A Private Equity Glossary
Seed capital is the money raised to begin developing a business or a new product. It might cover only the essentials such as a business plan and operating expenses. The term “angel” came from the Broadway theater, when wealthy individuals gave money to propel theatrical productions. The term “angel investor” was first used by the University of New Hampshire’s William Wetzel, founder venture capital glossary of the Center for Venture Research. A concept applicable to both stock and options, which prevents the recipient from owning all stock or options outright and instead earn them over time. For stock, vesting typically refers to stock that’s earned over time and, therefore, not re-purchasable by the company. For options, vesting indicates the number of options that become exercisable.
- A type of fund that has a fixed number of shares outstanding, which are offered during an initial subscription period, similar to an initial public offering.
- Multiples tend to be one and one-half to three times the purchase price.
- However, in certain financings new investors may require that their liquidation preference amount be equal to more than the amount they originally invested (often referred to as a “multiple” liquidation preference).
- A reverse stock split has no economic effect in and of itself, but is usually undertaken when a company’s stock price has fallen significantly and the company wants to raise it to a more typical range.
- The conversion of existing preferred stock into common or a new series of preferred stock has a significant economic effect, as those stockholders will often lose substantial liquidation preferences and other rights.
- A multiple liquidation preference will almost always also be a senior liquidation preference as well.
A person who provides backing to very early-stage businesses or business concepts. Angel investors are typically entrepreneurs who have become wealthy, often in technology-related industries. The amount of securities assigned to an investor, broker, or underwriter in an offering. 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. A group of external advisors to a private equity group or portfolio company. Advice provided varies from overall strategy to portfolio valuation.
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The report must be filed within 90 days after the end of the company’s fiscal year. the sale or exchange of a company ownership for cash, debt, or equity. The process of spreading investments among various different types of securities and various companies in different fields. A stock having a provision that if one or more dividend payments are omitted, the omitted dividends must be paid before dividends may be paid on the company’s common stock. Venture capital provided by [in-house investment funds of] large corporations to further their own strategic interests.
Microventures
An offering in which the investment banker agrees to distribute as much of the offering as possible, and return any unsold shares to the issuer. performance goals against which startups are measured if they want more investment money. Usually venture capital glossary an outsider hired by a syndicate of angel investors to perform due diligence on investment opportunities and coordinate allotment of investment duties among members. Archangels typically have no financial commitment to the syndicate.
A common term that refers to laws passed by various states to protect the public against securities venture capital glossary fraud. The term originated when a judge ruled that a stock had as much value as apatch of blue sky.
The period begins on the date of purchase and ends on the date of sale, and determines whether a gain or loss is considered short-term or long-term, for capital gains tax purposes. The general shape and form of a chart showing revenue, customers, cash, or some other financial venture capital glossary or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts to impress potential investors. Receipts for shares in a foreign based corporation traded in capital markets around the world.
Glossary Of Investment Terms
A condition in which securities prices fall and widespread pessimism causes the stock market’s downward spiral to be self-sustaining. Calculated by dividing the gross dividend by the share price and expressed as percentage. It shows the annual return on an investment from interest and dividends, excluding any capital gain element. It may be held in the company’s treasury indefinitely, reissued to the public, or retired. Treasury stock receives no dividends and does not carry voting power while held by the company.
A type of debt financing provided to venture-backed companies from specialized banks or non-bank lenders. Used generically to refer to a company’s first equity round from serious seed or angel investors following its friends & family round but prior to a Series A. A term in VC financings that requires investors to participate in future down-valuation financings of the company, or else suffer punitive consequences . A different way of distributing ownership-options are the right to buy shares based on a set of conditions. When an option is “exercised,” the option to buy stock is used and the result is issued shares.
In other cases, an initial acquisition may serve as the platform through which the other acquisitions will be made. A barrier against information flows between different divisions or operating groups within banks and securities firms. Examples include a policy barrier between the trust venture capital glossary department from making investment decisions based on any substantive inside information that may come into the possession of other bank departments. The term also refers to barriers against information flows between corporate finance and equity research and trading operations.
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corporate VCs are specialized subsidiaries within corporations with a mission to spread their cash around. Some investments are strategic (“Hey, we do similar things, let’s work together…”) or purely financial (“That idea isn’t really in our wheelhouse, venture capital glossary but it looks like it’s going to make money, so we want in”), or a blend. Startups can also profit from the corporation’s experience and other resources . In some cases, a holding company will be created to acquire the new companies.