An accounting document that reflects the financial situation of a company at a given point in time, recording what is owns and its rights (assets), equity capital, and its obligations to third parties (liabilities).
Hurdles that companies face when entering a given market as newcomers to such market, typically generated by established companies. Barriers to entry include, for example, brands, patents, exclusive rights to a distribution channel, large investments required to get established.
Difficulty in leaving the industry when there are low or even negative returns. For example, industries that require investment in specialised assets tend to have greater barriers to exit.
A market reference and process by which a company compares and measures its current relative status. An investor references a company’s growth by determining whether or not they have met certain benchmarks, ie, market references. For example, company A has met the benchmark of having X amount of recurring revenue after 2 years in the market.
The creation of a business funded exclusively by the entrepreneur’s direct resources or the company’s business revenue.
A group of individuals, elected by stockholders, chosen to oversee and general manager the affairs of a company. A board typically includes investors and independent members with industry high profile and track record. Not all startups have a board, but investors typically require a board seat after investing.
Point from which the company begins to generate positive operating results. The lower the critical point of a company, the easier it will be for the company to reach it and the lower its economic risk.
Short-term loan that serves as a “bridge” financing prior to a long-term debt or equity investment can be assured.
Regular forecast, usually annual, prepared by a company, that includes the expected and reference financials for that period, including variable costs, revenues, expenses, investment and sources of funding.
A time-based metric reflecting how much cash it consumes on any given time-frame. Burn rates are typically calculated over annual or monthly periods, and in some cases can be calculated on a weekly or daily basis.
Individual investor who directly invests its own money typically in companies in the seed or start-up stage. BAs make their own investment decisions and are financially independent, in other words, a possible total loss of their investments will not significantly change the economic situation of their assets. Some BAs, in addition to investing, also monitor and provide strategic support to entrepreneurs. They are also known as Informal Venture Capital Investors.
The structured process in which the company is going to create value, deliver it to its clients and generate income in the process.
A business that is targeting another business with its product or services. B2B technology is also sometimes referred to as enterprise technology. This is different from B2C which stands for business to consumer, and involves selling products or services directly to end-users consumers.
A capitalization table (or cap table) is a table providing a break-down of a company’s percentages of ownership, equity dilution, and value of equity in each round of investment by founders, investors, and other equity investors.
Financial resources currently available for investment of funding operations. Entrepreneurs raise capital to start a company and continue raising capital to fuel growth.
Refers to the total capital which the VC manages on behalf of its own investors and themselves.
Refers to a top level limit placed on investor notes in a round of financing. An example is when Entrepreneurs and investors agree to place a “cap” on the valuation of the company when notes can be converted into equity. This means investors will own a certain percentage of a company relative to that cap when the company raises another round of funding if the round is priced higher that such cap. Uncapped rounds are generally more favorable to the entrepreneurs. For the absence of doubt, the Entrepreneurs should be away that the cap is not typically the only pricing reference on a convertible note.
Amount of cash that is collected and deployed from and to third parties by a business during a given period.
Refers to the process of completing all tasks and terms on the initial drafting of a contract in order for a contract to be signed and put in force.
Development process of a solution, in which all interested parties are invited to play an active role, in an equal and reciprocal relationship.
The advantage a company has over its competitors, generating a differentiation and/or superior value creation, perception and performance than the alternatives.
Direct: Competition between two companies that sell the same product/service in the same market;
Indirect: Competition between two companies that sell different products/services, but which can be used or perceived by customers as satisfying in a sufficiently acceptable way the same need.
Debt that can be converted to equity based on certain conditions, typically a pre-defined valuation and date.
Office space shared by entrepreneurs. The aim is to share all the resources a company or project needs to operate, which, in most cases, allows for a more informal environment and a strong interconnection.
The process of funding a venture (equity crowdfunding) or production of a product (reward crowdfunding) by raising small individual amounts of capital from a large number of people (the crowd), usually through an online platform.
Production model that uses the intelligence and collective knowledge and volunteers, generally spread across the Internet, to solve problems, create content and solutions or develop new technologies – and also to generate the flow of information.
Assets that are not long lasting or permanent in a company. They are short-term assets and of greater liquidity, such as deposits, accounts receivable and inventory.
The company’s debts, which should be paid within less than twelve months.
