Glossary
Investment terms across venture capital, real estate, and private markets
Investment terms across venture capital, real estate, and private markets
An accelerator is designed to help startups grow by providing support, connections and the knowledge they need to be successful. Accelerators are often sponsored by
Accounts receivable (AR) is the balance of money due to a firm for goods or services delivered or used but not yet paid for. Accounts
An accredited investor is someone who meets the standards set by Securities Exchange Commission (SEC). Accredited investors include FINRA series 7, 65 and 82 registered
Acquisition is when one company buys or acquires another. Startups are sometimes acquired by larger companies with more resources to developed the product or service.
Alpha is the amount of return that is attributed to the active efforts of a manager, as opposed to market forces. In private equity, alpha
An angel investor (also known as a private investor, seed investor or angel funder) is a high-net-worth individual who provides financial backing for small startups
Annual recurring revenue (ARR) is the yearly revenue driven by contracted work for subscription based companies. Related Terms: Net Income, Gross Return
Appreciation is when a property’s value goes up over time. This can happen because the market grows, rents increase, operations improve, or upgrades are made.
Property type classifies real estate by its use, like residential, office, retail, industrial, or healthcare. Each type has different risks and potential returns.
The amount of money that a manger is advising on. Related Terms: Market Capitalization, Valuation Cap
Beta measures a security’s sensitivity to movements by the market. A Beta of 1.0 means that the security’s price moves in lock-step with the market.
Bootstrapping is building a company from the ground up with nothing but personal savings. Related Terms: Seed Funding, Accelerator, Pivot
A bridge loan is a short term loan that is used in-between capital raises to fund ongoing development or operations. Related Terms: Promissory Note, Short
A broker is engaged in the business of effecting transactions for the account of others. A dealer is engaged in buying and selling securities for
Broker Dealers, unlike crowdfunding platforms, are required to perform due diligence on any potential offering prior to making it available to investors. The BD is
A buyout is when an investor obtains controlling interest in a company and then buys the remaining shares from the current investors. Related Terms: Merger,
A cap rate shows the expected return on a property before financing. It’s calculated by dividing the property’s net income by its price. Investors use
Capital Stock is the total amount of common and the preferred stock that a company issues. It is not always equal to the number of
Carried interest, which is also known as “carry” is the share of the profits from an investment that is paid out to the general partners
A company’s “cash burn rate” or “burn rate” is the rate at which the company is spending its cash on hand and is usually expressed
Cash flow is the money a property makes after paying for expenses and loans. Positive cash flow is what investors can get paid from each
A Central Index Key or CIK number is a number given to an individual, company, or foreign government by the United States Securities and Exchange
Common stock represents ownership in a company and is a type of security. Common stock usually has voting rights on how the company is run.
Conversion Price is the price that is used to determine how many shares of common stock and investor will receive for their existing investment. Related
A convertible note is an investment vehicle often used by seed investors investing in startups when the company wants to delay establishing a valuation for
A Crowd Note is essentially a convertible note that has been modified to suit equity crowdfunding. The primary difference between a crowd note and a
Equity crowdfunding allows large groups of people to place investments, usually of small amounts, in a private company. Offerings are conducted via online platforms. Not
A custodian is a financial institution responsible for safeguarding financial assets.
Deal flow refers to the pipeline of investment opportunities available to an investor. Related Terms: Series A Financing, Private Equity, Seed Funding
Debt service is the total amount you pay each period for a property’s loan, including both principal and interest. How easily a property can cover
A discount price is when the price of the offering is less than its actual value. Related Terms: Pre-Money Valuation, Discount Rate
The discount rate is the interest rate used to estimate the present value of future cash flows when doing a discounted cash flow (DCF) analysis.
