Investor Dictionary

Accelerator - A program that provides mentorship, resources, and funding to startups in exchange for equity.

Accredited Investor - An accredited investor is someone who meets certain criteria set by a governing entity (in the US, this is the SEC)

Allocation - The portion of a fund's capital designated for a specific investment or asset class.

Alpha Test - The initial testing phase of a product or service conducted internally before releasing it to a larger audience.

Angel Investor - Someone who invests their own money directly into startups

Anti-Money Laundering (AML) - A set of rules and measures designed to keep the financial world clean. It helps banks and investment folks prevent bad actors from using the system for illegal activities by ensuring transparency in money transactions.

Asset Class - A group of financial instruments with similar characteristics and behaviors. Common asset classes include stocks, bonds, real estate, and commodities.

Bad Actor - Someone who tries to play unfairly or do something unethical or illegal in the investment world. Rules and safeguards are in place to catch and stop these bad players, keeping the financial game fair for everyone.

Beta Test - A beta test lets a small group of people try out a product before it is launched to see how well it works and if any improvements are needed. 

Bootstrapping - When someone starts and grows a business using their own resources and money, without relying on outside help like loans or investors.

Burn Rate - The speed at which a business spends its money. It's how fast the money "burns," or gets used up. Understanding the burn rate helps investors and business owners know how long the money will last before they need to bring in more.

Cap Table - A financial chart that lists all owners and how much of the company they own. 

Capital Call - When a company or fund requests a certain percentage of committed capital.

Capital Call Notice - A notice where investors are asked to contribute more money to a business or investment fund.

Capital Call Notice Period - The time between giving investors notice of a capital call and when they actually need to transfer over the money.

Capital Commitment - The total amount of money an investor promises to contribute to a business or investment fund.

Capital Line of Credit - An amount of money a business can borrow when needed, but they only pay interest on what they use. 

Capital Raising Exemptions - Regulatory exceptions that allow businesses to fundraise without having to complete the comprehensive registration process mandated by securities regulators. These allowances are designed to expedite capital formation and streamline the fundraising process, providing these businesses with a more accessible route for obtaining capital while maintaining investor protections.

Carried Interest - A percentage of the profits earned by an investment fund that fund managers receive as compensation for successful investments.

Check Size - The amount of money an investor is willing to invest in a particular opportunity.

Clawback - A legal way to take back some money. It happens when investors get back some of the profits they shared when certain conditions are met. These terms will be outlined in any legal document.

Close - The finalization of a funding round or investment.

Co-Investment - a collaborative effort where multiple investors join forces to support a venture or project, sharing both the risks and rewards.

Common Stock - A type of ownership in a company indicating that you're a shareholder and have a claim on the company's profits.

Competitive Advantage - A special “power,” or skill, that gives a business an edge over others. It could be something unique they do better or differently, making them stand out in the market.

Conflict of Interest - Competing interests that could influence decision-making.

Convertible Note - A type of debt that can convert into equity under predetermined conditions.

Crowdfunding - A group effort to fund a project or business. Instead of relying on one big investor, many people contribute small amounts of money to help the project or business get off the ground. 

Deal - A specific investment opportunity or transaction.

Deal Flow - The amount of investment opportunities an investor receives

Debt Financing - A loan to fund a business or project in place of giving away ownership. The borrower agrees to repay the loan amount plus interest over time. 

Derisk -  taking steps to make an investment less risky. It involves strategies and actions to minimize potential losses or uncertainties.

Distribution - The payment of profits or returns to investors.

Due Diligence - Conducting thorough research by checking details, understanding the risks, and making sure everything about the company adds up.

Equity - Ownership in a company represented by shares of stock.

Equity Financing - Selling a piece of the ownership in a business to raise funds. Investors buy shares and become partial owners.

Exit - The process of selling or divesting an investment, providing a return to investors.

Financial Statements - The formal records of a company's financial activities and position, including the income statement, balance sheet, and cash flow statement, and provides a comprehensive view of the company's financial performance.

Fiscal Year - A 12-month accounting period used for financial reporting, beginning at any predetermined date.

Follow On - Additional investment in a company in which an investor has already invested, typically at the same terms as the original investment.

Fund Duration - The period during which the fund operates, making investments and managing assets before reaching the end of its planned existence.

Fund Extension - An agreed upon duration when the original timeline isn't enough to wind down the fund.

Fundraising - The process of gathering money for a specific purpose, often used in the context of raising capital for a business, investment fund, or a particular project.

Fundraising Period - The window of time during which a business or investment fund actively seeks contributions or investments.

General Partner (GP) - An individual or entity managing a venture capital fund.

General Solicitation - Advertising or marketing efforts to reach a broader audience and generate interest in an investment opportunity. This is highly regulated in most countries.

Good Faith - Acting with honesty and sincerity, without fraudulent intent.

Growth Stage - Beyond the early startup phase and involves scaling up operations, increasing market share, and capturing more customers.

Incubator - Builds out beginning-stage ideas with resources, mentorship, and funding builds out a business model and company.

Initial Public Offering (IPO) - When a privately held company starts selling its shares to the public for the first time, allowing anyone to become a shareholder.

Interest - A fee paid for borrowing money or the return earned on an investment. 

Intrastate Offerings - Designed to support local economies and foster investment within a specific geographic region.

Investment - Putting money into something with the expectation of making more money in the future. It could be stocks, real estate, or a business.

Investment Period - The phase when the fund is actively deploying capital into various opportunities.

Lead Investor credit: Sunita Uthra - investor who does the primary due diligence for any given investment

Letter of Intent (LOI) - A formal note outlining the key terms and conditions of a potential agreement between parties, expressing the intention to move forward.

