometimes investing alongside and on the same terms as angels, a more modern
denition is that angels write checks with their own money, while VCs write checks with
other peoples money (venture capitalists typically raise funds from investors called limited
partners who do not actively participate in the funds investment decisions and operations,
whereas the VCs act as the general partners making the investment decisions and
overseeing the invested companies.)

Angel Round (http://fundingsage.com/?post_type=explandict&p=2444)- A round of

investment into a startup company from angel investors not previously aliated with the
founder. Typically the rst money invested in a company after the founders own money, and
the founders friends and family.7

Annex Fund (http://fundingsage.com/?post_type=explandict&p=1854)- Annex funds are

side funds that can provide an extra pool of money to supplement the original VC Funds.9
Annual Recurring Revenue (http://fundingsage.com/?post_type=explandict&p=2655)- The
recurring subscription-based revenue which software as a service / platform as a service,
(SaaS / PaaS) based companies receive annually; also known as the run rate.6
- Synonyms: ARR

Anti Dilution Provisions (http://fundingsage.com/?post_type=explandict&p=1855)- Anti

Dilution Provisions are contractual measures that allow investors to keep a constant share of a
rm's equity in light of subsequent equity issues. These may give investors preemptive rights
to purchase new stock at the oering price. Examples include Broad-Based Weighted Average
Ratchet, Narrow-Based Weighted Average Ratchet, and Full Ratchet Anti Dilution.9

Articles of Incorporation (http://fundingsage.com/?post_type=explandict&p=1278)-

Documentation led with the Secretary of State or Company Registrar which acts as a charter
to document the establishment and existence of a corporation.6
- Synonyms: Certicate of Incorporation, Corporate Charter

Articles of Organization (http://fundingsage.com/?post_type=explandict&p=1280)-

Documentation led with the Secretary of State which acts as a charter to document the
establishment and existence of a Limited Liability Company.6

Assets (http://fundingsage.com/?post_type=explandict&p=498)- This word refers to all

nancial resources that a corporation owns. Current assets can be any form of currency,
including traded inventory, investments, and checks. Fixed assets (capital assets) consist of
material goods and equipment of a company, such as the land by which the company sits on,
the company building, and technological machinery. Intangible assets mainly comprise of
intellectual property protection, copyrights, patents, etc.4

Balance Sheet (http://fundingsage.com/?post_type=explandict&p=499)- A condensed

nancial statement showing the nature and amount of a companys assets, liabilities, and
capital on a given date.3

Bankruptcy (http://fundingsage.com/?post_type=explandict&p=508)- An inability to pay

debts. Chapter 11 of the bankruptcy code deals with reorganization, which allows the debtor to
remain in business and negotiate for a restructuring of debt.3

Bear Hug (http://fundingsage.com/?post_type=explandict&p=501)- An oer made directly

to the Board of Directors of a target company. Usually made to increase the pressure on the

3
target with the threat that a tender oer may follow.3

beBee (http://fundingsage.com/?post_type=explandict&p=2485)- A business oriented social

media platform which can be found online at www.bebee.com (https://www.bebee.com/).6

Benchmarks (http://fundingsage.com/?post_type=explandict&p=502)- Benchmarks are

performance goals against which a company's success is measured. Benchmarks are often
used by investors to help determine whether a company should receive additional funding or
whether management should receive extra stock.5

Best Eorts (http://fundingsage.com/?post_type=explandict&p=503)- An oering in which

the investment banker agrees to distribute as much of the oering as possible and return any
unsold shares to the issuer.3

BHAG (http://fundingsage.com/?post_type=explandict&p=2386)- Big Hairy Audacious Goal,

the giant sweeping vision of a startup founder to change the world.7
- Synonyms: Big Hairy Audacious Goal

Big Hairy Audacious Goal (http://fundingsage.com/?post_type=explandict&p=2387)- The

giant sweeping vision of a startup founder to change the world.7

Black Swan (http://fundingsage.com/?post_type=explandict&p=2377)- An unpredictable

event typically with extreme consequences.7

Blind Pool (http://fundingsage.com/?post_type=explandict&p=1856)- A blind pool is a form

of limited partnership which doesn't specify what investment opportunities the general
partner plans to pursue.9

Blue Sky Laws (http://fundingsage.com/?post_type=explandict&p=504)- A common term

that refers to laws passed by various states to protect the public against securities fraud. The
term originated when a judge ruled that a stock had as much value as a patch of blue sky.3

Board of Directors (http://fundingsage.com/?post_type=explandict&p=2445)- A group of

people elected by the company's shareholders (often to the terms of the negotiated
Shareholders Agreement) that makes decisions on major company issues, including
hiring/ring the Chief Executive Ocer.7
Bond (http://fundingsage.com/?post_type=explandict&p=506)- Specic type of debt
instrument most commonly sold by government entities.3

Book Value (http://fundingsage.com/?post_type=explandict&p=505)- Book value of a stock

is determined from a companys balance sheet by adding all current and xed assets and then
deducting all debts, other liabilities, and the liquidation price of any preferred issues. The sum
arrived at is divided by the number of common shares outstanding, and the result is book
value per common share.3

Bootstrapping (http://fundingsage.com/?post_type=explandict&p=2385)- Funding a

company only by reinvesting initial prots; from "pulling yourself up by your own
bootstraps."7

Bridge Financing (http://fundingsage.com/?post_type=explandict&p=510)- A limited

amount of equity or short-term debt nancing typically raised within 6-18 months of an
anticipated public oering or private placement meant to bridge a company to the next
round of nancing.3

Bridge Loan (http://fundingsage.com/?post_type=explandict&p=509)- A temporary short-

term loan that is obtained for use for an interim period, typically one year, until the borrower
can obtain a more comprehensive, longer-term nancing package.6

Broker-Dealer (http://fundingsage.com/?post_type=explandict&p=511)- In reference to

Crowdfunding, one of the two types of "Intermediary" (Portals being the other)
authorized by the JOBS Act to handle the sale of crowdfunded securities (i.e. equity or debt
instruments) by an issuing company. More generally, a governmentally regulated
component of the U.S. nancial system, either a natural person or an organization trading
securities on its own account or on behalf of customers. Broker-dealers are regulated by the
federal Securities and Exchange Commission (SEC), the Financial Industry Regulatory
Authority (FINRA)(a Self-Regulatory Organization, or SRO), and sometimes the various
states.1

Brokers (http://fundingsage.com/?post_type=explandict&p=2532)- Licensed individuals or

rms, which charge a fee, to raise capital for startup companies from private investors and
funds.6
Burn Out (http://fundingsage.com/?post_type=explandict&p=512)- AKA. Cram Down -
Extraordinary dilution, by reason of a round of nancing, of a non-participating investors
percentage ownership in the issuer.3

Burn Rate (http://fundingsage.com/?post_type=explandict&p=514)- The rate at which a

company expends net cash over a certain period, usually a month.3

Business Development Company (http://fundingsage.com/?post_type=explandict&p=515)-

(BDC)A vehicle established by Congress to allow smaller, retail investors to participate in and
benet from investing in small private businesses as well as the revitalization of larger private
companies.3
- Synonyms: BDC

Business Judgment Rule (http://fundingsage.com/?post_type=explandict&p=516)- The legal

principle that assumes the board of directors is acting in the best interests of the shareholders
unless it can be clearly established that it is not. If the board was found to violate the business
judgment rule, it would be in violation of its duciary duties to the shareholders.3

Business Model Canvas (http://fundingsage.com/?post_type=explandict&p=1241)- Based on

nine building blocks, the Business Model Canvas is an entrepreneurial tool that enables
entrepreneurs to design, develop, articulate, challenge, invent and pivot their strategic
business model. The building blocks referenced above include customer segments, value
proposition, channels, customer relations, revenue streams, key resources, key activities, key
partnerships, and cost structures.6
- Synonyms: Business Canvas

Business Plan (http://fundingsage.com/?post_type=explandict&p=517)- A document

utilized by management and relied upon heavily by some investors, that entrepreneurs use in
detailing their business concept as well as their companys overall strategic and nancial
objectives. In recent years the Business Model Canvas has become increasingly popular with
both entrepreneurs and managers as a guide or framework for the startup's eorts, and in
many cases is now utilized in lieu of the Business Plan by these parties.6

Business Plan Competition (http://fundingsage.com/?post_type=explandict&p=2446)- A

program historically run by a university or other not-for-prot organization to encourage
students to develop plans for a new business. Increasingly a showcase competition for
existing startups seeking nancing from angels and other investors.7
Buyout (http://fundingsage.com/?post_type=explandict&p=1857)- A buyout is dened as
the purchase of a company or a controlling interest of a corporation's shares, product line or
business. A leveraged buyout is accomplished with borrowed money or by issuing more stock.9

C-Corporation (http://fundingsage.com/?post_type=explandict&p=2534)- A legal structure,

preferred by investors and many entrepreneurs of startup companies seeking funding. Like
Limited Liability Companies, (LLCs) and S-Corporations, C-Corporations protect shareholders
from liability in the event of a legal issue or bankruptcy. Unlike LLCs and S-Corporations, C-
Corporations may not make an election to pass corporate income, deductions and losses to
shareholders for federal tax purposes. However, C-Corporations have no limits on the number
of shareholders which may own their shares. Entrepreneurs and investors typically prefer that
their startup's C-Corporation be registered in Delaware. However, Nevada and Wyoming are
becoming increasingly popular. Additionally, many entrepreneurs chose to register as a C-
corporation in their own state.6

CAGR (http://fundingsage.com/?post_type=explandict&p=518)- Compound Annual Growth

Rate. The year-over-year growth rate applied to an investment or other aspect of a rm using
a base amount.3

Call (http://fundingsage.com/?post_type=explandict&p=2512)- A contractual

term/condition which provides the company the option to compel the investor to sell their
shares.6

Call Option (http://fundingsage.com/?post_type=explandict&p=519)- The right to buy a

security at a given price (or range) within a specic time period.3

Cap (http://fundingsage.com/?post_type=explandict&p=2376)- The maximum company

valuation at which a convertible note will convert into a company's stock.7

Capital (http://fundingsage.com/?post_type=explandict&p=520)- Financial capital is a term

that can refer to the money exchanged between entrepreneurs and investors during a business
deal. Entrepreneurs need to raise capital for their startups while investors can provide them
with the needed capital (or funding). Financial capital usually comes with interest, and new
business owners can use their nancial capital in purchasing real capital (or machinery or
equipment) for their new business.4
Capital Expenditures (http://fundingsage.com/?post_type=explandict&p=1858)- Capital
Expenditures are money spent by a company to add or expand property, plant, and equipment
assets, with the expectation that they will benet the company over a long period of time
(more than one year).9
- Synonyms: Capital Outlay

Capital Gains (http://fundingsage.com/?post_type=explandict&p=522)-

The dierence between an assets purchase price and selling price, when the selling price is
greater. Long-term capital gains (on assets held for a year or longer) are taxed at a lower
rate than ordinary income.3
Capital Gain is the gain to investor from selling a stock, bond or mutual fund at a higher
price than the purchase price. The capital gain is usually the amount realized (net sales
price) less your investment (adjusted tax basis) in the property. A capital gain may be short-
term (one year or less) or long-term (more than one year) and must be claimed on income
taxes.5

Capital Under Management (http://fundingsage.com/?post_type=explandict&p=521)- The

amount of capital available to a angel or VC Fund's management team for startup venture
investments.6
- Synonyms: Assets Under Management

Capitalization Table (http://fundingsage.com/?post_type=explandict&p=523)- A table

depicting the quantity of shares or unit ownership which is held by each investor in a
corporation or LLC, typically including founders' equity, investor equity, and advisor /
employee Stock Option Pools.6

Capitalize (http://fundingsage.com/?post_type=explandict&p=524)- To record an outlay as

an asset (as opposed to an expense), which is subject to depreciation or amortization.3

Carried Interest (http://fundingsage.com/?post_type=explandict&p=525)- or Carry3The

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 signicant economic incentive for venture
capital fund managers to achieve capital gains.3

Cash Position (http://fundingsage.com/?post_type=explandict&p=526)- The amount of

cash available to a company at a given point in time.3
Chapter 11 (http://fundingsage.com/?post_type=explandict&p=527)- The part of the
Bankruptcy Code that provides for reorganization of a bankrupt companys assets.3

Chapter 7 (http://fundingsage.com/?post_type=explandict&p=529)- The part of the

Bankruptcy Code that provides for liquidation of a companys assets.3

Claim Dilution (http://fundingsage.com/?post_type=explandict&p=530)- A reduction in the

likelihood that one or more of the rms claimants will be fully repaid, including time value of
money considerations.3

Clawback (http://fundingsage.com/?post_type=explandict&p=531)- A clawback obligation

represents the general partners promise that, over the life of the fund, the managers will not
receive a greater share of the funds distributions than they bargained for. Generally, this
means that the general partner may not keep distributions representing more than a specied
percentage (e.g., 20%) of the funds cumulative prots, if any. When triggered, the clawback
will require that the general partner return to the funds limited partners an amount equal to
what is determined to be excess distributions.3

Closed-end Fund (http://fundingsage.com/?post_type=explandict&p=532)- A type of fund

that has a xed number of shares outstanding, which are oered during an initial subscription
period, similar to an initial public oering. 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 uctuates in response to investor demand as well as changes in the values of
its holdings or its Net Asset Value. Unlike open-end mutual funds, closed-end funds do not
stand ready to issue and redeem shares on a continuous basis.3

Closing (http://fundingsage.com/?post_type=explandict&p=533)-
An investment event occurring after the required legal documents are implemented between
the investor and a company and after the capital is transferred in exchange for company
ownership or debt obligation.3
This is the transaction that occurs after entrepreneurs and investors legally exchange all
required legal documentation and capital that is needed in their business deal. When an
investor closes in on a deal, they have already negotiated with the entrepreneur the
details encompassing corporate ownership and monetary obligation.4
Closing is the nal event to complete the investment, at which time all the legal documents
are signed and the funds are transferred.5
Co-invest (http://fundingsage.com/?post_type=explandict&p=2422)- When more than one
investor joins in making an investment on similar terms.7

Co-investment (http://fundingsage.com/?post_type=explandict&p=534)- The syndication

of a private equity nancing round or an investment by an individual (usually general
partners) alongside a private equity fund in a nancing round.3

Collar Agreement (http://fundingsage.com/?post_type=explandict&p=535)- Agreed-upon

adjustments in the number of shares oered in a stock-for-stock exchange to account for
price uctuations before the completion of the deal.3

Collateral (http://fundingsage.com/?post_type=explandict&p=536)- This word is used in

the nancial transaction between the lender and borrower. Often times, when entrepreneurs
seek capital from a nancial institution, they use their assets (personal belongings and
material goods) as a collateral or security for their loan. Should the borrower default on
payments, the lending institution has the legal authority conscate those assets.4