Concept used to specify the time limit for a particular action.
The rate at which investment projects and business proposals are received by investors, like Business Angels, or Venture Capital Firms. It is an indication of the vitality of the business in this sector of activity.
Is the decrease in existing shareholders’ ownership (as a percentage) of a company due to the company’s issuing of new equity.
Innovation based on scientific and/or technological rationale at both the fundamental and incremental level of scientific state-of-the art, resulting in differentiation that is potentially capable of transforming an industry or value chain and which bestows its lead product with a marked ability to stand out from the crowd and its competitors
An analysis/audit process carried out by a person or entity prior to entering a business agreement, namely before making an investment in a firm or company, to minimise risk.
Initial phase in the life cycle of a company that includes the Seed and Start-up stages and, in general, runs until there are recurring sales of products/services and the company becomes cash-flow positive.
Financing of companies that are setting up or at a stage where they have recently started operating and the sales volume is still non-existent or very low to its potential as a business.
A cash flow measurement that takes operational revenue less expenses without including interest, taxes, depreciation and amortization. It is widely used as a ballpark proxy for operational cash-flow (assuming no working capital).
The term enterprise typically refers to a company or business (i.e. an enterprise tech startup is a company that is building technology for businesses).
A measure of a company’s value calculated as market capitalization, including all debt and equity interests, minus excess cash.
An individual who starts a business venture, assuming all potential risk and reward for his or herself.
A seasoned entrepreneur who is employed by a Venture Capital Firm to help the firm vet potential investments and mentor the firm’s portfolio companies in different aspects of operations and strategy.
Capital made available to a company, which is invested, directly or indirectly, in exchange for a corresponding share of the current and future cash-flows to shareholders.
The sale of participations held through an intermediary or directly to another investor, including trade sale, amortisation loss, reimbursement of shares/loans, the sale to another financial intermediary or to another investor, the sale to a financial institution and the selling shares to the public, including an initial public offering (IPO).
Resources owned by the company, that are permanent or constant, not meant to be sold or transformed as a result of the company’s regular activities.
Follow-on investment is a subsequent investment made by an investor who has made a previous investment in the company.
The creator of the company and partners, if they exist, are the co-founders.
Fully diluted cap table is the individual percentage ownership by shareholders outstanding if all possible sources of conversion, such as convertible bonds and employee stock options, are exercised into stocks.
An investment vehicle comprising capital commitment. Funds typically have specific investment thesis, including sectors, regions and deal amounts that they target for their investments.
A fund that invests in other funds.
The process for seeking capital commitments from investors
An Institution to host and develop startups. An Incubator provides early-stage startup companies with office space, resources, advice and networking opportunities. It is an analogy with the growth of infants: those that are born fragile stay in the incubator until they are ready to hold their own.
Implementation of a new idea or improvement of a solution through a new product, process, organisational or marketing method, with the purpose of increasing performance, knowledge and competitive position.
An original concept or new application for technical solutions that can be transformed into tangible products or services that are more effective and efficient in satisfying needs compared to those already on the market. The innovation can also be the result of a new approach to the market or a business model that enables significant growth.
The first sale of shares of a company when it goes public and starts selling shares on the stock exchange that become publically traded
Identifiable non-monetary assets that lack physical substance or are intangible, such as software, licenses and patents.
A set of measures that can be used to gauge the performance and state of a given business or sector. KPIs can include revenue growth measures, monthly active user growth rates for certain technology firms or leverage ratios, among many others. Depending on a given business’s strategic and operational initiatives, KPIs hold different priorities and relevancies on managing and monitoring performance.
An entity or individual that deploys the largest individual investment in a given round of funding for a company. As the primary financier for the round, the lead investor determines the current valuation of the company and typically the majority of the relevant terms of the financing.
An agreement by which a company grants another the right to use certain know-how and/or to exploit industrial property rights in exchange for payment, usually through royalties.
A limited partner (or LP) is a third-party investor in an investment fund.
A lock-up is a period of time when investors in a company are not allowed to redeem or sell shares.
Liquidation preference establishes that certain investors receive their investment money back first before other company owners in the event the company is sold or has another liquidation (payout) event to shareholders.
The process of selling equity or strategic assets that generate inbound cash-flow that can be used to fund new investments and/or return capital to partners.