Limited Partner Agreement (LPA) - A legal document that outlines the rights, responsibilities, and terms for all limited partners participating in the investment venture.

Limited Partner (LP) - An investor in a limited partnership who contributes capital to the partnership, but typically has limited involvement in its management. They share in the profits but have liability protection.

Limited Partnership - An arrangement where some partners actively manage a business (general partners), and others invest money but have limited involvement (limited partners).

Liquidation - Wrapping things up and selling assets to pay off debts. It can refer to selling off a company's assets when it's shutting down or distributing proceeds to investors when closing a fund.

Management Fee - A regular fee paid by investors to compensate the fund managers for overseeing and managing the fund's operations.

Market Capitalization (Market Cap) - The total value of a publicly traded company. It's calculated by multiplying the company's current stock price by the total number of outstanding shares. Market cap helps investors gauge the size and value of a company in the stock market.

Marketable Securities - Investments that can be easily bought or sold in the financial markets. These include stocks, bonds, or other financial instruments that have high liquidity, meaning they can be quickly converted to cash.

Minimum - The minimum amount of money an investor needs to contribute to join a fund or the minimum investment required to participate in a particular opportunity.

Minimum Viable Product (MVP) - The simplest version of a new product or service that can be used and tested. It allows creators to get their idea out quickly and gather feedback to make improvements.

Organizational Expenses - Costs incurred when setting up and organizing a new business entity; include legal fees, registration costs, and other initial setup expenditures.

Pitch - A presentation to convince investors or potential partners about the value and potential of a business idea or investment opportunity.

Pitch Deck - A set of slides that provides information about a business, project, or investment opportunity, helping to convey key details in a clear and engaging manner.

Portfolio - A collection of investments held by an individual or an investment fund.

Portfolio Allocation - Distribution of investments among different asset classes or securities within a portfolio involving strategic planning to achieve a balanced and diversified investment approach.

Pre-Seed - The earliest stage of funding for a startup. It's the phase where founders seek initial capital to develop their business idea and create a prototype or proof of concept before moving to more significant funding rounds.

Preferred Stock - a type of ownership in a company that often has priority over common stockholders in terms of dividends and assets in case of liquidation.

Private Placement - A method of raising capital where securities are sold directly to a select group of investors, bypassing the public market.

Pro Rata - The right of an existing investor to participate in a new funding round to maintain their proportional ownership. It ensures that current investors can keep their stake in the company when additional capital is raised.

Recycle -  a strategic approach where funds that are returned from previous investments are reinvested in new opportunities.

Regulation A - Beneficial for smaller companies seeking to raise capital from a broader investor base while navigating a regulatory framework that is more flexible than a traditional IPO process.

Regulation D - Often used for private placements, where companies sell securities to a specific group of investors rather than the general public.

Risk Tolerance - The amount of uncertainty or volatility someone is willing to endure in pursuit of potential returns.

Roll up vehicle (RUV) credit: Levi Reed— Similar to an SPV, used by founders to collected existing investors into a single entity on the cap table. Unlike SPVs, RUV formation fees are typically paid by the startup rather than the investors.

Runway - The amount of time a company can continue its operations with the current available funds before needing additional financing. It's often used as a measure of financial sustainability and planning for the future.

Section 4(a)(2) - Often used for private placements where securities are sold to a limited number of sophisticated investors.Sector - A way to categorize companies based on the industry or market in which it operates.

Seed - The initial stage of funding for a startup where founders seek capital to develop their business idea, conduct market research, and build a prototype or minimum viable product.

Share - A unit of ownership in a company.

Side Letter - A supplementary agreement that contains additional terms or conditions that are specific to the parties involved.

Simple Agreement for Future Equity (SAFE) - An investment contract used in early-stage startups in which investors provide funds to a startup in exchange for the promise of future equity when a priced round of funding occurs.

Start-up Studio - A company that creates and develops multiple startup ventures simultaneously that provides resources, expertise, and support to foster the growth of new businesses.

Sophisticated Investor - An individual or entity that possesses a high level of financial knowledge, experience, and expertise in making investment decisions.

SPV (Special Purpose Vehicle) - The legal name of a syndicate

Stage - Where the company is in their fundraising journey (seed, series A, series B, series C, etc)

Subscription - The process of formally joining or signing up for a fund.

Successor Fund -  A new investment fund that follows or succeeds a previous fund managed by the same entity, or investment firm.

Syndicate - An entity made up of pooled funds, intended for a single investment.

Target Market - The audience that a company aims to reach with its offerings.

Term Sheet - A non-binding document outlining the key terms and conditions of a potential investment or business deal.

Thesis - The definition of where your investments will go. For VC firms, this is a legal definition. It typically covers stage and sector.

Total Addressable Market (TAM) - The entire potential market for a product or service, representing the maximum revenue a company could generate if it captured 100% of the market share.

Unicorn - A rare and highly valued startup company that shows exceptional growth and potential, and reaches a valuation of $1 billion or more.

Valuation - The process of determining an estimated monetary value of a business, asset, or investment.

Venture Capital Firm - An entity that owns a collection of venture capital funds

Venture Capital Fund - An investment entity focused on a specific thesis

Venture Debt - A form of debt financing provided to startups and high-growth companies that typically comes from specialized lenders and complements equity financing, providing additional capital with regular interest payments.

Vintage - The specific year or period when an investment fund is formed or a particular set of assets is acquired. It's used to categorize funds or assets based on the time of their origin.

Volatility - The degree of variation of a trading price series over time.

Wind Down - The process of closing or concluding the operations of a business, fund, or investment; involving settling outstanding obligations, distributing assets, and completing any remaining tasks.