Committed Capital (http://fundingsage.com/?post_type=explandict&p=537)- The total

dollar amount of capital pledged to a private equity fund.3

Common Stock (http://fundingsage.com/?post_type=explandict&p=538)-

A class of ownership that has lower claims on earnings and assets than Preferred Stock. It is
riskier to own common stock because in the event of Liquidation, common stock
shareholders are the last to claim rights to assets.2
A unit of ownership of a corporation. In the case of a public company, the stock is traded
between investors on various exchanges. Owners of common stock are typically entitled to
vote on the selection of directors and other important events and in some cases receive
dividends on their holdings. Investors who purchase common stock hope that the stock
price will increase so the value of their investment will appreciate. Common stock oers no
performance guarantees. Additionally, in the event that a corporation is liquidated, the
claims of secured and unsecured creditors and owners of bonds and preferred stock take
precedence over the claims of those who own common stock.3
This term represents a constituent in corporate ownership. People who own shares of
common stock (common stockholders) often have voting rights in their companys
decision-making matters and executive board of elections. Through company dividends and
capital appreciation of corporate assets, common stockholders can also share in their
companys nancial success.4
Conversion Ratio (http://fundingsage.com/?post_type=explandict&p=539)- The number of
shares of stock into which a convertible security may be converted. The conversion ratio
equals the par value of the convertible security divided by the conversion price.3

Convertible (http://fundingsage.com/?post_type=explandict&p=540)- Convertibles are the

corporate securities, usually preferred shares or bonds, that can be exchanged for a set
number of another form, usually common share, at a pre-stated price. Convertibles are
appropriate for investors who want higher income than is available from common stock,
together with greater appreciation potential than regular bonds oer. From the issuer's
standpoint, the convertible feature is usually designed as a sweetener, to enhance the
marketability of the stock or preferred.5

Convertible Note (http://fundingsage.com/?post_type=explandict&p=542)- A debt

instrument that can be converted into another security, such as shares of common or
preferred stock.6

Convertible Preferred Stock (http://fundingsage.com/?post_type=explandict&p=543)-

Preferred stock that may be converted into common stock or another class of preferred stock,
either voluntarily or mandatory.3

Convertible Security (http://fundingsage.com/?post_type=explandict&p=541)- A bond,

debenture or preferred stock that is exchangeable for another type of security (usually
common stock) at a pre-stated price. Convertibles are appropriate for investors who want
higher income, or liquidation-preference protection, than is available from common stock,
together with greater appreciation potential than regular bonds oer. (See Common Stock,
Dilution, and Preferred Stock).3

Corporate Charter (http://fundingsage.com/?post_type=explandict&p=545)- The document

prepared when a corporation is formed. The Charter sets forth the objectives and goals of the
corporation, as well as a complete statement of what the corporation can and cannot do while
pursuing these goals.3

Corporate Resolution (http://fundingsage.com/?post_type=explandict&p=546)- A

document stating that the corporations board of directors has authorized a particular
individual to act on behalf of the corporation.3
Corporate Venture (http://fundingsage.com/?post_type=explandict&p=2406)- An
investment from one corporation in another, typically at an early stage for strategic reasons.7

Corporate Venture Capital (http://fundingsage.com/?post_type=explandict&p=547)-

Corporate venture capital is a subsidiary of a large corporation which makes venture capital
investments.5

Corporate Venturing (http://fundingsage.com/?post_type=explandict&p=548)-

Venture capital provided by [in-house investment funds of] large corporations to further
their own strategic interests.3
Corporate Venturing is a practice of a large company, taking a minority equity position in a
smaller company in a related eld.5

Corporation (http://fundingsage.com/?post_type=explandict&p=544)- A legal entity

structure for businesses enterprises which are typically chartered by a state or the federal
government, under which ownership is held by shareholders.6

Covenant (http://fundingsage.com/?post_type=explandict&p=549)- A protective clause in

an agreement.3

Cram Down (http://fundingsage.com/?post_type=explandict&p=513)- AKA. Burn Out -

Extraordinary dilution, by reason of a round of nancing, of a non-participating investors
percentage ownership in the issuer.3

Crowdfunding (http://fundingsage.com/?post_type=explandict&p=550)- Crowdfunding

is the process of raising nancial support for a venture via smaller amounts from many
investors (the crowd), rather than the alternative pattern of larger amounts from a smaller
number of supporters. Charities and philanthropies have traditionally employed both
fundraising strategies (soliciting both the general populace, or crowd, as well as fewer
wealthier donors), while businesses have usually taken the route involving fewer and larger
supporters. Todays internet has vastly increased the ability of fundraisers to communicate
information, solicit and receive nancial support from anyone on-line. Crowdfunding without
the expectation of nancial return, or with the promise of a specic good or service, are
termed donation-based or reward-based crowdfunding, are in the nature of charitable
solicitation or business marketing, and have never been illegal in the U.S. In contrast,
soliciting funds in return for a ownership interest or expectation of repayment, are termed
equity-based or debt-based crowdfunding (together grouped as securities-based
crowdfunding), and have been until now governed (and eectively prevented) by federal and
state securities law. One of the most signicant parts (Title III) of the federal Jumpstart Our
Business Startups, or JOBS Act of 2012 specically enabled and legalized security-based
crowdfunding, subject to a variety of regulations and restrictions.1

Crowdfunding Intermediary Regulatory Advocates (http://fundingsage.com/?

post_type=explandict&p=551)- (CfIRA)An open organization of diverse participants and
parties interested in the crowdfunding industry (portals, broker-dealers, professional
and business service providers, investors, etc.) dedicated to interacting with each other and
advocating with the regulators charged with shaping and governing the nascent industry of
securities-based crowdfunding authorized by the JOBS Act. CfIRA has participated in
numerous hearings, written ocial letters as well as popular articles, etc., both in public as
well as government forums (Congress, SEC, FINRA, etc.) See http://www.cra.org
(http://www.cra.org/) for more information.1

Crowdfunding Professional Association (http://fundingsage.com/?

post_type=explandict&p=552)- (CfPA)The American industry trade organization dedicated
to facilitating a vibrant, credible and growing crowdfunding community, from investors
through service providers to entrepreneurs. See http://crowdfundingprofessional.org
(http://crowdfundingprofessional.org/) for more information.1
- Synonyms: CfPA

Cumulative Preferred Stock (http://fundingsage.com/?post_type=explandict&p=553)- A

stock having a provision that if one or more dividend payments are omitted, the omitted
dividends (arrearage) must be paid before dividends may be paid on the companys common
stock.3

Cumulative Voting Rights (http://fundingsage.com/?post_type=explandict&p=554)- When

shareholders have the right to pool their votes to concentrate them on an election of one or
more directors rather than apply their votes to the election of all directors. For example, if the
company has 12 openings to the Board of Directors, in statutory voting, a shareholder with 10
shares casts 10 votes for each opening (10x12 = 120 votes). Under the cumulative voting
method however, the shareholder may opt to cast all 120 votes for one nominee (or any other
distribution he might choose).3

D&O Insurance (http://fundingsage.com/?post_type=explandict&p=2513)- Insurance

obtained by portfolio companies to cover the costs of legal expenses associated with claims
against its' board members and protect them from lawsuits.6
- Synonyms: Directors' and Ocers' Insurance
Daily Active Users (http://fundingsage.com/?post_type=explandict&p=2668)- Distinct
website users who engage with a site's oerings or services in a given day.6

Dead Pool (http://fundingsage.com/?post_type=explandict&p=2374)- Where companies

that die go.7

Deal Flow (http://fundingsage.com/?post_type=explandict&p=555)- Deal ow (dealow) is

the rate at which investment oers are presented to funding institutions.5

Deal Lead (http://fundingsage.com/?post_type=explandict&p=2453)- The investor or

investment organization taking primary responsibility for organizing an investment round in a
company. The deal lead typically nds the company, negotiates the terms of the investment,
invests the largest amount, and serves as the primary liaison between the company and the
other investors.7

Deal Structure (http://fundingsage.com/?post_type=explandict&p=2535)- The framework

of a deal between investors and a startup company which is typically outlined in a term sheet
and dened in detail in Purchase Agreements and related documentation, providing the rights
and obligations of the parties.6

Debenture (http://fundingsage.com/?post_type=explandict&p=556)-
A debt instrument; basically the same as a Promissory Note.3
(promissory note)This designation is a legal document detailing the terms of repayment and
interest that a borrower is responsible for. It also details the principal amount owed and the
maturity date. For example, nancial institutions can approve qualied applicants for loans.
They send out debenture or promissory statements to borrowers as a reminder of their legal
contract.4

Debt (http://fundingsage.com/?post_type=explandict&p=557)-
Any obligation by one person to pay another. May be a primary (direct) obligation as in a
Note, or a secondary (contingent) obligation as in a guaranty.3
This is an amount of money that a borrower owes to an individual, investor, or lending
institution. In the nance world, the word debt is often associated with interest
payments. For example, when an individual has a credit card limit of $5,000, the lender,
usually a bank, is willing to lend the credit card holder $5,000 of credit. If the lender uses
$500 of that total amount, they are now considered to be in $500 debt until the total
amount is paid. Partial payment of an owed amount always encompasses interest.4
Debt Financing (http://fundingsage.com/?post_type=explandict&p=558)- Debt Financing
means when a rm raises money for working capital or capital expenditures by selling bonds,
bills, or notes to individual and/or institutional investors. In return for lending the money, the
individuals or institutions become creditors and receive a promise to repay principal and
interest on the debt.5

Debt Instrument (http://fundingsage.com/?post_type=explandict&p=560)- Any instrument

evidencing the obligation of the maker to pay the holder of the debt instrument. Includes
Bonds, Debentures and Notes of all kinds.3

Debt Table (http://fundingsage.com/?post_type=explandict&p=1244)- A debt table is a table

providing a summary and analysis of a startups debt, by type. It includes details related to the
interest rates for each instrument as well as debt service requirements.6

Deciency Letter (http://fundingsage.com/?post_type=explandict&p=561)- A letter sent by

the SEC to the issuer of a new issue regarding omissions of material fact in the registration
statement.3

Demand Registration (http://fundingsage.com/?post_type=explandict&p=562)- Resale

registration that gives the investor the right to require the Company to le a Registration
Statement registering the resale of the securities issued to the investor in a private oering.3

Demand Rights (http://fundingsage.com/?post_type=explandict&p=563)- Contemplate that

the company must initiate and pursue the registration of a public oering including, although
not necessarily limited to, the shares proered by the requesting shareholder(s).3

Demo Day (http://fundingsage.com/?post_type=explandict&p=673)- Where the graduating

class of Incubators and Accelerators is given a chance to pitch to investors.2

Depreciation (http://fundingsage.com/?post_type=explandict&p=676)-
An expense recorded to reduce the value of a long-term tangible asset. Since it is a non-cash
expense, it increases free cash ow while decreasing the amount of a companys reported
earnings.3
This term refers to the gradual loss in value of currency, stocks, and material goods. For
example, biotechnology can depreciate over the course of 4 years.4
Dilution (http://fundingsage.com/?post_type=explandict&p=678)- Issuing more shares of a
company dilutes the value of holdings of existing shareholders.2 A reduction in the percentage
ownership of a given shareholder in a company caused by the issuance of new shares.3

Dilution Protection (http://fundingsage.com/?post_type=explandict&p=680)- Mainly

applies to convertible securities. Standard provision whereby the conversion ratio is changed
accordingly in the case of a stock dividend or extraordinary distribution to avoid dilution of a
convertible bondholders potential equity position. Adjustment usually requires a split or stock
dividend in excess of 5% or issuance of stock below book value. Share Purchase Agreements
also typically contain anti-dilution provisions to protect investors in the event that a future
round of nancing occurs at a valuation that is below the valuation of the current round.3

Director (http://fundingsage.com/?post_type=explandict&p=682)- Person elected by

shareholders to serve on the board of directors. The directors appoint the president, vice
president and all other operating ocers, and decide when dividends should be paid (among
other matters).3

Disclosure Document (http://fundingsage.com/?post_type=explandict&p=684)- A booklet

outlining the risk factors associated with an investment.3

Discounted Convertible Note (http://fundingsage.com/?post_type=explandict&p=2447)- A

loan that converts into the same equity security being purchased in a future investment round,
but at a discounted price representing a risk premium for early investment.7

Diversication (http://fundingsage.com/?post_type=explandict&p=686)- The process of

spreading investments among various types of securities and various companies in dierent
elds.3

Dividend (http://fundingsage.com/?post_type=explandict&p=688)- The payments

designated by the Board of Directors to be distributed pro-rata among the shares outstanding.
On preferred shares, it is generally a xed amount. On common shares, the dividend varies
with the fortune of the company and the amount of cash on hand and may be omitted if
business is poor or if the Directors determine to withhold earnings to invest in capital
expenditures or research and development.3

Dividend Preference (http://fundingsage.com/?post_type=explandict&p=690)- Preferred

stockholders receive dividends before common stockholders. Dividend can be cumulative or

2
non-cumulative.2

Double Bottom Line (http://fundingsage.com/?post_type=explandict&p=2423)- In Impact

Investing, the goal of measuring a company by its positive societal impact in addition to its
nancial returns.7

Double Dip (http://fundingsage.com/?post_type=explandict&p=1850)- Participating

preferred stock which entitles a holder to a liquidation preference and also to participate in the
residual value.9

Down-round (http://fundingsage.com/?post_type=explandict&p=2416)- When the

valuation of a company at the time of an investment round is lower than its valuation at the
conclusion of a previous round.7

Drag-along Rights (http://fundingsage.com/?post_type=explandict&p=691)-

Majority shareholders can force minority shareholders to join in the sale of a company.
Minorityshareholders will receive same price, terms, and conditions.2
A majority shareholder's right, obligating shareholders whose shares are bound into the
shareholders agreement to sell their shares into an oer the majority wishes to execute.3

Drip Feed (http://fundingsage.com/?post_type=explandict&p=2363)- When investors fund a

startup a little bit at a time instead of in a lump sum.7

Drive-by Deal (http://fundingsage.com/?post_type=explandict&p=1859)- A drive-by deal is

slang term often used when referring to a deal in which a venture capitalist invests in a
startup with the goal of a quick exit strategy. The VC takes little to no role in the management
and monitoring of the startup. 9

Dry Powder (http://fundingsage.com/?post_type=explandict&p=2362)- Money held in

reserve by a venture fund or angel investor in order to be able to make additional investments
in a company.7

Due Diligence (http://fundingsage.com/?post_type=explandict&p=564)-

A process undertaken by potential investors individuals or institutions to analyze and
assess the desirability, value, and potential of an investment opportunity.3
 This is the process whereby individuals or groups of people conduct independent
investigations regarding a particular matter. In the business world, investors conduct timely
due diligence when inquiring about prospective investment endeavors. This may entail a
background search of the companys founders, review of the entrepreneurs credit scores,
and routine follow-up with references and associates, etc. New business owners, on the
other hand, are encouraged to also conduct due diligence when nding a potential investor.
Through due diligence, both the investor and entrepreneur has the opportunity to diligently
analyze and assess each other for the potential of an investment opportunity and
partnership.4
Due diligence is the process of investigation and evaluation, performed by investors, into
the details of a potential investment, such as an examination of operations and
management and the verication of material facts.5

