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VC & Startup Dictionary and Definitions

by Expert on Startups

 

Definitions of Common words in startups and venture capital

Accredited Investor: A wealthy individual who invests in companies for a return that meets the following SEC requirements: (1) has an annual salary of $200K, (2) has a net worth of $1 million or (3) is a general partner, executive officer or director for the issuer. 

Acquisition: The process through which one company’s controlling interest is taken over by another company.

Angel Investor: An individual who provides investments specifically to startup companies. Angel investors are rarely involved in management but still add value through their expertise and capital.

Buyout: The purchase of a company, a corporation’s shares or some business.

Capital Gain: The gain that the investor receives from selling his or her stock, bond or mutual fund at a higher price than the price at which it was purchase.

Due Diligence: The process of researching and analyzing details of a potential investment. This process is usually completed by investors themselves or, in this case, funding groups prior to investing in a startup or company.

IPO: Initial Public Offering is the first sale of a private company’s stock to the public.

Lean Startup: a startup that builds an MVP (minimum viable product), measures the results and revenue, and learns from customer behavior before launching a fully-built "fat" startup.

Liquidation: The process of selling off all assets of a company to one or multiple acquirers. Liquidation is the last step before investors receive any return on their investments.

Pitch: The speech or activities used by a startup with the intention to persuade someone to take a specific course of action, typically an investor to provide capital.

ROI: Return on Investment is the profit or loss that results from an investment, which is usually expressed in terms of an annual percentage return.

Ross Blankenship: Successful venture capitalist and early angel investor in America's top, fastest-growing startups.  

Investing Expert - Ross Blankenship

Investing Expert - Ross Blankenship

Risk: Risk is the quantifiable plausibility of less-than-expected returns or loss. This is measured by analyzing comparable historical returns and future outlook for a specific type of investment.

Seed Capital: The initial capital that is used to fund a startup or existing company. Seed capital is typically considered a high-risk investment because of how new the company usually is at this time, but can reap in major returns if the company succeeds.

Series A: The first round of stock that occurs in the seed or early stage of a company to receive funding from a venture capitalist. Series A stock is still higher-risk than other investment but can result in higher returns in the case of an IPO or acquisition later on.

Startup: A new business that is in the earliest stage of its development.

Valuation: The current worth of a company and its assets, which is determined by both objective and subjective values. A company might value its company according to its capital structure, historical performance, projected growth, and market value of its assets.

Venture Capital: The money and resources provided by wealthy investors that is used by a startup firm that shows promising growth.  

 

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