Dissolution Event occurs when a company voluntarily terminates its operations or when its creditors force the company to terminate its operations. Related Terms: Exit Strategy,
A dividend is a payment of cash or stock from a company’s earnings to each stockholder as declared by the company’s board of directors. Related
A drag along right gives a majority shareholder the right to force a minority shareholder to agree to the sale of the company. This is
Due diligence is the process of investigating, evaluating and assessing an investment, whether in a fund or directly in a company. The due diligence investigation
Early-stage can refer to a company, a stage of financing or the strategic focus of a venture capital fund. When a company is “early-stage” it
Equity is the part of a property you actually own. It’s the property’s value minus any loans. Equity can grow if the property increases in
Equity financing is when a company raises money by issuing stock. Related Terms: IPO, Preferred Stock, Common stock
Escrow is a legal arrangement in when a third party temporarily holds large sums money or property until a specific event occurs. Escrow is often
An exit strategy is how you get your money back from an investment. In real estate, this could mean selling the property to someone else,
The planned method for realizing investment returns, such as selling the asset, refinancing, or recapitalization, is often based on market conditions and asset performance.
A family office is an entity established by a wealthy family to manage the assets and investments of the family. Related Terms: Qualified Purchaser, Accredited
FINRA is authorized by Congress to protect America’s investors by making sure the broker-dealer industry operates fairly and honestly. FINRA is funded by its members.
A finder’s fee or referral fee is a commission paid to the person or entity that introduces a potential customer to an investment opportunity.
Follow-On Investment means a subsequent investment made by an investor after an initial round of investment in a startup company. Related Terms: Rolling Close, Preemptive
A fund refers to a private equity fund, it may be a venture capital fund, growth equity fund or buyout fund. The fund is a
A General Partner is the individual or entity that make the decisions for the partnership or limited liability corporation. Related Terms: Limited Partner, Institutional Investor
GAAP is the standard that is set for the reporting and recording of accounting information. It includes an income statement, balance sheet, cash flow statement,
Gross Rental Income is all the rent a property is supposed to bring in before subtracting vacancies, expenses, or any discounts.
Gross return is the return a fund obtains from its investments, before deduction of management fee, expenses or carried interest. Related Terms: Net Income, Net
Hold period is how long you expect to keep a property before selling or refinancing it. The length of the hold affects your expected returns
When an investment is described as illiquid, it generally means that there is no readily available market in which to sell the investment. Investments in
Incubators are entities that provide support to start ups before they have significant financing. Sometimes they provide physical work space as well as guidance on
The first closing of an offering is referred to as the initial closing which happens when the set minimum amount of funds has been raised.
An initial public offering (IPO) is when the shares of a private corporation are offered to the public in a new stock issuance. This allows
Institutional Investors are large investors that can include insurance companies, commercial, investment or merchant bank, finance companies, mutual funds, savings and loan association, credit union,
Intellectual property is defined as unique ideas, products, services or processes that a certain company has developed. Intellectual property is traditionally protected under four categories:
Interest is the amount that is charged for borrowing money. Investors can be paid interest when lending money to a company through a debt offering
The internal rate of return (IRR) is a metric in financial analysis that is used to estimate the profitability of potential investments. Related Terms: Cash
The JOBS act permits certain offerings to be exempt from registration if they meet certain conditions in order to make it easier for small entities
Late stage venture capital are investments that occur after a venture-backed company has developed its product, proved that there is a market opportunity, has meaningful
Lease term is how long a tenant has agreed to rent a space. Longer leases usually mean more stable income and less risk of having
A letter of intent (LOI) is a commitment of one party to do business with another. The letter outlines the terms of a potential deal.
A leveraged buyout is when one company acquires another using borrowed. The assets of the company being acquired are often what is used as the
Liabilities are any debts the company has, whether they are bank loans, mortgages, unpaid bills, notes, any other sum of money that the company owes.
A limited partner is a part owner in a business, usually a limited partnership or limited liability company and does not actively participate in running
Liquidation preference is the order in which investors receive their money if the company ceases operations. First all creditors are paid and then holders of
A liquidity event is an outcome that allows company founders and investors to convert their illiquid stock to cash or liquid stock that can be
LTV (Loan-to-Value) is the size of a loan compared to the property’s value. A lower LTV usually means less financial risk and better protection if
A lock-up agreement refers to a legally binding contract that prohibits insiders from selling any of their shares for a set period of time. These
Long Term Debt (LTD) refers to the outstanding debt a company holds that has a maturity of 12 months or longer. On the balance sheet,
A Mandatory Conversion occurs when preferred stock holders are required to convert their shares into common stock. Related Terms: Buyout, Drag Along, Leveraged Buyout
“Market Capitalization” or “Market Cap” is the total market value of a publicly-traded company which is determined by multiplying earnings per share by the number
Market value is the estimated price a property would sell for in a fair, open market between willing buyers and sellers.