Early Exit (http://fundingsage.com/?post_type=explandict&p=2454)- An approach to angel

investing popularized by author Basil Peters, in which the goal of an investment is the sale of
a company within a few years without requiring additional large investments from VCs,
thereby providing high relative returns without requiring companies to be home runs.7

Early Stage (http://fundingsage.com/?post_type=explandict&p=693)-

The key characteristic is market development. The business is focused on sales and
marketing and proving business viability.2
A state of a company that typically has completed its seed stage and has a founding or core
senior management team, has proven its concept or completed its beta test, has minimal
revenues, and no positive earnings or cash ows.3
This term generally refers to a young enterprise that is three years old or younger. During
this phase, a company is still in its novel stages of development. They could be in the
process of experimenting with new products or services that they intend to market in the
near future and/or may have viable products that are already available to the public.4

EBITDA (http://fundingsage.com/?post_type=explandict&p=695)- Earnings Before Interest,

Taxes, Depreciation, and Amortization. A measure of cash ow calculated as: = Revenue -
Expenses (excluding tax, interest, depreciation, and amortization). EBITDA looks at the cash
ow of a company. By not including interest, taxes, depreciation, and amortization, we can
clearly see the amount of money a company brings in. This is especially useful when one
company is considering a takeover of another because the EBITDA would cover any loan
payments needed to nance the takeover.3
Economies of Scale (http://fundingsage.com/?post_type=explandict&p=698)- Economic
principle that, as the volume of production increases, the cost of producing each unit
decreases.3

Elevator Pitch (http://fundingsage.com/?post_type=explandict&p=700)-

An elevator pitch is a brief presentation, typically 30 60 seconds in duration, presenting
the entrepreneurs concept / solution, business model, go to market strategy and value
proposition to potential angel or venture capital investors, in order to obtain the attention of
the investors, such that they are compelled to learn more about the opportunity.6
An extremely concise presentation of an entrepreneurs idea, business model, company
solution, marketing strategy, and competition delivered to potential investors. Should not
last more than a few minutes, or the duration of an elevator ride.3
This term refers to an entrepreneurs brief verbal summary of their business proposal. The
name elevator pitch was designated because the entrepreneurs oral presentation is often
the duration of a quick elevator ride. During an elevator pitch, the entrepreneur concisely
outlines their business proposal, marketing strategy, and competitive tactic to potential
investors. Prospective business owners are strongly encouraged to polish this pitch, since it
can mean the dierence between raising desired capital and completely leaving their
business ideas behind.4

Employee Stock Option Plan (http://fundingsage.com/?post_type=explandict&p=565)-

(ESOP)A plan established by a company whereby a certain number of shares is reserved for
purchase and issuance to key employees. Such shares usually vest over a certain period of time
to serve as an incentive for employees to build long-term value for the company.3
- Synonyms: ESOP

Employee Stock Ownership Plan (http://fundingsage.com/?post_type=explandict&p=701)-

A trust fund established by a company to purchase stock on behalf of employees.3

Employer Identication Number (http://fundingsage.com/?post_type=explandict&p=1260)-

An EIN or employer identication number is a unique, nine-digit identication number
utilized by the Internal Revenue Service, (IRS) and assigned to business entities to identify
employers as part of the tax reporting process. In order to obtain an EIN, business entities
must le or apply to the IRS.6
- Synonyms: Federal Employer Identication Number, (FEIN)

Entrepreneur (http://fundingsage.com/?post_type=explandict&p=2455)- A person who

organizes and operates a business or businesses, taking on greater than normal nancial risks
to do so. Entrepreneurs are the founders of startups and are the people angel investors
support.7

Equity (http://fundingsage.com/?post_type=explandict&p=702)-
Ownership in the capital of a Company. In corporations, it is called stock; in limited
partnerships or LLCs, it is called interests or units.3
This designation is given to a stockholders ownership in a company. The amount of
ownership is obtained when an individual or corporation purchases one or more shares of
stock (equity shares). The more equity purchased, the greater the ownership.4

Equity Financing (http://fundingsage.com/?post_type=explandict&p=703)- Equity

nancing is a term used for company's issuance of shares of common or preferred stock to
raise money. Equity nancing is commonly done when its per share prices are high-the most
money that can be raised for the smallest number of shares.5

Equity Kicker (http://fundingsage.com/?post_type=explandict&p=707)- Option for private

equity investors to purchase shares at a discount. Typically associated with mezzanine
nancings where a small number of shares or warrants are added to what is primarily a debt
nancing.3

Equity Oerings (http://fundingsage.com/?post_type=explandict&p=705)- Equity Oerings

is raising funds by oering ownership in a corporation through the issuing of shares of a
corporation's common or preferred stock.5

Equity Seed Round (http://fundingsage.com/?post_type=explandict&p=2456)- When an

entrepreneur rst sells a part of his or her business - and therefore a proportional part of the
good things (like prots) and the not-so-good things (like losses) - to an investor. Equity
investments, unlike loans, do not need to be paid back.7

ERISA (http://fundingsage.com/?post_type=explandict&p=709)-
ERISA shall mean the United States Employee Retirement Income Security Act of 1974, as
amended, including the regulations promulgated thereunder.3
Signicant Participation Test: A test that is satised if the General Partner determines in its
reasonable discretion that Persons that are benet plan investors within the meaning of
Section (f)(2) of the Final Regulation constitute or are expected to constitute at least 25
percent of the interests of the Limited Partners. Note that the test is 25% of the interests of
 all the limited partners, which means 20% (+/-) in the partnership as a whole, taking into
account the general partners interest.3

Escrow (http://fundingsage.com/?post_type=explandict&p=2412)- When a third party holds

value during a transaction, releasing it only when a specied condition has been fullled.7

European Business Angels Network (http://fundingsage.com/?

post_type=explandict&p=711)- (EBAN) The European equivalent of Americas Angel Capital
Association. See http://www.eban.org (http://www.eban.org/) for more information.1
- Synonyms: EBAN

Exchange Act (http://fundingsage.com/?post_type=explandict&p=714)- [34 Act]

Regulates periodic reporting by companies with publicly traded securities, companies with
more than 500 shareholders, and brokers and dealers in securities.3
- Synonyms: 34 Act

Executive Summary (http://fundingsage.com/?post_type=explandict&p=1075)-

An executive summary is a one to two page document which provides an overview of a
startup entrepreneurs business opportunity. It summarizes the key points of the startups
business plan with a focus on obtaining investor interest, for potential investment. The goal
of the executive summary is to grab the attention of the investor, such that they desire to
learn more about the opportunity.6
This outline is a very important component of a companys business plan. It concisely
summarizes the proposed business idea(s) and the fundamental objectives of the company.
Upon review, the investor(s) should have a precise understanding of the prospective
companys mission. The executive summary is the most informative part of a business plan
for the investor(s) and plays an inuential role in determining if the company is viable
enough for investment.4

Exercise Price (http://fundingsage.com/?post_type=explandict&p=716)- The price at which

an option or warrant can be exercised.3

Exit (http://fundingsage.com/?post_type=explandict&p=718)- Exit is the sale or exchange

of a signicant amount of company ownership for cash, debt, or equity of another company.5

Exit Route (http://fundingsage.com/?post_type=explandict&p=1861)- An exit route is the

method by which an investor would realize an investment.9
Exit Strategy (http://fundingsage.com/?post_type=explandict&p=719)-
A funds intended method for liquidating its holdings while achieving the maximum
possible return. These strategies depend on the exit climates, including market conditions
and industry trends. Exit strategies can include selling or distributing the portfolio
companys shares after an initial public oering (IPO), a sale of the portfolio company, or a
recapitalization.3
This is a companys negotiated approach whereby investors are given an event or time
within the development of their company to receive their return on investment (ROI). This
can be achieved through a liquidity event, where their equity is converted into cash.4
Exit Strategy is the way in which a venture capitalist or business owner intends to use to get
out of an investment that he/she has made. Exit Strategy is also called liquidity event.5

Expansion Stage Company (http://fundingsage.com/?post_type=explandict&p=721)- This

term generally refers to a company that is three years old or more. During this period of
development, a company may already have been successful commercializing many of their
products and services but may not generate desired prot. An enterprise that is in its
expansion stage may resort to seeking additional sources of capital to minimize the risk of
failure. Many venture capitalists invest during this stage of a companys development.4

Fiduciary Responsibility (http://fundingsage.com/?post_type=explandict&p=723)- Refers to

trust responsibility to make good investments that will earn a high rate of return.2

Final Regulation (http://fundingsage.com/?post_type=explandict&p=725)- An ERISA term,

it is the United States Department of Labors Final Regulation relating to the denition of
plan assets in (29 C.F.R. 2510.3-101).3

Financier (http://fundingsage.com/?post_type=explandict&p=772)- Financier is a person or

nancial institution engaged in the lending and management of money and makes a living
participating in commercial nancing activities.5

Finder (http://fundingsage.com/?post_type=explandict&p=773)- A person who helps to

arrange a transaction.3

First Stage Capital (http://fundingsage.com/?post_type=explandict&p=1864)- First stage

capital is the money provided to entrepreneur who has a proven product, to start commercial
production and marketing, not covering market expansion, de-risking, acquisition costs.9
First-round Financing (http://fundingsage.com/?post_type=explandict&p=1862)- First-
round nancing is the rst investment in a company made by external investors.9

Flat Round (http://fundingsage.com/?post_type=explandict&p=2413)- An investment round

in which the pre-money valuation of a startups' round is the same as its post-money
valuation from the previous round.6

Flipping (http://fundingsage.com/?post_type=explandict&p=774)- The act of buying shares

in an IPO and selling them immediately for a prot. Brokerage rms underwriting new stock
issues tend to discourage ipping and will often try to allocate shares to investors who intend
to hold on to the shares for some time. However, the temptation to ip a new issue once it has
risen in price sharply is too irresistible for many investors who have been allocated shares in a
hot issue.3

Follow-on Investing (http://fundingsage.com/?post_type=explandict&p=775)-

(follow-up investing)This word refers to the event whereby investors reinvest in a company
sometime during its development. Often times, follow-on investments occur when a
company is not performing successfully as planned. Angel capitalists tend to avoid follow-
on investments within the same company because of the high risk of additional monetary
loss.4
A subsequent investment made by an investor who has made a previous investment in the
company, generally a later stage investment in comparison to the initial investment.5

- Synonyms: follow-up investing

Form 10-K (http://fundingsage.com/?post_type=explandict&p=776)- This is the annual

report that most reporting companies le with the Commission. It provides a comprehensive
overview of the registrants business.3

Form 10-KSB (http://fundingsage.com/?post_type=explandict&p=777)- This is the annual

report led by reporting small business issuers. It provides a comprehensive overview of the
companys business, although its requirements call for slightly less detailed information than
required by Form 10-K.3

Form S-1 (http://fundingsage.com/?post_type=explandict&p=778)- The form can be used to

register securities for which no other form is authorized or prescribed, except securities of
foreign governments or political sub-divisions thereof.3
Form S-4 (http://fundingsage.com/?post_type=explandict&p=779)- Type of Registration
Statement under which public company mergers and security exchange oers may be
registered with the SEC.3

Form SB-2 (http://fundingsage.com/?post_type=explandict&p=780)- This form may be

used by small business issuers to register securities to be sold for cash. This form requires
less detailed information about the issuers business than Form S-1.3

Founder's Agreement (http://fundingsage.com/?post_type=explandict&p=1263)- A formal

written agreement among the founders of a startup which documents the founders accord on
ownership, roles and responsibilities, company governance / decision-making and operations.
Issues such as founder contributions, vesting and exit / departure are also typically included in
these Agreements. Founders agreements are typically shorter, less technical agreements
between the founders that are to be developed further into operating agreements or corporate
by-laws, as the concept and structure of the company develops. Operating agreements and
corporate by-laws generally contain all of the same provisions typically included in a
founders agreement.6

Founder's Stock (http://fundingsage.com/?post_type=explandict&p=2457)- The common

stock owned by one or more of the company's founders, typically received when the company
was incorporated and not purchased for cash.7
- Synonyms: Founder's Equity

Founders Shares (http://fundingsage.com/?post_type=explandict&p=781)- Shares owned

by a companys founders upon its establishment.3

Free cash ow (http://fundingsage.com/?post_type=explandict&p=783)- The cash ow of a

company available to service the capital structure of the rm. Typically measured as operating
cash ow less capital expenditures and tax obligations.3

Friends & Family Round (http://fundingsage.com/?post_type=explandict&p=2458)- An

investment in a company that often follows the founder's own investment, from people who
are investing primarily because of their relationship with the founder rather than their
knowledge of the business.7

Friends and Family (http://fundingsage.com/?post_type=explandict&p=782)- A common

way for a startup to fund their initial round of capital. A 20-25% discount from the next round
is appropriate. The valuation cap is going to vary depending on the size of the raise and the
size of the opportunity.2

Full Ratchet Antidilution (http://fundingsage.com/?post_type=explandict&p=784)-

The sale of a single share at a price less than the favored investors paid reduces the
conversion price of the favored investors convertible preferred stock to the penny. For
example, from $1.00 to 50 cents, regardless of the number of lower-priced shares sold.3
Full ratchet is an investor protection provision which species that options and convertible
securities may be exercised relative to the lowest price at which securities were issued since
the issuance of the option or convertible security. The full ratchet guarantee prevents
dilution, since the proportionate ownership would stay the same as when the investment
was initially made.5

Fully Diluted Earnings Per Share (http://fundingsage.com/?post_type=explandict&p=785)-

Earnings per share expressed as if all outstanding convertible securities and warrants have
been exercised.3

Fully Diluted Outstanding Shares (http://fundingsage.com/?post_type=explandict&p=786)-

The number of shares representing total company ownership, including common shares and
current conversion or exercised value of the preferred shares, options, warrants, and other
convertible securities.3

Fund Size (http://fundingsage.com/?post_type=explandict&p=788)- The total amount of

capital committed by the investors of a venture capital fund.3

Funding (http://fundingsage.com/?post_type=explandict&p=787)- This term is used

synonymously with the words nancing and capital. It refers to the amount of money
that is needed for a business endeavor. For example, a new business owner may seek a certain
amount of funding for their startup company. This raised capital can be used to launch their
endeavor as well as to sustain their company until monetary prot can be generated.4

Funding Platform (http://fundingsage.com/?post_type=explandict&p=2459)- Any online

website used to facilitate investments in private companies. As a dened term, a specic type
of platform dened by the JOBS Act of 2012 that will allow non-Accredited investors to invest
in private oerings.7
Fundless Equity Sponsors (http://fundingsage.com/?post_type=explandict&p=1865)-
Fundless equity sponsors are sourcing and vetting deals without any committed capital, lining
up nancial sponsors on a deal-by-deal basis.9

GAAP (http://fundingsage.com/?post_type=explandict&p=789)- Generally Accepted

Accounting Principles. The common set of accounting principles, standards, and procedures.
GAAP is a combination of authoritative standards set by standard-setting bodies as well as
accepted ways of doing accounting.3

General Partner (http://fundingsage.com/?post_type=explandict&p=790)- (GP)The partner

in a limited partnership responsible for all management decisions of the partnership. The GP
has a duciary responsibility to act for the benet of the limited partners (LPs) and is fully
liable for its actions.3
- Synonyms: GP