The process of selling assets in order to pay creditors (and potentially shareholders) followed by closing the company
Small market segment made up of a perfectly identifiable group of consumers with a homogeneous profile.
The overall amount that the total group of potential customers is willing to pay for the product/service at any given time.
Group of individuals with similar needs and preferences in terms of consumption and purchase profile.
Percentage or quota of the market that a company or product/service has, calculated by dividing the sales of the product/service by the total Market size.
Acquisition of a company by its management, supported by external financing.
An informal meeting to promote the exchange of ideas between multiple players in the business scene, from CEOs to programmers, investors, mentors.
A business advisor. Has a key role in the validation process, start or development of a start-up, when the entrepreneurs need it most. They are also well-known individuals at events and start-ups competitions, advising new entrepreneurs on the development of ideas and their business model. Having a good mentor can make all the difference in an entrepreneur’s success.
M&A are transactions in which the ownership of companies or their operating units are transferred or consolidated with other entities. While a merger is a legal consolidation of two entities into one entity, an acquisition occurs when one entity takes ownership of another entity’s stock, equity interests or assets, even though both are transactions generally result in the consolidation of assets and liabilities under one entity.
A form of Debt financing, but it also includes embedded equity instruments or options.
Consists of a simpler version of a product/service, created with minimal effort and resources, used to test and validate the business.
An agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being disclosed to third parties.
A group of relations between contacts. Expanding it is a fundamental exercise for any new entrepreneur who wants to make their project be market aware.
A Latin term that means “of equal step”, “simultaneously”, “equal footing”, “at the same time”, in financial terms, in equal standing, where all parties are treated in the same manner. For example, when stated that “investors shall receive/pay pari passu”, it means that they will receive/pay in proportion to their investment and all at the same time.
Summary communication, usually 3 to 5 minutes, of a value proposition of a business idea growth path and potential, with the purpose of finding a potential investor or partner.
Pivot, or pivoting, means to redirect/explore the company’s business model/strategy to alternative and potentially more profitable markets/segments. Typically the company may keep addressing the past market/segment while the new strategy does not proves its success
A company that has received an equity investment from a specific Venture Capital or a Private Equity firm.
The act of developing the offer and the brand of the company to take a prominent place in the minds of the target-customers.
Pre-money valuation refers to the value investors perceived accrued at the company immediately before they add their capital infusion; Post-money valuation is how much the company is valued after the capital infusion and typically is the sum of the pre-money valuation and the capital infusion. Most references are to a company’s post-money valuation. Naturally Pre-money can be determined by subtracting the capital infusion amount from the post money valuation.
A market demonstration that there is perceived value and acceptance to buy by potential customers to the product/service provided by the company.
An accounting document that shows the results (profits or losses) obtained by a company in a specific period.
A demonstration of the technical feasibility of a concept or idea that a startup is based on.
Pro rata is from the Latin ‘in proportion.’ A Venture Capitalist with supra pro rata rights gives it the option of increasing its ownership of a company in subsequent rounds of funding.
Type of financing classified not as pure equity capital or debt, with a greater risk than senior debt and a risk that is lower than ordinary capital, where the return for the holder is predominately linked to the profit or loss of the undertaking target-company, which is not guaranteed in the event of default. The quasi-equity investments may be structured as a debt, unsecured and unsubordinated, including mezzanine debt and, in some cases, convertible into equity, or as preferred equity.
A corporate reorganization of a company’s capital structure, changing the mix of equity and debt. A company will usually recapitalize to prepare for an exit, lower taxes, or defend against a takeover or reshape the relative balance of ownership and individual returns among shareholders.
The profit or loss resulting from an investment transaction as a percentage of the original investment, usually expressed on an annualized basis.
The enterprise-value-to-revenue multiple (EV/R) is a measure of the value of a comparable stock and uses it to determine a reference value to a company’s enterprise value based on its revenue.
Long term cash infusion into a company as Equity. Following seed capital, typically the companies move on to the first round, Round A, then on to Round B, and so on. There may be a multitude of rounds of investment during the course of the start-up.
A software product that is hosted remotely, usually provided over the Internet (also known as “in the cloud”) that the customer pays a regular time-linked fee for using (not acquiring) – that can be terminated remotely in case of cease payment or contract termination (hence being a service like business model however with a scalable profile).
