D U E D I L I G E N C E The process of investigation and evaluation, performed by investors, into the details of a

potential investment.

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A N G E L I N V E S TO R S Individuals who provide seed or start-up

finance to entrepreneurs in return for equity.

B U R N R AT EThe rate at which a start-up uses its venture capital funding before it begins earning any

revenue.

CA P I TA L I Z AT I O N TA B L ESpreadsheet or table that shows ownership stakes in a company, typically a start-up or

early stage venture.

E X I TThe means by which an investor or business owner is able to realise his investment in a company. Normally an IPO or a trade sale.

FOLLOW-ON FUNDING – A situation where an investor has invested in a particular

company in the past, and then provides additional funding at a later stage.

GENERAL PARTNER This can refer to the top-ranking partners at a PE/VC firm as well as the firm managing the

PE/VC fund.

HURDLE RATE – The minimum amount of return, that is distributed to the limited

partners, until the time when the general partner is eligible to deduct carried interest.

INCUBATOR – An organization that helps nurture business ideas, or new technologies, to the point that they become attractive to

venture capitalists.

JOBS (JUMPSTART OUR BUSINESS START-UPS) ACT – Legislation that eases regulatory restrictions for new businesses to

make it easier for start-ups to get established.

KICKER An added feature of a debt obligation

designed to enhance its appeal to investors, such as a warrant.

LIQUIDATION PREFERENCE – A term to specify which investors get paid first, and how much they get paid, in the event of a liquidation

event such as the sale of the company.

MEZZANINE FINANCING A type of loan finance, that incorporates equity-based options, and sits between

equity and secured debt.

NON-DISCLOSURE AGREEMENT (NDA) A legal contract, between two or more parties,

that signifies that a confidential relationship exists between the parties involved.

OWNER-EMPLOYEE / OWNER OPERATOR A sole proprietor or any individual who has

ownership of at least 20% of the capital and/or profits associated with a given venture.

PREEMPTIVE RIGHTS - The right of current shareholders to avoid being diluted by buying a proportional number of shares of any

future issue of common stock.

QUARTILE RANKING - A system of ranking funds based on performance. The top

one-quarter of performers are in the upper quartile, and so on.

RIGHT OF FIRST REFUSAL – The right of investors to be given the opportunity to

purchase any common stock that might come onto the market before anyone else can.

SERIES ‘A’ F INANCING

The first round of financing undergone for a new business venture after seed capital.

TERM SHEET

A summary sheet detailing the terms and conditions of an investment opportunity.

U N I C O R N

A start-up with a valuation of $1 billion or more.

VA L U AT I O N - Can refer to pre-money valuation (value of the company prior to an

investment) and post-money valuation (sum of the pre-money value and the investment amount).

W A R R A N T

An option to purchase stock in a company, typically exercised over an extended period.

Y I E L D

The income return (either interest or dividend)

on an investment.

ZOMBIE FUND – A fund that has invested all of its committed capital and continues to collect management fees despite little or no

hope of achieving higher returns for investors.

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I n v e s t i n g w i t h a G l o b a l P e r s p e c t i v e

capitalist exploits

ABC’S OF VENTURE CAPITAL & PRIVATE EQUITY

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SOURCES: http://www.accreditedinvestormarkets.com/

http://www.accreditedinvestormarkets.com/glossary/ http://www.altassets.net/private-equity-and-venture-capital-glossary-of-terms

http://blog.pitchbook.com/private-equity-and-venture-capital-glossary/ http://fullratchet.net/

http://www.fundingpost.com/glossary/venture-glossary.asp http://www.investopedia.com/dictionary/

http://www.investorwords.com/ http://www.mava.org/Entrepreneurs/Glossary-of-Terms.aspx

http://www.startupfinancialmodel.com/2011/12/26/definition-of-pre-money-and-post-money-values/ http://www.techrepublic.com/article/glossary-startup-and-venture-capital-terms-you-should-know/

https://vcexperts.com/reference/glossary