General Solicitation (http://fundingsage.com/?post_type=explandict&p=2460)- When a

private company publicly seeks investors in connection with an equity oering. Previously
prohibited by US securities law, now permissible under certain conditions according to the
JOBS Act of 2012.7

Golden Handcus (http://fundingsage.com/?post_type=explandict&p=791)- This occurs

when an employee is required to relinquish unvested stock when terminating his employment
contract early.3

Golden Parachute (http://fundingsage.com/?post_type=explandict&p=792)- Employment

contract of upper management that provides a large payout upon the occurrence of certain
control transactions, such as a certain percentage share purchase by an outside entity or when
there is a tender oer for a certain percentage of a companys shares. This is discussed in
more detail at the Executive Employment Agreement.3

Golden Rule (http://fundingsage.com/?post_type=explandict&p=2478)- The investor with

the gold, makes the rules. (The same meaning as "those who bring the money drive the bus";
i.e., forget whatever any previous contracts say, if you need money and only one source is
willing to supply it, you'll take the money on their terms, period.)7

Grant (http://fundingsage.com/?post_type=explandict&p=2417)- Money provided by a

government agency or other organization that does not need to be repaid and does not

7
purchase equity.7

Holding Company (http://fundingsage.com/?post_type=explandict&p=793)- A corporation

that owns the securities of another, in most cases with voting control.3

Holding Period (http://fundingsage.com/?post_type=explandict&p=794)- The amount of

time an investor has held an investment. 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.3

Home Run (http://fundingsage.com/?post_type=explandict&p=2373)- When a company has

an exit that returns 20 or more times investors' initial capital.7

Honeypot (http://fundingsage.com/?post_type=explandict&p=2654)- A highly attractive

oering used to entice a specic, targeted audience.6

Hot Issue (http://fundingsage.com/?post_type=explandict&p=795)- A newly issued stock

that is in great public demand. Technically, it is when the secondary market price on the
eective date is above the new issue oering price. Hot issues usually experience a dramatic
rise in price at their initial public oering because the market demand outweighs the supply.3

Hurdle Rate (http://fundingsage.com/?post_type=explandict&p=796)- The internal rate of

return that a fund must achieve before its general partners or managers may receive an
increased interest in the proceeds of the fund. Often, if the expected rate of return on an
investment is below the hurdle rate, the project is not undertaken.3

Illiquid (http://fundingsage.com/?post_type=explandict&p=2431)- An investment that

cannot be readily sold or transferred into cash. Unlike public stocks for which there is a ready
market, angel investments are typically held for 5 to 10 years.7

Impact Investing (http://fundingsage.com/?post_type=explandict&p=2364)- Financial

investments that also aim to have a benet for society.7

In-Licensing Agreement (http://fundingsage.com/?post_type=explandict&p=1274)-

Agreements with external or third parties under which the startup has been granted
permission to utilize certain technologies owned by those third parties, under dened terms
and conditions.6

Incubator (http://fundingsage.com/?post_type=explandict&p=566)- An organization

established to support the development of startup companies with intermediate term access,
(1 - 3 years) to facilities, (oce and lab space), resources and development programs,
potentially including mentoring. Incubators dier from accelerators in that the latter typically
focus on acceleration of growth in a shorter dened period whereas the former is focused on
the development of the company and its product over a longer time period.6

Information Rights (http://fundingsage.com/?post_type=explandict&p=2564)- A provision,

typically found in Investors Rights Agreements which requires startup companies to provide
board updates and nancial information to minority shareholders on a periodic, (such as
quarterly or yearly) basis.6

Initial Public Oering (http://fundingsage.com/?post_type=explandict&p=567)-

(IPO) The sale or distribution of a stock of a portfolio company to the public for the rst
time. IPOs are often an opportunity for the existing investors (often venture capitalists) to
receive signicant returns on their original investment. During periods of market downturns
or corrections, the opposite is true.3
(IPO)This is a private corporations rst-time sale or allocation of a stock that is made
available to the public. IPOs can be distributed to both young and established companies
who seek to expand or warrant public trading.4

- Synonyms: IPO

Institutional Investors (http://fundingsage.com/?post_type=explandict&p=568)-

Organizations that professionally invest, including insurance companies, depository
institutions, pension funds, investment companies, mutual funds, and endowment funds.3
Institutional Investors refers mainly to insurance companies, pension funds and investment
companies collecting savings and supplying funds to markets but also to other types of
institutional wealth like endowment funds, foundations, etc.5

Intermediary (http://fundingsage.com/?post_type=explandict&p=569)- Either a "Broker-

Dealer" or a "Portal", both allowed by the JOBS Act to consummate a securities-based
crowdfunding transaction.
Invention Assignment Agreement (http://fundingsage.com/?
post_type=explandict&p=1277)- An agreement under which founders, employees,
contractors, developers and others assign intellectual property rights to a company. Typically,
these stakeholders or related parties of the company acknowledge that any and all intellectual
property developed by them while working for or with the company, whether individually or
jointly with other stakeholders, are the property of the company, not the individual. It can also
apply to intellectual property that founders and others may contribute to a startup company at
the time of its establishment.6

Investment Banks (http://fundingsage.com/?post_type=explandict&p=570)- Investment

Bank is a nancial intermediary that performs a variety of services which includes
underwriting, acting as an intermediary between an issuer of securities and the investing
public, facilitating mergers and other corporate reorganizations, and also acting as a broker
for institutional clients.5

Investment Company Act of 1940 (http://fundingsage.com/?post_type=explandict&p=571)-

Investment Company Act shall mean the Investment Company Act of 1940, as amended,
including the rules and regulations promulgated thereunder.3

Investment Letter (http://fundingsage.com/?post_type=explandict&p=572)- A letter signed

by an investor purchasing unregistered long securities under Regulation D, in which the
investor attests to the long-term investment nature of the purchase. These securities must be
held for a minimum of one year before they can be sold.3

Investment Round (http://fundingsage.com/?post_type=explandict&p=2432)- A set of one

or more investments made in a particular company by one or more investors on essentially
similar terms at essentially the same time.7

IPO (http://fundingsage.com/?post_type=explandict&p=573)- Initial Public Oering or IPO

is the rst sale of stock by a private company to the public. IPOs are often smaller, younger
companies seeking capital to expand their business.5
- Synonyms: Initial Public Oering

IRA Rollover (http://fundingsage.com/?post_type=explandict&p=574)- The reinvestment of

assets received as a lump-sum distribution from a qualied tax-deferred retirement plan.
Reinvestment may be the entire lump sum or a portion thereof. If reinvestment is done within
60 days, there are no tax consequences.3
IRR (http://fundingsage.com/?post_type=explandict&p=575)-
Internal Rate of Return. A typical measure of how VC Funds measure performance. IRR is
technically a discount rate: the rate at which the present value of a series of investments is
equal to the present value of the returns on those investments.3
Internal Rate of Return or IRR is often used in capital budgeting, it's the interest rate that
makes net present value of all cash ow equal zero. Essentially, IRR is the return that a
company would earn if they expanded or invested in themselves, rather than investing that
money abroad.5

Issued Shares (http://fundingsage.com/?post_type=explandict&p=576)- The amount of

common shares that a corporation has sold (issued).3

Issuer (http://fundingsage.com/?post_type=explandict&p=577)-
A company raising funds through a "Portal" or "Broker-Dealer" via securities-based
crowdfunding, and issuing a security (equity or debt) to each investor in return for his or
her funds.1
Refers to the organization issuing or proposing to issue a security.3

J-curve (http://fundingsage.com/?post_type=explandict&p=2499)- The appearance of a

graph showing the typical value progression of early stage investment portfolios. Values often
drop soon after the initial investment during the startup and early stage period, but rebound
signicantly in later years after companies reach protability.7

JOBS Act (http://fundingsage.com/?post_type=explandict&p=579)- The Jumpstart Our

Business Startups (JOBS) Act, passed by overwhelming bipartisan congressional majorities
in both chambers and signed into law by President Obama in April, 2012. The JOBS Act
contains seven sections, or titles aimed at facilitating dierent aspects of the development
and success of the all-important business startups and growth companies that create the vast
majority of new employment in our country. Title III legalizes and regulates securities-based
crowdfunding. Actual implementation of the securities-based crowdfunding authorized in the
JOBS Act awaits rule-making by the Securities and Exchange Commission (SEC) and Financial
Industry Regulatory Authority (FINRA), called for within 270 days of passage of the JOBS Act
but realistically hoped for sometime in 2013.1

Kentucky Windag (http://fundingsage.com/?post_type=explandict&p=580)- In hunting, the

modied aim required to compensate for wind or target movement. Used herein to describe
the process by which an investor must increase the percentage he needs today so that he will
end up with a desired target percentage ownership in the future, after adjusting for future
dilutive nancing rounds.3

Key Employees (http://fundingsage.com/?post_type=explandict&p=581)- Professional

management attracted by the founder to run the company. Key employees are typically
retained with warrants and ownership of the company.3

Later Stage (http://fundingsage.com/?post_type=explandict&p=582)- A stage of company

growth characterized by viable products, a developed market, signicant customers, sustained
revenue growth, and both prots and positive cash ow from operations. Later-stage
companies would generally be candidates for an IPO. Investments in the C round or after
qualify as later stage.3

Later-stage Company (http://fundingsage.com/?post_type=explandict&p=583)- This is a

company that is considered to be in its mature stages of development. Unlike early and
expansion-stage companies, later-stage companies already have successful commercialized
products and services that are publically available as well as a signicant generated cash ow.
Many venture capitalists tend to invest in mature companies since they are less risky, are
already established, have proven to be a nancial success.4

Law of Large Numbers (http://fundingsage.com/?post_type=explandict&p=2504)- A

theorem that suggests that the average of results obtained from a large number of trials
should be close to the expected value, assuring stable long-term results for the averages of
random events. When applied to angel investing, it suggests that large portfolios of
investments, made consistently over time, will return signicantly positive results.7

Lead Investor (http://fundingsage.com/?post_type=explandict&p=584)- The primary

investor of a syndicated round of nancing. This investor is typically the largest investor of
the syndicated round and ususally structures and leads the negotiation of terms related to the
investment's documentation.6

Leveraged Buyout (http://fundingsage.com/?post_type=explandict&p=585)-

(LBO)A takeover of a company, using a combination of equity and borrowed funds.
Generally, the target companys assets act as the collateral for the loans taken out by the
acquiring group. The acquiring group then repays the loan from the cash ow of the
acquired company. For example, a group of investors may borrow funds, using the assets of
the company as collateral, in order to take over a company. Or the management of the
company may use this vehicle as a means to regain control of the company by converting a
 company from public to private. In most LBOs, public shareholders receive a premium to the
market price of the shares.3
(LBO)This is a type of aggressive business practice whereby investors or a larger
corporation utilizes borrowed funds (junk bonds, traditional bank loans, etc.) or debt to
nance its acquisition. The high debt-to-equity ratio enables the investors to buyout a
smaller company with very little cash. Leveraged buy-outs can be either friendly or hostile,
depending on the negotiations made.4

- Synonyms: LBO

Limited Partner (http://fundingsage.com/?post_type=explandict&p=586)- (LP)An investor

in a limited partnership who has no voice in the management of the partnership. LPs have
limited liability and usually have priority over GPs upon liquidation of the partnership.3
- Synonyms: LP

Limited Partnerships (http://fundingsage.com/?post_type=explandict&p=587)-

An organization comprised of a general partner, who manages a fund, and limited partners,
who invest money but have limited liability and are not involved with the day-to-day
management of the fund. In the typical venture capital fund, the general partner receives a
management fee and a percentage of the prots (or carried interest). The limited partners
receive income, capital gains, and tax benets.3
Limited partnership is a business organization with one or more general partners, who
manage the business and assume legal debts and obligations and one or more limited
partners, who are liable only to the extent of their investments. Limited partnership is the
legal structure used by most venture and private equity funds. Limited partners also enjoy
rights to the partnership's cash ow, but are not liable for company obligations.5

LinkedIn (http://fundingsage.com/?post_type=explandict&p=2484)- A business oriented

social media platform which can be found online at www.linkedin.com
(https://www.linkedin.com/).6

Liquidation (http://fundingsage.com/?post_type=explandict&p=588)-
When a business is bankrupt or terminated, its assets are sold and the proceeds pay
creditors. Anything left over is distributed to shareholders.2
1) The process of converting securities into cash. 2) The sale of the assets of a company to
one or more acquirers in order to pay o debts. In the event that a corporation is liquidated,
 the claims of secured and unsecured creditors and owners of bonds and preferred stock take
precedence over the claims of those who own common stock.3
This is an event that represents the complete or partial closing of a company. In a
liquidation event, a companys assets and material goods (securities) are converted into
cash and/or distributed for sale to pay o existing corporate debt.4
Liquidation is the sale of the assets of a portfolio company to one or more acquirers when
venture capital investors receive some of the proceeds of the sale.5

Liquidation Preference (http://fundingsage.com/?post_type=explandict&p=590)- Liquidity

preference is the right to receive a specic value for the stock if the business is liquidated.5

Liquidation Waterfall (http://fundingsage.com/?post_type=explandict&p=2483)- The

sequence in which all parties, including investors, employees, creditors, and others receive
payments in the event of a company's liquidation through acquisition or bankruptcy.7

Liquidity Event (http://fundingsage.com/?post_type=explandict&p=589)-

An event that allows a VC to realize a gain or loss on an investment. The ending of a private
equity providers involvement in a business venture with a view to realizing an internal
return on investment. Most common exit routes include Initial Public Oerings [IPOs], buy
backs, trade sales, and secondary buyouts. (See also: Exit Strategy.)3
This occasion represents the common exit strategy of most entrepreneurs and investors.
When a corporation is purchased (through a merger or acquisition) or when an IPO is made,
equity is converted to cash.4
Liquidity event is the way in which an investor plans to close out an investment. Liquidity
event is also known as exit strategy.5

Lock-up Period (http://fundingsage.com/?post_type=explandict&p=591)-

The period of time that certain stockholders have agreed to waive their right to sell their
shares of a public company. Investment banks that underwrite initial public oerings
generally insist upon lockups for a set period of time, typically 180 days from large
shareholders (such as 1% ownership or more) in order to allow an orderly market to develop
in the shares. The shareholders that are subject to lockup usually include the management
and directors of the company, strategic partners, and such large investors. These
shareholders have typically invested prior to the IPO at a signicantly lower price to that
oered to the public and therefore stand to gain considerable prots. If a shareholder
attempts to sell shares that are subject to lockup during the lockup period, the transfer
agent will not permit the sale to be completed.3
 Lock-Up Period is the period an investor must wait before selling or trading company shares
subsequent to an exit, usually in an initial public oering the lock-up period is determined
by the underwriters.5

Maa (http://fundingsage.com/?post_type=explandict&p=2487)- In the context of angel

funding and startups, a colloquial term used to describe the loose association of people
previously involved with a highly successful technology company, such as Google, Facebook,
Paypal or LinkedIn, as founders, early employees or investors.6