The market that a startup companies product or service fits into. Examples include: consumer technology, cleantech, biotech, and enterprise technology.
The amount that is raised when a business is still in its initial stage, in order to take its first steps in the market. At this stage, there are seed rounds, the initial rounds of investment, to raise the first external cash for the start-up (seed money).
Financing for research and development of the initial concept and finalise proof of concept, before the business has reached the Early Stage.
The stage prior to the official start of the company, where the initial concept of the product/service is defined and starts being developed.
Refers to the specific round of financing a company is raising. Venture rounds that typically occur around certain milestones: a Series A round is raised after a seed investment has taken a company as far as it can go; a Series B may be when the company is reaching close to profitability but needs capital for hiring/development needs; Series C and D+ rounds are commonly known as late-stage rounds, and generally fall into the time when a company has a defined business model that has taken hold, is making significant revenues and is looking to expand at a large scale.
Debt that takes priority over other debt securities in the event of liquidation.
Creation of a new independent company, with innovative products or services, initially generated from a project in an already existing company (known as parent company).
The stage of development a company is in. There is no explicit rule for what defines each stage of a company, but it tend to be categorized as early stage, mid-stage and late stage.
A start-up is a new company, or even one in the embryonic stage or still being constituted, which has promising projects linked to research and development of innovative ideas. There is a high risk involved in the business. However, despite this, they are ventures with low initial costs and are highly scalable, in other words, they have high growth potential when things go well. Eric Ries, author of Lean Startup, defines a start-up as “a group of people in search of a repeatable and scalable business model, working under conditions of extreme uncertainty”.
When the company starts and it begins to develop its products/services for commercialization.
Stock options are sold or granted by one party to another, that give the option buyer the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain period of time.
A syndication is an alliance formed for the purpose of investing in a large transaction that would be hard or impossible for the entities involved to do individually or they prefer to do combinedly allowing them to pool their resources and share risks.
Assets consisting of land, buildings and plants, machinery and equipment.
A group of consumers to whom the company decides to direct their products, services or ideas with a strategy aimed at meeting needs and preferences.
A non-binding agreement that outlines the major aspects of an investment to be made in a company. A term sheet sets the groundwork for building out detailed legal documents.
Quantitative evidence of market demand. It is proof that the product or service is necessary and can be expressed, as appropriate, using different metrics (revenues, margins, active members, registered users, traffic).
A portion of an investment more commonly seen/used in venture rounds. In many agreements (especially in healthcare), a second portion/tranche/instalment of a round is made upon specified milestones, such as regulatory approval. Every tranche or instalment of a round will be part of the same round.
A turnaround is the financial recovery of a company that has been performing poorly for an extended time.
The accrued perceived amount of value a company has to any specific third party(or parties) that is (are) acquiring an specific equity stake that is generally accepted by current equity holders to allow an exit transaction to be executed.
A set of individual contributions (value added) by different stakeholders in an industry to the resulting service/product in the creation of the total value of such service/product for the final recipient/user/customer.
Value perceived by the customers or potential customers related to a differentiated product/service that addresses a problem and satisfies an identified need. May be applied to an organisation or just to some products/services, defined through the identification and creation of benefits offered to the clients or potential clients, which determines its value positioning in relation to the competition or potential competitors and it relevance in the Value Chain
Funds to support differentiating early stage companies with growth potential competing in the global market of high growth/significant markets.
Financial operators which manage Venture Capital Funds.
Fund created to make Venture Capital investments.
Venture capital investment is considered the acquisition, for a limited period of time, of equity instruments and instruments of borrowed capital in companies with high growth potential, as a means to benefit from the respective valorisation.
Period in which an employee of a company can be granted rights to stock options and contributions provided by the employer. The rights typically gain value (vest) over time until they reach their full value after a pre-determined amount of time. For example, if an employee was offered 200 stock unites over 10 years, 20 units would vest each year. This gives employees an incentive to perform well and stay with the company for a longer period of time.
Contigent provision in a financial contract that allows one of the parties in accordance with its terms to terminate its rights and obligations stated in the contract or implicit in the investment.
Difference between the current assets and the short-term liabilities of a company.