Midterm terms part 1 Flashcards
Dilutive capital
Equity financing which means the company receives financing in exchange for equity
Nondilutive capital
dept financing that includes bank and non-bank landing
Cash Runway
represents the amount of cash you have on hand and how long it will last if your expenses exceed your revenue
Term sheet
nonbinding agreement that shows the basic terms and conditions of an investment and it serves as a template and basis for more detailed, legally binding documents.
Down round
refers to a private company offering additional shares for sale at a lower price than it had been sold for in the previous financing round.
Clusters
a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field
Venture capital firms
a financial institution that provides funding to early-stage and high-potential startups in exchange for equity ownership, typically with the goal of supporting their growth and development
Investment staging
the practice of breaking down the funding of a startup or project into distinct phases, with each stage corresponding to specific development milestones and financing needs
Sorting mechanism
the mechanism of the capital market, that ensures that the highest quality investors invest in the highest quality portfolio firms
Limited partner
are outside investors who are typically required to invest a certain amount at the outset, but can phase in the remainder of their investment over time
General partner
venture capitalists who provide only a small proportion (about1%) of the capital raised by a given fund
5 biggest European clusters by VC investment
Paris, London, Berlin, Stockholm, Upper Bavaria
5 CEE innovation clusters
Budapest, Poznan, Warsaw, Riga, Tallinn, Gdansk
Mentors
provide guidance and support to startups with offering advice on everything from product development to fundraising
Accelerator
organizations who provide pre-seed funding and membership to pre-revenue and pre-product concepts
Follow-on investment
Investments in an existing portfolio company of a private equity fund that are made to protect or enhance the value of the fund’s investment
Unicorn
a privately held startup company with a value of over $1 billion.
Decacorn
a privately held company with a valuation that exceeds $10 billion
Value-to-capital ratio
the cumulative valuation and cumulative capital raised
Pre-seed round
the earliest stage of startup funding, coming before seed funding and other stages for emergent startups receiving the first check from at least one institutional investor
Seed round
: the first formal round of venture capital financing for a startup (investors typically want the company to have gained a degree of traction by then)
Founder-market fit
the founders building their startup have deep experience in and knowledge of the market that they are targeting
Go-to-market fit
a plan that helps businesses position a new product or service for launch, define their ideal customers, and coordinate messaging
Investment thesis
the strategy by which a venture capital fund makes money for the fund investors
Portfolio diversification
the process of investing your money in different asset classes and securities in order to minimize the overall risk of the portfolio
Spray and pray investment strategy
is conducting as many investments as possible
MVP (Minimal Viable Product):
a product with enough features to attract early-adopter customers and validate a product idea early in the product development cycle
Alpha
abnormal return of a VC – beta: correlation of the average return
Investor validation
the process in which investors presence in portfolio firms increase outcome
Angel investors
Private individuals, investing in pre-seed, seed and round A startups with common or preferred equity, convertible debt. They seek firms with high growth potential, with a min. expected return >30%, but they go for max 10% of its shares
High-net-worth individuals
a person with at least $1 million in liquid financial assets
Private venture capital firms
Venture capital firms owned by private individuals or associations
Corporate venture capital firms
Venture capital firms that are either subsidiaries of corporations or have corporations as their LPs
Government venture capital firms
By default, they are all owned by a government institution (with corporate structures)
Early stage fund
the first three stages of a company’s development. It is divided into three distinct funding types: seed funding, startup funding and early-growth funding
Later stage fund
any method of generating capital by a business in the later stages of its roll-out. Typically, this type of funding is equity-based. This means that neither you nor your business will incur debt. Instead, you sell partial ownership of your business to an investor or investment firm.
Growth fund
a diversified portfolio of stocks that has capital appreciation as its primary goal, with little or no dividend payouts
Buyout fund
a fund that buys a majority stake in firms (later stage majority purchase).
Corporate (Strategic) Investors
Individual investors or firms who invest with the goal of acquiring strategic advantages rather than simply financial returns
Due diligence
an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.
Syndicated investment
a group of investors who pool their resources to invest in a startup company. The investors can be individuals, venture capital firms, or other entities
Lead investor
the only investor who maintains a relationship with the invested firm, and is entitled to ask for information