Main Street Business (http://fundingsage.com/?post_type=explandict&p=2482)- A term

utilized to reference small traditional family lifestyle businesses such as local retail and
service providers. These businesses are typically operated by family for the benet of the
family without the objective of a liquidation event such as the strategic sale or IPO of the
company. As a result, these businesses are not typically funded by angel investment groups or
VCs.6

Major Investor (http://fundingsage.com/?post_type=explandict&p=2461)- As used in

investment term sheets, any investor who puts in more than a dened amount into a given
round and is therefore entitled to specic information and / or voting rights.7

Majority (http://fundingsage.com/?post_type=explandict&p=2565)- The percentage

dening the level of shareholders that must approve signicant company actions such as
borrowing money, or acquiring or merging with another business; typically dened to be
50.1% or greater.6

Management Buy-in (http://fundingsage.com/?post_type=explandict&p=1866)-

Management buy-in is the purchase of a business by an outside team of managers who have
found nancial backers and plan to manage the business actively themselves.9
- Synonyms: MBI

Management Buy-out (http://fundingsage.com/?post_type=explandict&p=1867)-

Management buy-out is the term used for the funds provided to enable operating
management to acquire a product line or business, which may be at any stage of development,
from either a public or private company.9
- Synonyms: MBO
Management Fee (http://fundingsage.com/?post_type=explandict&p=592)- Compensation
typically paid annually from an investment fund to the general partner or investment advisor
of the fund to cover administration costs, expenses related to investor relations and to
compensate them for their services and expertise.6

ManagementTeam (http://fundingsage.com/?post_type=explandict&p=593)- The persons

who oversee the activities of a venture capital fund.3

Market (http://fundingsage.com/?post_type=explandict&p=594)- Based on supply and

demand, this term refers to the societal arrangement whereby consumers purchase goods and
services from businesses and individual sellers in exchange for currency. In economic
relevance, the market can be divided into dierent industries, such as biotechnology, food,
etc. The exchange between the consumer and seller contribute to a societys market economy
which greatly depends on these transactions for economic viability.4

Market Capitalization (http://fundingsage.com/?post_type=explandict&p=595)- The total

dollar value of all outstanding shares. Computed as shares multiplied by current price per
share. Prior to an IPO, market capitalization is arrived at by estimating a companys future
growth and by comparing a company with similar public or private corporations. (See also:
Pre-Money Valuation.)3

Meetup (http://fundingsage.com/?post_type=explandict&p=2474)- A website which enables

the facilitation of online in-person meetings of groups with similar interests. Local Meet-ups
groups focus on a wide variety of interests, including technology, entrepreneurship,
investments and startups from the entrepreneurial world.6

Merger (http://fundingsage.com/?post_type=explandict&p=596)- A combination of

business entities under which eciency improvements are expected to be achieved from
potential synergies by eliminating duplicate factors of production such as plant, equipment
and labor and by the more ecient use of capital driving increases in revenues and prots in
the resulting company.6

Mezzanine Debt (http://fundingsage.com/?post_type=explandict&p=597)- Mezzanine debts

are debts that incorporates equity-based options, such as warrants, with a lower-priority debt.
Mezzanine debt is actually closer to equity than debt, in that the debt is usually only of
importance in the event of bankruptcy. Mezzanine debt is often used to nance acquisitions
and buyouts, where it can be used to prioritize new owners ahead of existing owners in the
event that a bankruptcy occurs.5
Mezzanine Financing (http://fundingsage.com/?post_type=explandict&p=598)-
A blend of debt and equity nancing, requiring no collateral and does not necessarily involve
giving up interest in the company. This capital is typically used to fund growth or to enable
management to buy out company owners for succession purposes. The interest rate is high,
ranging from 20-30% and lenders can convert their stake to equity or ownership in the
event of default.2
Refers to the stage of venture nancing for a company immediately prior to its IPO.
Investors entering in this round have lower risk of loss than those investors who have
invested in an earlier round. Mezzanine-level nancing can take the structure of preferred
stock, convertible bonds, or subordinated debt.3
Mezzanine Financing is a late-stage venture capital, usually the nal round of nancing
prior to an IPO. Mezzanine Financing is for a company expecting to go public usually within
6 to 12 months, usually so structured to be repaid from proceeds of a public oerings, or to
establish oor price for public oer.5

Mezzanine Level (http://fundingsage.com/?post_type=explandict&p=1868)- Mezzanine

level is a term used to describe a company which is somewhere between startup and IPO.
Venture capital committed at mezzanine level usually has less risk but less potential
appreciation than at the startup level, and more risk but more potential appreciation than in
an IPO.9

Micro-VC (http://fundingsage.com/?post_type=explandict&p=2475)- The correct term for

organizations often referred to as super angels. Structured similar to a traditional venture
fund, a Micro-VC is typically much smaller in size, with fewer partners, and invests less
money but at an earlier stage.7

Minority Enterprise Small Business Investment Companies (http://fundingsage.com/?

post_type=explandict&p=599)- Minority Enterprise Small Business Investment Companies
or MESBICs are government-chartered venture rms that can invest only in companies that
are at least 51 percent owned by members of a minority group.5
- Synonyms: MESBICs, MESBIC

Monthly Active Users (http://fundingsage.com/?post_type=explandict&p=2667)- Distinct

website users who engage with a site's oerings or services in a given month.6

MutualFund (http://fundingsage.com/?post_type=explandict&p=600)- A mutual fund, or

an open-end fund, sells as many shares as investor demand requires. As money ows in, the
fund grows. If money ows out of the fund, the number of the funds outstanding shares
drops. Open- end funds are sometimes closed to new investors, but existing investors can still
continue to invest money in the fund. In order to sell shares, an investor usually sells the
shares back to the fund. If an investor wishes to buy additional shares in a mutual fund, the
investor must buy newly issued shares directly from the fund. (See also: Closed-end Funds.)3

NASD (http://fundingsage.com/?post_type=explandict&p=602)- The National Association

of Securities Dealers. A mandatory association of brokers and dealers in the over- the-counter
securities business. Created by the Maloney Act of 1938, an amendment to the Securities Act of
1934.3

NASDAQ (http://fundingsage.com/?post_type=explandict&p=603)- An automated

information network which provides brokers and dealers with price quotations on securities
traded over the counter.3

National Angel Capital Organization (http://fundingsage.com/?

post_type=explandict&p=601)- (NACO)Canadas analogue of the American Angel Capital
Association (ACA), and a close aliate and partner of the ACA.
Seehttp://www.nacocanada.com (http://www.nacocanada.com/)for more information.1
- Synonyms: NACO

Negative Control Provisions (http://fundingsage.com/?post_type=explandict&p=2476)-

Terms agreed to as part of an investment round that protect investors from major adverse
actions (such as dissolving the company, or selling it to someone for $1), but do not provide
the right to armatively control the company.7

Net AssetValue (http://fundingsage.com/?post_type=explandict&p=604)- (NAV)Calculated

by adding the value of all of the investments in the fund and dividing by the number of shares
of the fund that are outstanding. NAV calculations are required for all mutual funds (or open-
end funds) and closed-end funds. The price per share of a closed-end fund will trade at either
a premium or a discount to the NAV of that fund, based on market demand. Closed-end funds
generally trade at a discount to NAV.
- Synonyms: NAV

Net Financing Cost (http://fundingsage.com/?post_type=explandict&p=605)- Also called

the cost of carry or, simply, carry, the dierence between the cost of nancing the purchase of
an asset and the assets cash yield. Positive carry means that the yield earned is greater than
the nancing cost; negative carry means that the nancing cost exceeds the yield earned.3
Net Income (http://fundingsage.com/?post_type=explandict&p=606)- The resulting
earnings of a company after deducting all costs and expenses, including operations, general
and administrative, selling, depreciation, interest expense, and taxes.6

NetPresentValue (http://fundingsage.com/?post_type=explandict&p=607)- An approach

used in capital budgeting where the present value of cash inow is subtracted from the
present value of cash outows. NPV compares the value of a dollar today versus the value of
that same dollar in the future after taking ination and return into account.3
- Synonyms: NPV

New Issue (http://fundingsage.com/?post_type=explandict&p=608)- A stock or bond

oered to the public for the rst time. New issues may be initial public oerings by previously
private companies or additional stock or bond issues by companies already public. New public
oerings are registered with the Securities and Exchange Commission. (See Securities and
Exchange Commission and Registration.)3

Newco (http://fundingsage.com/?post_type=explandict&p=609)- The typical label for any

newly organized company, particularly in the context of a leveraged buyout.3

No Shop, No Solicitation Clauses (http://fundingsage.com/?post_type=explandict&p=610)-

A no shop, no solicitation, or exclusivity, clause requires the company to negotiate exclusively
with the investor, and not solicit an investment proposal from anyone else for a set period of
time after the term sheet is signed. The key provision is the length of time set for the
exclusivity period.3

Non Solicitation Agreement (http://fundingsage.com/?post_type=explandict&p=1243)- An

agreement under which an employee or principal agrees not to solicit their existing
employers or companys employees, clients or customers after departing the company either
for their own benet or that of a competitor.6

Non-Compete Agreement (http://fundingsage.com/?post_type=explandict&p=1239)- An

agreement between two parties under which one party agrees not to become employed by,
enter into or establish a similar business, trade or profession in competition with the other
party. Such agreements typically restrict competition on a geographic basis for a certain period
of time.6
- Synonyms: Restrictive Covenants
Non-Dilutive Shares (http://fundingsage.com/?post_type=explandict&p=2696)- Shares
with protective rights, such that when the number of shares outstanding increase, the existing
shareholders positions are protected and remain constant in terms of their percentage
ownership of the company. Shares for which a nancing round does not cause dilution of the
existing shareholders.6

Non-Disclosure Agreement, (NDA) (http://fundingsage.com/?

post_type=explandict&p=1238)- An NDA is a formal legal agreement between two or more
parties undertaken by the parties to keep information shared or provided by one party to
another condential. NDAs are utilized where parties become privy to condential and / or
sensitive information, which the disclosing party desires not be made available to third parties
or the general public. Such agreements may also include the condentiality of the relationship
in existence between the parties.6
- Synonyms: Condentiality Agreement

Nonaccredited (http://fundingsage.com/?post_type=explandict&p=611)- An investor not

considered accredited for a Regulation D oering. (See Accredited Investor.)3

NVCA Model Documents (http://fundingsage.com/?post_type=explandict&p=2481)- A

standard set of investment documents for a Series A equity investment round developed by a
group of most of the major venture law rms for the National Venture Capital Association.7

NYSE (http://fundingsage.com/?post_type=explandict&p=612)- The New York Stock

Exchange. Founded in 1792, the largest organized securities market in the United States. The
Exchange itself does not buy, sell, own, or set prices of stocks traded there. The prices are
determined by public supply and demand. Also known as the Big Board.3

OeringDocuments (http://fundingsage.com/?post_type=explandict&p=613)- Documents

evidencing a private-placement transaction. Include some combination of a purchase
agreement and/or subscription agreement, notes or stock certicates, warrants, registration-
rights agreement, stockholder or investment agreement, investor questionnaire, and other
documents required by the particular deal.3

One Liner (Cocktail party) (http://fundingsage.com/?post_type=explandict&p=1077)- A

cocktail party one liner is a clear, crisp, engaging sentence which provides potential investors
a succinct overview of your startup concept and business model. It challenges the investor to
become intrigued by both the implied problem and your proposed solution.6
Open-endFund (http://fundingsage.com/?post_type=explandict&p=614)- An open-end
fund, or a mutual fund, generally sells as many shares as investor demand requires. As money
ows in, the fund grows. If money ows out of the fund, the number of the funds outstanding
shares drops. Open-end funds are sometimes closed to new investors, but existing investors
can still continue to invest money in the fund. In order to sell shares, an investor generally
sells the shares back to the fund. If an investor wishes to buy additional shares in a mutual
fund, the investor generally buys newly issued shares directly from the fund.3

Operating Agreement (http://fundingsage.com/?post_type=explandict&p=1261)- An

agreement between the members of a Limited Liability Company, (LLC) which governs the
LLCs business including member powers, rights, duties and obligations, and outlining the
decision making process related to operational, functional and nancial issues in a structured
manner. The operating agreement of LLC companies is similar to bylaws utilized by
corporations.6

Operating Budget (http://fundingsage.com/?post_type=explandict&p=1257)- A budget

consisting of estimates of income and expenses from a companys operations typically
prepared on an annual basis. Expenses typically include operating costs related to producing
the companys product or service, labor, administration and marketing but exclude long term
and non-operational items such as capital debt. Operating income would typically exclude
items such as investment income.6
- Synonyms: Annual Budget

Option (http://fundingsage.com/?post_type=explandict&p=615)- A security granting the

holder the right to purchase a specied number of a Companys securities at a designated
price at some point in the future. The term is generally used in connection with employee
benet plans as Incentive Stock Options (ISOs or statutory options) and Non-qualied
stock options (NSOs or Nonquals).However stand-alone options may be issued outside
of any plan. Generally non-transferable, in distinction to warrants.3

Option Pool (http://fundingsage.com/?post_type=explandict&p=618)- The number of

shares set aside for future issuance to employees of a private company.3

OTC (http://fundingsage.com/?post_type=explandict&p=619)- Over-the-Counter. A market

for securities made up of dealers who may or may not be members of a formal securities
exchange. The over-the-counter market is conducted over the telephone and is a negotiated
market rather than an auction market such as the NYSE.3
- Synonyms: Over-the-Counter, Over the Counter
OutstandingStock (http://fundingsage.com/?post_type=explandict&p=620)- The amount
of common shares of a corporation which are in the hands of investors. It is equal to the
amount of issued shares less treasury stock.3

Oversubscription (http://fundingsage.com/?post_type=explandict&p=621)- Occurs when

demand for shares exceeds the supply or number of shares oered for sale. As a result, the
underwriters or investment bankers must allocate the shares among investors. In private
placements, this occurs when a deal is in great demand because of the companys growth
prospects.3

OversubscriptionPrivilege (http://fundingsage.com/?post_type=explandict&p=622)- In a
rights issue, arrangement by which shareholders are given the right to apply for any shares
that are not purchased.3

PageRank (http://fundingsage.com/?post_type=explandict&p=2692)- An algorithm which

provides a measure of the relative importance of internet web pages and returned search
results.6

PariPassu (http://fundingsage.com/?post_type=explandict&p=623)- At an equal rate or

pace, without preference.3

Participating Preferred (http://fundingsage.com/?post_type=explandict&p=624)- A

preferred stock in which the holder is entitled to the stated dividend and also to additional
dividends on a specied basis upon payment of dividends to the common stockholders.3

Participating Preferred Stock (http://fundingsage.com/?post_type=explandict&p=625)-

Preferred stock that has the right to share on a pro-rata basis with any distributions to the
common stock upon liquidation, after already receiving the preferred-liquidation preference.3

Partnership (http://fundingsage.com/?post_type=explandict&p=626)- A nontaxable entity

in which each partner shares in the prots, losses, and liabilities of the partnership. Each
partner is responsible for the taxes on its share of prots and losses.3

