A

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Acquisition – When one company buys controlling stake in another company.

Agile – A philosophy of software development that promotes incremental development and emphasizes adaptability and collaboration.

Angel investor – Individual who provides a small amount of capital to a startup for a stake in the company. Typically precedes a Seed Round and usually happens when the startup is in its infancy.

B

Bootstrapped – A company is bootstrapped when it is funded by an entrepreneur's personal resources or the company's own revenue.

Bridge loan – Also known as a swing loan. Short-term loan to bridge the gap between major financing.

Buyout – A common exit strategy. The purchase of a company's shares that gives the purchaser controlling interest in the company.

C

Capped notes – Refers to a "cap" placed on investor notes in a round of financing.

Convertible debt – This is when a company borrows money with the intent that the debt accrued will later be converted to equity in the company at a later valuation. This is done in the early stages of a company's life, when a valuation is more difficult to complete and investing carries higher risk.

D

Debt financing – This is when a company raises money by selling bond, bills, or notes to an investor with the promise that the debt will be repaid with interest. It is typically performed by late-stage companies.

Disruption – Also known as disruptive innovation. An innovation or technology is disruptive when it "disrupts" an existing market by doing things such as: challenging the prices in the market, displacing an old technology, or changing the market audience.

Due diligence – An analysis an investor makes of all the facts and figures of a potential investment. Can include an investigation of financial records and a measure of potential ROI.

E

Entrepreneur – An individual who starts a business venture, assuming all potential risk and reward for his or herself.

Entrepreneur in residence (EIR) – 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.

Equity financing – The act of raising capital by selling off shares of a company. An IPO is technically a form of equity financing.

Exit – This is how startup founders get rich. It's the method by which an investor and/or entrepreneur intends to "exit" their investment in a company. Commons options are an IPO or buyout from another company. Entrepreneurs and VCs often develop an "exit strategy" while the company is still growing.

F

Fund of funds – A mutual fund that invests in other mutual funds.

G

Ground floor – A reference to the beginning of a venture, or the earliest point of a startup.

I

Incubator – An organization that helps develop early stage companies, usually in exchange for equity in the company.

IPO – Initial public offering. The first time shares of stock in a company are offered on a securities exchange or to the general public. At this point, a private company turns into a public company (and is no longer a startup).

L

Lead investor – A venture capital firm or individual investor that organizes a specific round of funding for a company. The lead investor usually invests the most capital in that round. Also known as "leading the round."

Leveraged buyout – When a company is purchased with a strategic combination of equity and borrowed money. The target company's assets or revenue is used as "leverage" to pay back the borrowed capital.

Liquidation – The process of dissolving a company by selling off all of its assets (making them liquid).

M

Mezzanine financing – Hybrid capital (a form of debt financing) typically used to fund adolescent and mature cash flow positive companies. Companies at this stage are no longer considered startups but have yet to go public. They are referred to as "mezzanine level" companies.

N

NDA – Non-disclosure agreement. An agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being shared with outside parties.

P

Pivot – The act of a startup quickly changing direction with its business strategy.

Portfolio company – A company that a specific Venture Capital firm has invested in is considered a "portfolio company" of that firm.

Preferred stock – A stock that carries a fixed dividend to be paid out before dividends carried by common stock.

Proof of concept – A demonstration of the feasibility of a concept that a startup is based on, often necessary for pitching to VCs.

Pro rata rights – This derives from the Latin 'in proportion' and gives a VC the option of increasing his or her ownership of a company in subsequent rounds of funding.

R

Recapitalization – 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.

ROI – Return on Investment is the money an investors get back as a percentage of the money they invested in a venture.

Round – Startups raise capital from VC firms in individual rounds, depending on the stage of the company. The first round is usually a Seed round followed by Series A, B, and C rounds if necessary. In rare cases rounds can go as far as Series F, as was the case with Box.net.

S

Seed – The seed round is the first official round of financing for a startup, when a company is usually raising funds for proof of concept and/or to build out a prototype and is referred to as a "seed stage" company.

Secondary public offering – When a company offers up new stock for sale to the public after an IPO. This often occurs when founders step down or seek to move into a lesser role within the firm.

Sector – The market that a startup company’s product or service fits into.

Series – The specific round of financing a company is raising. Stage – The stage of development a startup company is in. Startups tend to be categorized as seed stage, early stage, mid-stage, and late stage.

Startup – A startup is a company in early stages of operations. Startups often want to disrupt an industry while a small business focuses on gaining local clients without necessarily seeking disruption.

T

Term sheet – 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.

V

Valuation – The process by which a company's worth or value is determined. An analyst will look at capital structure, management team, and revenue or potential revenue.

Venture capital – Money provided by venture capital firms to small, high-risk, startup companies with major growth potential.

Venture capitalist – An individual investor, working for a venture capital firm, that chooses to invest in specific companies. Venture Capitalists have experience investing in specific related sectors and tend not to invest outside of their area of expertise.