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ACCOUNTING -
The recording, classifying, summarizing and interpreting
in a significant manner and in terms of money, transactions
and events of a financial character.
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| ACCOUNTS PAYABLE - |
| Trade accounts of businesses representing obligations to pay for goods and services received |
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| ACCOUNTS RECEIVABLE - |
| Trade accounts of businesses representing moneys due for goods sold or services rendered evidenced by notes, statements, invoices or other written evidence of a present obligation. |
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| ACID RATIO - |
| Current assets less inventories divided by current liabilities. Also known as "Quick Ratio." |
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| ACQUISITION - |
| The act of one company taking over controlling interest in another company. Investors often look for companies that are likely acquisition candidates, because the acquiring firms are often willing to pay a premium to the market price for the shares. |
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| ANGEL INVESTOR - |
| Individuals that provide venture capital to seed or early stage companies.. Business angels can usually add value through their contacts and expertise. Independent Angels provide equity capital to small businesses, most often entering into participation during the growth phase of maturation. Archangels are individuals who marshal informal capital by establishing syndicates of other investors. Often, archangels play a primary role in commercialization of product ideas and technology. They contribute to economic development far beyond their own personal investments by creating the informal network infrastructures that facilitate informal capital. |
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| BENCHMARKS – (aka MILESTONES) - |
| Benchmarks are performance goals against which a company's success is measured. Often they are used by investors to help determine whether a company will receive additional funding or whether management will receive extra stock. Sometimes management will agree to issue more stock to its investors if the company does not meet its benchmarks, thus compensating the investor for the delay of his return. |
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| BRIDGE LOAN - |
| Bridge Loans are short-term financing agreements that fund a company's operations until it can arrange a more comprehensive longer-term financing. The need for a bridge loan arises when a company runs out of cash before it can obtain more capital investment through long-term debt or equity. |
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| BUYOUT - |
| Funds provided to enable an enterprise to acquire another enterprise or product line or business. |
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| CLOSING- |
| The final event to complete the investment, at which time all the legal documents are signed and the funds are transferred. |
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| DEBT FINANCING - |
| Money that business owners must pay back with interest. There are myriad types of debt financing, from simple commercial loans to bridge/swing loans in which a lender makes a short-term loan in anticipation of equity financing at a later stage in the development of a business. |
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| DUE DILIGENCE - |
| The thorough investigation and evaluation of a company’s financial history, potential legal issues, intellectual property portfolio, shareholder problems, management team's characteristics, investment philosophy, and terms and conditions prior to committing capital to the fund. |
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| EQUITY FINANCING - |
| Selling an interest in your business to an outside party to raise money. |
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| EXECUTIVE SUMMARY - |
| Executive Summary refers to a synopsis of the key points of a business plan. |
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| EXIT - |
| How an investor gets his/her money back. Also known as a “Liquidity Event.” Usually a purchase or public offering. |
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| FOLLOW-ON - |
| 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. |
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| IPO (Initial Public Offering)- |
| Issue of shares of a company to the public by the company (directly) for the first time. |
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| IRR - |
| Internal Rate of Return. Explained in Investors. |
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| LEAD INVESTOR - |
| The investor who leads a group of investors into an investment. Usually one venture capitalist will be the lead investor when a group of venture capitalists invest in a single business |
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| Leveraged Buy-out (LBO) - |
| An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business. |
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| LIMITED PARTNERSHIPS - |
| The legal structure used by most venture and private equity funds. Usually fixed life investment vehicles. The general partner or management firm manages the partnership using policy laid down in a Partnership Agreement. The Agreement also covers, terms, fees, structures and other items agreed between the limited partners and the general partner. |
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| LIQUIDATION- |
| 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. |
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| LOCK-UP PERIOD- |
| The period an investor must wait before selling or trading company shares subsequent to an exit -- usually in an initial public offering the lock-up period is determined by the underwriters. |
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| MEZZANINE FINANCING- |
| Financing for a company expecting to go public usually within 6-12 months; usually structured to be repaid from proceeds of a public offerings, or to establish floor price for public offer. |
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| PRIVATE EQUITY - |
| Private equities are equity securities of companies that have not gone public (in other words, companies that have not listed their stock 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 find 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 offering, a sale or merger, or a recapitalization. |
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| RAISING CAPITAL - |
| It refers to obtaining capital from investors or venture capital sources |
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| RECAPITALIZATIONL - |
| The reorganization of a company’s capital structure. A company may seek to save on taxes by replacing preferred stock with bonds in order to gain interest deductibility. |
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| Return On Investment (ROI) - |
| The internal rate of return on an investment. |
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| SECONDARY PURCHASE - |
| Purchase of stock in a company from a shareholder, rather than purchasing stock directly from the company. |
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| SEED CAPITAL - |
| Money used to purchase equity-based interest in a new or existing company. A venture capitalist's return usually comes from preferred stock, a share of profits, royalties or capital appreciation of common stock. Most venture capitalists look for companies with high growth potential. |
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| SYNDICATION - |
| The process whereby a group of venture capitalists will each put in a portion of the amount of money needed to finance a small business. |
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| TERM SHEET- |
| A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. The Term Sheet is a template that is used to develop more detailed legal documents. |
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| VENTURE CAPITAL- |
| Money used to purchase equity-based interest in a new or existing company. A venture capitalist's return usually comes from preferred stock, a share of profits, royalties or capital appreciation of common stock. Most venture capitalists look for companies with high growth potential. |
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| VALUATION - |
The value of your company at a given point. You can use DCF (Discounted Cash Flow), outstanding shares, and other methods to arrive at this value which is both an art and a science. |
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The bottomline is that either
I've never done the "numbers" for a business.