Partnership Agreement (http://fundingsage.com/?post_type=explandict&p=627)- The

contract that species the compensation and conditions governing the relationship between
investors (LPs) and the venture capitalists (GPs) for the duration of a private equity funds
life.3
Pay to Play (http://fundingsage.com/?post_type=explandict&p=2477)- A term in VC
nancing that requires investors to participate in future down-valuation nancings of the
company, or else suer punitive consequences (such as getting their Preferred stock converted
into Common stock). One reason why investors keep some dry powder on hand.7

Peer to Peer Lending (http://fundingsage.com/?post_type=explandict&p=2467)- A

relatively new type of online nancing solution through which individuals lend money to
other individuals or small businesses.7

PennyStocks (http://fundingsage.com/?post_type=explandict&p=628)- Low-priced issues,

often highly speculative, selling at less than $5/share.3

Performance Based Vesting (http://fundingsage.com/?post_type=explandict&p=1869)-

Under performance-based vesting, options Vest only if specied performance criteria are met.
For example, options may vest if annual earnings per share exceed a certain target by a
specied date.9

Piggyback Registration (http://fundingsage.com/?post_type=explandict&p=629)- A

situation when a securities underwriter allows existing holdings of shares in a corporation to
be sold in combination with an oering of new public shares.3

PIKDebtSecurities (http://fundingsage.com/?post_type=explandict&p=630)- (Payment in

Kind) PIK Debt are bonds that may pay bondholders compensation in a form other than cash.3
- Synonyms: Payment in Kind, Payment In-Kind

PIPE (http://fundingsage.com/?post_type=explandict&p=631)- ("Private Investment for

Public Equity)Private oering followed by a resale registration.3
- Synonyms: Private Investment for Public Equity

Pipeline (http://fundingsage.com/?post_type=explandict&p=632)- Pipeline is the ow of

upcoming underwriting deals.5

Pitch (http://fundingsage.com/?post_type=explandict&p=633)- A presentation in which a

startup founder attempts to persuade an investor of the viability of their company. The
presentation spectrum varies based on the specic purpose of the pitch. Brief presentations in
which an entrepreneur provides a 30 - 60 second overview of their idea, business model and
marketing strategy, with the purpose of attaining a followup audience with an investor are
described as elevator pitches. Formal, detailed presentations utilizing power point type slide
decks, with the specic objective of seeking investment from angel groups or VCs, are known
as investment presentation pitches.6

Pitch Deck (http://fundingsage.com/?post_type=explandict&p=1072)- A presentation

created by entrepreneurs that details the attributes of a startup opportunity in order to help
the entrepreneurs communicate it with investors, in their eorts to raise money to fund their
venture. The presentation, which typically includes approximately a dozen slides, provides a
summary of the startups business plan, and helps investors determine if they have a
continued interest in evaluating the company.6

PIV (http://fundingsage.com/?post_type=explandict&p=634)- Pooled Investment Vehicle. A

legal entity that pools various investors capital and deploys it according to a specic
investment strategy.8

Placement Agent (http://fundingsage.com/?post_type=explandict&p=635)- The investment

bank, broker, or other person that locates investors to purchase securities from the Company
in a private oering, in exchange for a commission.3

Plain English Handbook (http://fundingsage.com/?post_type=explandict&p=636)- The

Securities and Exchange Commission online version of Plain English Handbook: How to
Create Clear SEC Disclosure Documents.6

Platform as a Service (http://fundingsage.com/?post_type=explandict&p=2657)- A cloud

computing service category which provides a foundation upon which customers can develop,
operate and manage multiple app functionalities without the need to develop the underlying
infrastructure.6
- Synonyms: PaaS

PoisonPill (http://fundingsage.com/?post_type=explandict&p=637)- A right issued by a

corporation as a preventative to a takeover measure. It allows right holders to purchase shares
in either their company or in the combined target and bidder entity at a substantial discount,
usually 50%. This discount may make the takeover prohibitively expensive.3

Portal (http://fundingsage.com/?post_type=explandict&p=639)- The second type of

"Intermediary" authorized by the JOBS Act to facilitate securities-based crowdfunding,
providing legally-mandated information to potential investors, and then managing transfer of
the oered funds to the issuing companies in return for an equity ownership stake in or debt
instrument from the issuing company.1

Portfolio (http://fundingsage.com/?post_type=explandict&p=2372)- The collection of all of

the companies invested in by an angel or VC.7

Portfolio Companies (http://fundingsage.com/?post_type=explandict&p=638)- Startups and

other companies in which an angel group, venture capital fund or private equity rm have
invested.6

Post-money Cap Table (http://fundingsage.com/?post_type=explandict&p=1276)- A cap

table depicting the ownership of the founders and investors in terms of absolute quantities of
shares or units, depending upon entity type, and percentages of total ownership they
represent. These ownership stakes and the related analyses, typically represent the
stakeholders of a startup venture and also provides analysis of equity dilution. The table
depicting the value of the entity and equity holdings by each of the stakeholders after an
investment by new investors is a post-money cap table.6

Post-money Valuation (http://fundingsage.com/?post_type=explandict&p=640)- The

valuation of a startup company immediately following it's most recent round of nancing
calculated by taking the product from multiplying the startup's total number of shares or units
outstanding by the share or unit price of this latest nancing round.6

Pre-money Cap Table (http://fundingsage.com/?post_type=explandict&p=1275)- A cap

table depicting the ownership of the founders and investors in terms of absolute quantities of
shares or units, depending upon entity type, and percentages of total ownership they
represent. These ownership stakes and the related analyses, typically represent the
stakeholders of a startup venture and also provides analysis of equity dilution. The table
depicting the value of the entity and equity holdings by each of the stakeholders prior to an
investment by new investors is a pre-money cap table.6

Pre-money Valuation (http://fundingsage.com/?post_type=explandict&p=641)-

The companys value immediately before funding. If Post-Money Valuation = $2.5M and the
company raised $500K, then the pre-money valuation = $2M.2
The valuation of a company prior to a round of investment. This amount is determined by
using various calculation models, such as discounted P/E ratios multiplied by periodic
earnings or a multiple times a future cash ow discounted to a present cash value and a
comparative analysis to comparable public and private companies.3
Preemptive Right (http://fundingsage.com/?post_type=explandict&p=642)- A shareholder's
right to acquire an amount of shares in a future oering at current prices per share paid by
new investors, whereby his/her percentage ownership remains the same as before the
oering.3

PreferredDividend (http://fundingsage.com/?post_type=explandict&p=643)- A dividend

ordinarily accruing on preferred shares payable where declared and superior in right of
payment to common dividends.3

Preferred Stock (http://fundingsage.com/?post_type=explandict&p=644)-

A class of ownership that has a higher claim on assets than Common Stock. In the event of
Liquidation, preferred stock shareholders have priority over earnings and assets and
generally earn dividends, but forego voting rights.2
A class of capital stock that may pay dividends at a specied rate and that has priority over
common stock in the payment of dividends and the liquidation of assets. Many venture
capital investments use preferred stock as their investment vehicle. This preferred stock is
convertible into common stock at the time of an IPO.3
This is a type of corporate share where the holders can exercise more rights, preferences,
and privileges than those with common stocks. It is often issued by private corporations or
enterprises that have not gone public yet. Both angel investors and venture capitalists prefer
to invest with preferred stock because of the superior rights and protective provisions
associated with these shares.4

Prepaid Warrant (http://fundingsage.com/?post_type=explandict&p=1870)- A prepaid

warrant is a warrant issued by an issuer entitling the holder to exercise into a specied
number of dierent securities, for no additional nancial consideration, during a specied
time period.9

Private Companies (http://fundingsage.com/?post_type=explandict&p=2408)- Companies

that are not publicly traded on the stock market.7

Private Equity (http://fundingsage.com/?post_type=explandict&p=645)-

A company ownership position that is not listed and cannot be traded on a public securities
exchange. Issuance, ownership and exchange of private securities are regulated dierently
from those of public securities under federal and state law.1
Equity securities of companies that have not gone public (are not listed on a public
exchange). Private equities are generally illiquid and thought of as a long-term investment.
As they are not listed on an exchange, any investor wishing to sell securities in private
 companies must nd a buyer in the absence of a marketplace. In addition, there are many
transfer restrictions on private securities. Investors in private securities generally receive
their return through one of three ways: an initial public oering, a sale or merger, or a
recapitalization.3
Private equities are equity securities of unlisted companies. Private equities are generally
illiquid and thought of as a long-term investment. Private equity investments are not
subject to the same high level of government regulation as stock oerings to the general
public. Private equity is also far less liquid than publicly traded stock.5

Private Oering/Private Placement (http://fundingsage.com/?

post_type=explandict&p=646)- Sale of unregistered, restricted securities by the company.3

PrivatePlacement (http://fundingsage.com/?post_type=explandict&p=647)-
Also known as a Reg. D oering. The sale of a security directly to a limited number of
investors in a private transaction.3
Private placement is a term used specically to denote a private investment in a company
that is publicly held. Private equity rms that invest in publicly traded companies
sometimes use the acronym PIPEs to describe the activity. Private placements do not have to
be registered with organizations such as the SEC because no public oering is involved.5

Private PlacementMemorandum (http://fundingsage.com/?post_type=explandict&p=648)-

Also known as an Oering Memorandum. A document that outlines the terms of securities to
be oered in a private placement. Resembles a business plan in content and structure.3

Private Securities (http://fundingsage.com/?post_type=explandict&p=649)- Private

securities are securities that are not registered and do not trade on an exchange. The price per
share is set through negotiation between the buyer and the seller or issuer.3

Pro Forma (http://fundingsage.com/?post_type=explandict&p=1871)- A pro forma is a

description of nancial statements that have one or more assumptions or hypothetical
conditions built into the data. A nancial projection based on assumptions. Also, refers to a
statement of income and balance sheets that exclude non-recurring items.9

Professional Partner (http://fundingsage.com/?post_type=explandict&p=1259)- Services

and professional partners of the startup entity typically including, but not limited to their
commercial attorney, intellectual property attorney, accountant / CPA, consultants and
contract development partners.6
Promissory Note (http://fundingsage.com/?post_type=explandict&p=650)- A legal
document under which the borrower, (maker of the note) commits to re-pay the lender,
(holder of the note) the principal amount owed as represented by the note. This legal
document, or contract between the maker and the holder typically includes terms depicting
agreed details related to the arrangement, including among other items, interest rates,
reporting requirements and maturity dates.6

Proprietary Deal Flow (http://fundingsage.com/?post_type=explandict&p=2409)- When an

investor has an opportunity to review a deal before other potential investors.7

Prospectus (http://fundingsage.com/?post_type=explandict&p=651)- A formal written oer

to sell securities that provides an investor with the necessary information to make an
informed decision. A prospectus explains a proposed or existing business enterprise and must
disclose any material risks and information according to the securities laws. A prospectus
must be led with the SEC and be given to all potential investors. Companies oering
securities, mutual funds, and oerings of other investment companies including Business
Development Companies are required to issue prospectuses describing their history,
investment philosophy or objectives, risk factors, and nancial statements. Investors should
carefully read them prior to investing.3

Public Company (http://fundingsage.com/?post_type=explandict&p=652)-

A company that has securities that have been sold in a registered oering and that are
traded on a stock exchange or NASDAQ. Must be a Reporting Company under SEC rules.
Often used incorrectly to describe companies that are only Reporting Companies and that
have not conducted a registered oering under Securities Act.3
Under SEC rules, a company that decides to go public oers their securities (stock, bonds,
liabilities) to be sold in a registered public oering. Through the sale of such assets, a
corporation can raise capital for their company, employees, or executive sta. These public
oerings are often traded on a stock exchange.4

Put (http://fundingsage.com/?post_type=explandict&p=2514)- A contractual term/condition

which provides the investor the option to compel the company to purchase their shares.6

Putoption (http://fundingsage.com/?post_type=explandict&p=653)- The right to sell a

security at a given price (or range) within a given time period.3

QPAM (http://fundingsage.com/?post_type=explandict&p=654)- Qualied professional

asset manager as dened by ERISA.3
- Synonyms: Qualied Professional Asset Manager

Qualied Purchaser (http://fundingsage.com/?post_type=explandict&p=2378)- An

individual with more than $5 Million in investments.7

Quora (http://fundingsage.com/?post_type=explandict&p=2502)- A leading question-and-

answer website where many industry experts in early stage investing answer questions.7

Raising Capital (http://fundingsage.com/?post_type=explandict&p=1872)- Raising capital

refers to obtaining capital from investors or venture capital sources.9

Recapitalization (http://fundingsage.com/?post_type=explandict&p=655)- The

reorganization of a companys capital structure. A company may seek to save on taxes by
replacing preferred stock with bonds in order to gain interest deductibility. Recapitalization
can be an alternative exit strategy for venture capitalists and leveraged-buyout sponsors. (See
also: Exit Strategy and Leveraged Buyout.)3

Reconrmation (http://fundingsage.com/?post_type=explandict&p=656)- The act a

broker/dealer makes with an investor to conrm a transaction.3

RedHerring (http://fundingsage.com/?post_type=explandict&p=657)- The common name

for a preliminary prospectus, due to the red SEC required legend on the cover. (See also:
Prospectus.)3

RedeemablePreferredStock (http://fundingsage.com/?post_type=explandict&p=658)-
Redeemable preferred stock, also known as exploding preferred, at the holders option after
(typically) ve years, which in turn gives the holders (potentially converting to creditors)
leverage to induce the company to arrange a liquidity event. The threat of creditor status can
move the founders o the dime if a liquidity event is not occurring with sucient rapidity.3

Registered Oering (http://fundingsage.com/?post_type=explandict&p=659)- [Public

Oering] A transaction in which a Company sells specied securities to the public under a
Registration Statement which has been declared eective by the SEC.3
- Synonyms: Public Oering
Registration (http://fundingsage.com/?post_type=explandict&p=660)- The SECs review
process of all securities intended to be sold to the public. The SEC requires that a registration
statement be led in conjunction with any public securities oering. This document includes
operational and nancial information about the company, the management, and the purpose
of the oering. The registration statement and the prospectus are often referred to
interchangeably. Technically, the SEC does not approve the disclosures in prospectuses.3

RegistrationObligation (http://fundingsage.com/?post_type=explandict&p=661)- The

obligation of Company to register the shares issued to an investor in a private oering for
resale to the public through a Registration Statement which the SEC has declared eective.3

RegistrationRights (http://fundingsage.com/?post_type=explandict&p=662)- The right to

require that a company register restricted shares. Demand Registered Rights enable the
shareholder to request registration at any time, while Piggy Back Registration Rights enable
the shareholder to request that the company register his or her shares when the company les
a registration statement (for a public oering with the SEC).

Registration RightsAgreement (http://fundingsage.com/?post_type=explandict&p=663)-

Separate agreement in which the investors registration rights are evidenced.3

RegistrationStatement (http://fundingsage.com/?post_type=explandict&p=664)- The

document led by a Company with the SEC under the Securities Act in order to obtain approval
to sell the securities described in the Registration Statement to the public. [S-1, S-2, S-3, S-4,
SB-1, SB-2, S-8, etc.] Includes the Prospectus.3

RegulationA (http://fundingsage.com/?post_type=explandict&p=665)- SEC provision for

simplied registration for small issues of securities. A Reg. A issue may require a shorter
prospectus and carries lesser liability for directors and ocers for misleading statements.3

RegulationC (http://fundingsage.com/?post_type=explandict&p=666)- The regulation that

outlines registration requirements for Securities Act of 1933.3

Regulation D (http://fundingsage.com/?post_type=explandict&p=667)- Regulation D is the

rule (Reg. D is a regulation comprising a series of rules) that allow for the issuance and
sale of securities.3
RegulationD Oering (http://fundingsage.com/?post_type=explandict&p=668)- (See
Private Placement.)3

RegulationS (http://fundingsage.com/?post_type=explandict&p=669)- The rules relating to

Oers and Sales made outside the US without SEC Registration.

RegulationS-B (http://fundingsage.com/?post_type=explandict&p=670)- Reg. S-B of the

Securities Act of 1933 governs the Integrated Disclosure System for Small Business Issuers.3

Regulation S-K (http://fundingsage.com/?post_type=explandict&p=671)- The Standard

Instructions for Filing Forms Under Securities Act of 1933, Securities Exchange Act of 1934,
and Energy Policy and Conservation Act of 1975.3

RegulationS-X (http://fundingsage.com/?post_type=explandict&p=672)- The regulation

that governs the requirements for nancial statements under the Securities Act of 1933 and
the Securities Exchange Act of 1934.3

ReportingCompany (http://fundingsage.com/?post_type=explandict&p=674)- A company

that is registered with the SEC under the Exchange Act.3

Representations and Warranties (http://fundingsage.com/?post_type=explandict&p=2424)-

A list of material statements or facts that are included in the investment documentation and to
which the entrepreneur unequivocally commits.7

ResaleRegistration (http://fundingsage.com/?post_type=explandict&p=675)- Registration

by a Company of the investors sale of the shares purchased by the investor in a private
oering.3

Restricted Securities (http://fundingsage.com/?post_type=explandict&p=677)- Public

securities that are not freely tradable due to SEC regulations. (See also: Securities and
Exchange Commission.)3

RestrictedShares (http://fundingsage.com/?post_type=explandict&p=679)- Shares

acquired in a private placement are considered restricted shares and may not be sold in a
public oering absent registration or after an appropriate holding period has expired. Non-
aliates must wait one year after purchasing the shares, after which time they may sell less
than 1% of their outstanding shares each quarter. For aliates, there is a two-year holding
period.3

Retained Earnings (http://fundingsage.com/?post_type=explandict&p=1873)- Retained

earnings are the corporate prots that are neither paid out in cash dividends to stockholders
nor used to increase capital stock, but are reinvested in the company. It is calculated by adding
company's net income to beginning retained earnings and subtracting any dividends paid to
shareholders.9

Return on Investment (http://fundingsage.com/?post_type=explandict&p=681)-

(ROI)This term is also referred to as the rate on return (ROR) or rate of prot. It is the
amount of money that is gained in a past or existing investment. For example, angel
investors tend to invest in startups and early stage companies. Because such investment is
considered to be risky, they expect a large ROI to compensate for such risk.4
Return On Investment or ROI is the prot or loss resulting from an investment transaction,
usually expressed as an annual percentage return. ROI is a return ratio that compares the
net benets of a project versus its total costs.5

- Synonyms: ROI

Reverse Vesting (http://fundingsage.com/?post_type=explandict&p=2505)- When founders

of a company agree that they will give back part of their stock holdings if they leave the
company before a specied date (typically four years). This is usually required by investors,
and a good thing for founders themselves in the case of multiple founders.7

Right of First Refusal (http://fundingsage.com/?post_type=explandict&p=683)- A right is

given to enter into a business transaction before others. For example, preferred stockholders
have the right to purchase additional shares issued by the company.2 The right of rst refusal
gives the holder the right to meet any other oer before the proposed contract is accepted.3

RightsOering (http://fundingsage.com/?post_type=explandict&p=685)- Issuance of

rights to current shareholders allowing them to purchase additional shares, usually at a
discount to market price. Shareholders who do not exercise these rights are usually diluted by
the oering. Rights are often transferable, allowing the holder to sell them on the open
market to others who may wish to exercise them. Rights oerings are particularly common to
closed-end funds, which cannot otherwise issue additional ordinary shares.3
Risk (http://fundingsage.com/?post_type=explandict&p=687)- The probability that part or
all of an original investment will be lost or that investment returns will be lower than
anticipated. Numerous factors may impact these potential investment and return losses,
including but not limited to demand risk, economic risk, environmental risk, funding risk,
legislative risk, maintenance risk, operational risk, procurement risk, technology risk and
timing risk.6

Royalty Based Financing (http://fundingsage.com/?post_type=explandict&p=1874)- Royalty

based nancing presumes a fundamental trade-o between the investor and the business
owner. In lieu of an equity ownership stake given to the investor, business owners agree to
return to the investor the original principal plus either a predetermined multiple of the
original investment (xed dollar payback) or payment of the royalty until a xed period of
time has elapsed (xed time payback). In some cases the royalty is based on a percentage of
sales of a specic product or set of products.9

Rule 144 (http://fundingsage.com/?post_type=explandict&p=689)- Rule 144 provides for

the sale of restricted stock and control stock. Filing with the SEC is required prior to selling
restricted and control stock, and the number of shares that may be sold is limited.4

Rule144A (http://fundingsage.com/?post_type=explandict&p=692)- A safe-harbor

exemption from the registration requirements of Section 5 of the 1933 Act for resales of
certain restricted securities to qualied institutional buyers, which are commonly referred to
as QIBs. In particular, Rule 144A aords safe-harbor treatment for reoers or resales to
QIBs by persons other than issuers of securities of domestic and foreign issuers that are
not listed on a U.S. securities exchange or quoted on a U.S. automated inter-dealer quotation
system. Rule 144A provides that reoers and resales in compliance with the rule are not
distributions and that the reseller is therefore not an underwriter within the meaning of
Section 2(a)(11) of the 1933 Act. If the reseller is not the issuer or a dealer, it can rely on the
exemption provided by Section 4(1) of the 1933 Act. If the reseller is a dealer, it can rely on the
exemption provided by Section 4(3) of the 1933 Act.3

Rule 144AExchange Oer (http://fundingsage.com/?post_type=explandict&p=694)- A

transaction in which one class of securities that were issued in a private placement are
exchanged for another, unusually almost identical, class of securities, in a transaction
registered with the SEC on a Form S-4 Registration Statement.3

Rule501 (http://fundingsage.com/?post_type=explandict&p=696)- Rule 501 of Regulation D

denes Accredited Investor, among other denitions and regulations.3
Rule505 (http://fundingsage.com/?post_type=explandict&p=697)- Rule 505 of Regulation
D is an exemption for limited oers and sales of securities.3

Rule 506 (http://fundingsage.com/?post_type=explandict&p=699)- Rule 506 of Regulation

D is considered a safe harbor for the private-oering exemption of Section 4(2) of the
Securities Act of 1933. Companies using the Rule 506 exemption can raise an unlimited
amount of money if they meet certain exemptions.3

Runway (http://fundingsage.com/?post_type=explandict&p=2389)- How long a startup can

survive before it goes broke; that is, the amount of cash in the bank divided by the burn rate.7

S-Corporation (http://fundingsage.com/?post_type=explandict&p=2576)- A closely held

business corporation which has the ability to make an election to pass corporate income,
deductions and losses to shareholders for federal income tax purposes. S-Corporations may
not have more than 100 shareholders, a shareholder who is not an individual, (special
exemptions may apply) or more than one class of stock. As a result, they are not generally
viewed as good structures for entrepreneurs seeking to nance their companies with funding
from angels, angel groups or venture capital rms.6

SaaS (http://fundingsage.com/?post_type=explandict&p=1957)- SaaS refers to Software as a

Service, a cloud based software application where users are charged on a subscription basis.6

SAFE (http://fundingsage.com/?post_type=explandict&p=2425)- Simple Agreement for

Future Equity, a new form of funding for early stage companies developed by YCombinator to
solve a number of issues with traditional convertible note nancing.7

SBIR (http://fundingsage.com/?post_type=explandict&p=704)- Small Business Innovation

Research Program. See Small Business Innovation Development Act of 1982.3
- Synonyms: Small Business Innovation Research

Screening (http://fundingsage.com/?post_type=explandict&p=2575)- A process utilized by

individual investors, angel groups and VC funds to determine their interest in investment
opportunities. The screening may be informal or formal in nature and typically includes an
assessment of the opportunity against the investors previously determined criteria for
investment.6
SEC (http://fundingsage.com/?post_type=explandict&p=2381)- The United States Securities
and Exchange Commission charged with regulating all sales of corporate securities.7
- Synonyms: Securities and Exchange Commission

Secondary Purchase (http://fundingsage.com/?post_type=explandict&p=706)- Secondary

Purchase is purchase of stock in a company from a shareholder rather than purchasing stock
directly from the company.5

Secondary Sale (http://fundingsage.com/?post_type=explandict&p=708)- The sale of

private or restricted holdings in a portfolio company to other investors.3

Securities (http://fundingsage.com/?post_type=explandict&p=710)- Includes all types of

equity and debt instruments and rights in and to them.3

SecuritiesActof1933 (http://fundingsage.com/?post_type=explandict&p=712)- The federal

law covering new issues of securities. It provides for full disclosure of pertinent information
relating to the new issue and also contains antifraud provisions.3

Securities Act of 1934 (http://fundingsage.com/?post_type=explandict&p=713)- The federal

law that established the Securities and Exchange Commission. The act outlaws
misrepresentation, manipulation, and other abusive practices in the issuance of securities.
Securities and Exchange Commission: The SEC is an independent, nonpartisan, quasi-judicial
regulatory agency that is responsible for administering the federal securities laws. These laws
protect investors in securities markets and ensure that investors have access to all material
information concerning publicly traded securities. Additionally, the SEC regulates rms that
trade securities, people who provide investment advice, and investment companies.3

Seed Capital (http://fundingsage.com/?post_type=explandict&p=717)- Seed Capital is the

money used to purchase equity-based interest in a new or existing company. This seed capital
is usually quite small because the venture is still in the idea or conceptual stage.5
- Synonyms: Seed Money

Seed Fund (http://fundingsage.com/?post_type=explandict&p=2388)- A venture capital

fund specializing in very-early-stage startups.7

Seed Money (http://fundingsage.com/?post_type=explandict&p=720)- The initial round of

capital for start-up companies, typically provided by angel investors through preferred stock
6
or convertible bond type instruments.6
- Synonyms: Seed Capital

Seed Round (http://fundingsage.com/?post_type=explandict&p=2414)- The rst

investments made into a company by someone other than the founder. The term comes from
planting a seed for the rst time.7

Seed Stage (http://fundingsage.com/?post_type=explandict&p=722)- The stage of a scalable

startup immediately following the concept stage. In this stage, the entrepreneurs typically
validate their product or service to the marketplace, develop their MVP, commence initial
market testing and development, and begin development of their business model / go to
market strategy. The rst formal round of investment beyond friends and family typically
occurs in this round with investment from super angels, angel groups and micro VCs.6
- Synonyms: Start-up Stage

Seed Stage Financing (http://fundingsage.com/?post_type=explandict&p=724)- An initial

state of a companys growth characterized by a founding management team, business-plan
development, prototype development, and beta testing.3

Senior Securities (http://fundingsage.com/?post_type=explandict&p=726)- Securities that

have a preferential claim over common stock on a companys earnings and in the case of
liquidation. Generally, preferred stock and bonds are considered senior securities.3

Serial Entrepreneur (http://fundingsage.com/?post_type=explandict&p=2379)- An

entrepreneur who has previously founded and run one or more ventures.7

Series A (http://fundingsage.com/?post_type=explandict&p=727)- A companys rst

signicant round of venture funding (though angels often participate in this round).2

Series A Crunch (http://fundingsage.com/?post_type=explandict&p=2464)- A putative

problem that has, or may occur if more companies get early stage funding from angels and
seed funds than are eventually able to obtain later stage funding from venture capital funds.7

Series A Preferred Stock (http://fundingsage.com/?post_type=explandict&p=728)-

The rst round of stock oered during the seed or early-stage round by a portfolio company
to the venture investor or fund. This stock is convertible into common stock in certain cases
 such as an IPO or the sale of the company. Later rounds of preferred stock in a private
company are called Series B, Series C, and so on.3
Series A Preferred Stock is the rst round of stock oered during the seed or early stage
round by a portfolio company to the venture capitalist. Series A preferred stock is
convertible into common stock in certain cases such as an IPO or the sale of the company.
Later rounds of preferred stock in a private company are called Series B, Series C and so on.5

Series B, C, D... (http://fundingsage.com/?post_type=explandict&p=2430)- Investment

rounds from venture capital funds subsequent to the rst Series A round.7

Series Seed (http://fundingsage.com/?post_type=explandict&p=2426)- Used generally to

refer to the rst equity round from serious seed or angel investors in a company, following its
Friends & Family round but prior to a Series A.7

Shareholders Agreement (http://fundingsage.com/?post_type=explandict&p=2479)- An

agreement signed during a nancing transaction by all of a company's shareholders in which
they agree in advance to certain provisions. These will typically include indicating which
parties are entitled to designate members of the board of directors, and thus control the
company.7

Shell Corporation (http://fundingsage.com/?post_type=explandict&p=729)- A corporation

with no assets and no business. Typically, shell corporations are designed for the purpose of
going public and later acquiring existing businesses. Also known as Specied Purpose
Acquisition Companies (SPACs).3

Sherpa (http://fundingsage.com/?post_type=explandict&p=2501)- In the startup world, an

advisor who helps guide and support a new company.7

Silent Partner (http://fundingsage.com/?post_type=explandict&p=730)- A silent partner is

an investor who does not have any management responsibilities but provides capital and
shares liability for any losses experienced by the entity. Silent partners are liable for in any
losses up to the amount of their invested capital and participate in any tax and cash ow
benets.5

Small Business Administration (SBA) (http://fundingsage.com/?

post_type=explandict&p=731)- Provides loans to small-business investment companies

3
(SBICs) that supply venture capital and nancing to small businesses.3
- Synonyms: SBA

SmallBusinessInnovationDevelopmentActof1982 (http://fundingsage.com/?
post_type=explandict&p=732)- The Small Business Innovation Research (SBIR) program is a
set-aside program for domestic small-business concerns to engage in Research/Research and
Development (R/R&D) that has the potential for commercialization. The SBIR program was
established under the Small Business Innovation Development Act of 1982, reauthorized until
September 30, 2000 by the Small Business Research and Development Enhancement Act, and
reauthorized again until September 30, 2008 by the Small Business Reauthorization Act of
2000.3

Small Business Investment Companies (http://fundingsage.com/?

post_type=explandict&p=733)- (SBIC) Small Business Investment Companies or SBIC are
lending and investment rms that are licensed and regulated by the Small Business
Administration . The licensing enables them to borrow from the federal government to
supplement the private funds of their investors. SBICs prefer investments between $100,000
to $250,000 and have much more generous underwriting guidelines than a venture capital
rm.5
- Synonyms: SBIC

Sni Test (http://fundingsage.com/?post_type=explandict&p=2355)- A colloquial

expression referring to a quick assessment of a situation to see whether it appears legitimate.7

Social Proof (http://fundingsage.com/?post_type=explandict&p=2418)- An investment

approach leaning heavily on the identity of other, well-known people who are supporting the
company.7

Social Venture (http://fundingsage.com/?post_type=explandict&p=2354)- A company

established to create societal benet through entrepreneurial methods.7

Society for Corporate Compliance and Ethics (http://fundingsage.com/?

post_type=explandict&p=734)- (SCCE)A non-prot professional organization dedicated to
fostering law-compliant and ethical corporate behavior.
Seehttp://www.corporatecompliance.org (http://www.corporatecompliance.org/)for more
information.1
- Synonyms: SCCE
Soft Landing (http://fundingsage.com/?post_type=explandict&p=2353)- A face-saving
acquisition of an unsuccessful startup, usually for little or no compensation.7

Spray and Pray (http://fundingsage.com/?post_type=explandict&p=2352)- Investing in lots

of companies in the hopes that one of them will hit it big.7

StaggeredBoard (http://fundingsage.com/?post_type=explandict&p=735)- This is an anti-

takeover measure in which the election of the directors is split in separate periods so that only
a percentage (e.g., one-third) of the total number of directors come up for election in a given
year. It is designed to make taking control of the board of directors more dicult.3

Startup (http://fundingsage.com/?post_type=explandict&p=736)- Startup is a new business

venture in its earliest stage of development.5

StatutoryVoting (http://fundingsage.com/?post_type=explandict&p=737)- A method of

voting for members of the Board of Directors of a corporation. Under this method, a
shareholder receives one vote for each share and may cast those votes for each of the
directorships. For example: An individual owning 100 shares of stock of a corporation that is
electing six directors could cast 100 votes for each of the six candidates. This method tends to
favor the larger shareholders.3

Stock Option Pool (http://fundingsage.com/?post_type=explandict&p=738)- Shares of stock

reserved for employees of a company. The option pool is a way of attracting talented
employees to a startup company - if the employees help the company do well enough to go
public, they will be compensated with stock. Employees who get into the startup early will
usually receive a greater percentage of the option pool than employees who arrive later.2

StockOptions (http://fundingsage.com/?post_type=explandict&p=739)- 1) The right to

purchase or sell a stock at a specied price within a stated period. Options are a popular
investment medium, oering an opportunity to hedge positions in other securities, to
speculate on stocks with relatively little investment, and to capitalize on changes in the
market value of options contracts themselves through a variety of options strategies. 2) A
widely used form of employee incentive and compensation. The employee is given an option to
purchase its shares at a certain price (at or below the market price at the time the option is
granted) for a specied period of years.3
Strategic Investors (http://fundingsage.com/?post_type=explandict&p=740)- Corporate or
individual investors that add value to investments they make through industry and personal
ties that can assist companies in raising additional capital as well as provide assistance in the
marketing and sales process.3

STTR (http://fundingsage.com/?post_type=explandict&p=2466)- The Small Business

Technology Transfer program, from the US government; intended to assist educational
institutions in transferring new technology to the private sector.7

Subordinated Debt (http://fundingsage.com/?post_type=explandict&p=742)- A note or loan

which can only be paid after other, more senior or higher ranking obligations can be paid, in
the event of a liquidation. This type of obligation, also known as "junior debt" is riskier than
unsubordinated, debt which has preferential claims on company assets.6

Subscription Agreement (http://fundingsage.com/?post_type=explandict&p=741)-

The application submitted by an investor wishing to join a limited partnership. All
prospective investors must be approved by the General Partner prior to admission as a
partner.3
An application under which an investor applies to acquire a specic number of shares or
units of a company at a specic price, at a later date, assuming the investor can be
determined to be qualied under SEC guidelines and the companys meeting certain
conditions. The agreement establishes the terms and conditions under which the investor
will be bound if accepted.6

Success Fee (http://fundingsage.com/?post_type=explandict&p=2345)- A percentage

commission paid to an intermediary or other individual as an incentive on the closing of a
large nancing transaction.7

Super Angel (http://fundingsage.com/?post_type=explandict&p=2346)- A misnomer

describing micro VCs. True super angels are active angels who make many signicant
investments, nd and negotiate investments, and can bring other investors along with them.7

Supermajority (http://fundingsage.com/?post_type=explandict&p=2567)- The percentage

dening the level of shareholders that must approve signicant company actions such as
borrowing money, or acquiring or merging with another business; typically dened in the
60.0% to 66.67% range.6
Syndicate (http://fundingsage.com/?post_type=explandict&p=743)- Underwriters or
broker/dealers who sell a security as a group.3

Syndication (http://fundingsage.com/?post_type=explandict&p=1115)- The process whereby

a group of venture capitalists will each put in a portion of the amount of money needed to
nance a small business.5

Tag Along/Drag Along (http://fundingsage.com/?post_type=explandict&p=2465)-

Provisions in a Shareholders Agreement that permit investors under certain dened
circumstances to sell their shares if you sell yours (tag), or force you to sell your shares if they
sell theirs (drag).7

Tag-AlongRights/ Rights of Co-Sale (http://fundingsage.com/?

post_type=explandict&p=744)- A minority-shareholder protection aording the right to
include their shares in any sale of control and at the oered price.3

Takedown Schedule (http://fundingsage.com/?post_type=explandict&p=745)- A takedown

schedule means the timing and size of the capital contributions from the limited partners of a
venture fund.3

Tax-freeReorganizations (http://fundingsage.com/?post_type=explandict&p=746)- Types

of business combinations in which shareholders do not incur tax liabilities. There are four
types A, B, C, and D reorganizations. They dier in various ways in the amount of
stock/cash that can be oered.3

Tenderoer (http://fundingsage.com/?post_type=explandict&p=747)- An oer to purchase

stock made directly to the shareholders. One of the more common ways hostile takeovers are
implemented.3

Terms Sheet (http://fundingsage.com/?post_type=explandict&p=748)- A non-binding

agreement or template that outlines an overview of the terms and conditions between the
entrepreneur and investor, which will ultimately be incorporated in the denitive investment
agreements between the parties.6

Time Value of Money (http://fundingsage.com/?post_type=explandict&p=749)- The basic

principle that money can earn interest; therefore, something that is worth $1 today will be
worth more in the future if invested. This is also referred to as future value.3
TreasuryStock (http://fundingsage.com/?post_type=explandict&p=750)- Stock issued by a
company but later reacquired. It may be held in the companys treasury indenitely, reissued
to the public, or retired. Treasury stock receives no dividends and does not carry voting power
while held by the company.3

TrustIndenture (http://fundingsage.com/?post_type=explandict&p=751)- Agreement

between the Company, the debt holders, and the trustee for the debt holders. Required for
registered oerings of debt securities. (See Trust Indenture Act of 1939.)3

Turnaround (http://fundingsage.com/?post_type=explandict&p=1875)- Turnaround is the

term used when the poor performance of a company or the business experiences a positive
reversal.9

ULPA (http://fundingsage.com/?post_type=explandict&p=752)- Uniform Limited

Partnership Act, see also the RULPA, Revised Uniform Limited Partnership Act U.L.P.A. 101 et
seq. (1976), as amended in 1985 (R.U.L.P.A.).3

Underwriter (http://fundingsage.com/?post_type=explandict&p=753)- An investment

banking rm leading the oat of a public issue, with the commitment and willingness to take
the securities being oered into its own book should the distribution fail. 6

Underwritten Oering (http://fundingsage.com/?post_type=explandict&p=754)- Registered

oering that is sold through a consortium of investment banks assembled by one or more lead
investment banks.3

UnitOering (http://fundingsage.com/?post_type=explandict&p=755)- Private or public

oering of securities in groups of more than one security. Most often a share of stock and
warrant to purchase some number of shares of stock, but could be two shares of stock, a note
and a share of stock, etc. Also used in some cases to refer to the sale of LP and LLC interests,
since those interests are composed of more than one right.3

Up-round (http://fundingsage.com/?post_type=explandict&p=2351)- When the valuation of

a company at the time of an investment round is higher than its valuation at the conclusion of
the previous round.7

Valley of Death (http://fundingsage.com/?post_type=explandict&p=2371)- The period

between the initial funding and the end of the runway. If you get through here, you should be
7
okay. If not...7

Vanity Metrics (http://fundingsage.com/?post_type=explandict&p=2693)- Information and

data collected by and about a company, its management or its users that serve little purpose
beyond internal emotional validation of the company. Such information and data lack the
quality and depth to support business decisions.6

Venture (http://fundingsage.com/?post_type=explandict&p=756)- Venture is often used for

referring to a risky start-up or enterprise company.5

Venture Capital (http://fundingsage.com/?post_type=explandict&p=757)- Investment

capital made available to high growth, scalable startups, typically beginning at the early stage,
from a fund supported by accredited investors.6

Venture Capital Financing (http://fundingsage.com/?post_type=explandict&p=759)- A type

of private equity investment provided to early stage high growth startup companies in the
latter stages of development, which have the potential for exceptional nancial returns. Such
venture capital investments typically range from $250,000 to $10 Million.6

Venture Capital Firm (http://fundingsage.com/?post_type=explandict&p=760)- Venture

Capital Firm is an investment company that invests its shareholders' money in startups and
other risky but potentially very protable ventures.5

Venture Capital Funds (http://fundingsage.com/?post_type=explandict&p=761)- Venture

capital funds pool and manage money from investors seeking private equity stakes in small
and medium-size enterprises with strong growth potential.5

Venture Capital Limited Partnership (http://fundingsage.com/?

post_type=explandict&p=762)- Venture Capital Limited Partnership is a limited partnership
which is formed to invest in small startup businesses with exceptional growth potential.5

Venture Capitalist (http://fundingsage.com/?post_type=explandict&p=758)- A group of

high net worth investors who pool their money to invest in later stage startup companies.6

Venture Debt (http://fundingsage.com/?post_type=explandict&p=2410)- A type of debt

nancing provided to venture-backed companies from specialized banks or non-bank
7
lenders.7

Vesting (http://fundingsage.com/?post_type=explandict&p=763)- A process in which you

earn your stock overtime. The purpose of vesting is to grant stock to people over a xed
period of time so they have an incentive to stick around. A typical vesting period for an
employee or Founder might be 3 - 4 years, which would mean they would earn 25% of their
stock each year over a 4 year period. If they leave early, the unvested portion returns back to
the company.2

Vesting Schedule (http://fundingsage.com/?post_type=explandict&p=2566)- A timetable

and methodology under which a startup releases shares to employees, management, founders,
advisors, board members and other company stakeholders.6

Voicemail Script (http://fundingsage.com/?post_type=explandict&p=1262)- A short, clear,

crisp engaging message which provides a succinct overview of your startup concept and
business model and can be shared via either email or telephone as a reply to potential
investors who have expressed an interest in your opportunity.6

VotingRight (http://fundingsage.com/?post_type=explandict&p=764)- The common

stockholders right to vote their stock in the aairs of the company. Preferred stock usually
has the right to vote when preferred dividends are in default for a specied amount of time.
The right to vote may be delegated by the stockholder to another person.3

Vulture Capitalist (http://fundingsage.com/?post_type=explandict&p=2350)- A VC whose

operating method is to diliberetely take advantage of an entrepreneur's troubles.7

Walking Dead (http://fundingsage.com/?post_type=explandict&p=2348)- A company that

isn't bankrupt, but will never succeed, and thus can't be sold or otherwise exited.7

Wantrepreneur (http://fundingsage.com/?post_type=explandict&p=2694)- An individual

who continuously ponders, desires or wants to start a business, acts as if they are an
entrepreneur but fails to take the steps necessary to establish and operate a business.6

Warrant (http://fundingsage.com/?post_type=explandict&p=765)- A type of security that

entitles the holder to buy a proportionate amount of common stock or preferred stock at a
specied price for a period of years. Warrants are usually issued together with a loan, a bond,
or preferred stock and act as sweeteners, to enhance the marketability of the accompanying
securities. They are also known as stock-purchase warrants and subscription warrants.3

Waterfall (http://fundingsage.com/?post_type=explandict&p=2349)- The order in which

investors (and everyone else) get their money out on an exit. Almost always this is "last in,
rst out."7

WeightedAverageAntidilution (http://fundingsage.com/?post_type=explandict&p=766)-
The investors conversion price is reduced, and thus the number of common shares received
on conversion increased, in the case of a down round; it takes into account both: (a) the
reduced price and, (b) how many shares (or rights) are issued in the dilutive nancing.3

WilliamsActof1968 (http://fundingsage.com/?post_type=explandict&p=767)- An
amendment of the Securities and Exchange Act of 1934 that regulates tender oers and other
takeover-related actions such as larger share purchases.3

Wireframe (http://fundingsage.com/?post_type=explandict&p=2685)- A visual depiction in

the form of a schematic or blueprint that represents the framework of a website and related
web pages. Typically low tech, it lacks in "look and feel" characteristics, focusing more on the
layout of the pages and arrangement of the content including potential navigational
processes.6

Workout (http://fundingsage.com/?post_type=explandict&p=768)- A negotiated agreement

between the debtor and its creditors outside the bankruptcy process.3

World Business Angel Association (http://fundingsage.com/?

post_type=explandict&p=769)- (WBAA)A non-government organization whose direct
members are national federations, which in turn represent business angel groups and
networks in their respective countries. Neither business angel groups themselves, nor
individual business angel investors, are members of WBAA, although they may be involved
with the organization in other ways and participate actively in its programs. Countries whose
national business angel federations are represented in the organization include Australia,
Chile, China, France, Germany, India, Italy, New Zealand, Panama, Portugal, Scotland, Spain,
United Arab Emirates, United Kingdom, and the United States, as well as the European Union.

Write-o (http://fundingsage.com/?post_type=explandict&p=770)- The act of changing the

value of an asset to an expense or a loss. A write-o is used to reduce or eliminate the value of

3
an asset and reduce prots.3

Write-up/Write-down (http://fundingsage.com/?post_type=explandict&p=771)- An upward

or downward adjustment of the value of an asset for accounting and reporting purposes. These
adjustments are estimates and tend to be subjective, although they are usually based on events
aecting the investee company or its securities benecially or detrimentally.3

Zombie Fund (http://fundingsage.com/?post_type=explandict&p=2347)- A VC rm that

can't raise a new fund, and thus can't make new investments.7

Zombie Startup (http://fundingsage.com/?post_type=explandict&p=2686)- A company

which claims to have continuing operations but which demonstrates little or no growth in
website visitations or use in recent quarters.6

Notes:

1. Source: Crowdfunding Professional Association website

2. Source: 37 Angels website
3. Source: Angel Capital Association website
4. Source: Go4Funding website
5. Source: FundingPost website
6. Source: FundingSage, LLC
7. Source: Angel Investing, by David S. Rose
8. Source: Institutional Limited Partners Association website
9. Source: Venture Choice website
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