A merger is when two companies jointly decide to form a new entity. Related Terms: Leveraged Buyout, Dissolution Event
A business moat is a key competitive advantage that differentiates a company from its competitors. Related Terms: Pivot, Unicorn, Scalability
Net income is how much the company made after all costs and expenses are subtracted from the revenue (amount of money the company earned). Related
Net Present Value (NPV) is the estimated value of future cash flows over the anticipated life of an investment discounted to the present. NPV analysis
NOI (Net Operating Income) is the money a property makes after paying for things like maintenance, insurance, and management—but before loans, taxes, or big repairs.
A note is a legal document that a borrower gives to a lender. Notes are similar to bonds and lenders receive interest. The full amount
Occupancy shows how much of a property’s space is rented out and earning income. Higher occupancy usually means steadier cash flow and better performance.
A pivot is a dramatic change in the company’s strategy. Pivots can occur in early-stage companies when a management team realizes that the target market
A pooled investment vehicle is one in which multiple investors add money to the pool to buy shares of the investment. Basically, it is a
The post-money valuation is the estimated value of the company after the investment has been made. It is equal to the pre-money valuation plus the
The pre-money valuation is the value of the company before an investment has been made. Related Terms: Post Money Valuation, Return On Investment
Preemptive rights give a shareholder the opportunity to buy additional shares of any future offering before shares are made available to the general public. They
Preferred stock is a type of security that usually pays a dividend but does not have voting rights. In the case of a company liquidation,
Private Equity (PE) is considered as an alternative investment. One is investing money in a private company that is illiquid and does not trade on
Pro Rata Rights are the rights of an investor (but not an obligation) to participate in future financing rounds so that they can maintain their
A promissory note is a signed legal document that promises to pay a set amount of money to a specific person either on a specific
A qualified client is a natural person or a company that, when entering into a contract has at least $1,000,000 of assets under the management
A qualified purchaser is an individual or a company who has $5 million or more in investments, a trust with more that $5 million in
The record date on which shareholders must own the stock in order to be entitled to receive a corporate dividend. The record date is usually
Registration is the process which a company goes through to be able to sell shares of its stock in the public markets. A company will
Regulation D is a type of offering that does not have to be registered with the SEC, but must file a Form D which is
Restricted securities are securities usually received in an unregistered, private sale from the issuing company or from an affiliate of the issuer. Investors can receive
Return on investment or return on costs is the ratio between net income and investment. A high ROI means the investment’s gains are more than
Revenue is the amount of money a company earns before expenses. It is also known as gross income. Related Terms: Accounts Receivable, Annual Recurring Revenue,
Start up companies have a high degree of risk and it is possible to lose the full amount invested. One should carefully review the offering
Rolling Close means that an offering has multiple closing dates. A rolling close allows a company to take in money as soon as the first
Saturation is a measure of how many companies are there in the market that are providing the same or similar products versus how big the
Scalability is the measure of a system’s ability to increase or decrease in performance and cost in response to changes in application and system processing
Secured Debt is debt that is backed by specific assets of a borrower. If the borrower does not pay or is unable to repay, then
The ACT is the rule that govern securities markets and related activity. Related Terms: Reg D, Restricted Securities
The U.S. Securities and Exchange Commission (SEC) is a federal agency responsible for administering federal securities laws that protects investors. The SEC also ensures that
Seed funding typically refers to the money first invested in the company from a source other than the founders. It can also be helpful to
Series A financing has been historically referred to a company’s first financing round with institutional venture capital investors. Today Series A financing more broadly means
Short-term debt is also known as liabilities. This is a debt obligations that is expected to be paid off within a year. Related Terms: Long
A side letter is used to clarify, supplement, or change an original agreement. The intention is to provide legally enforceable rights and obligations, but this
A SAFE, or Simple Agreement for Future Equity, entitles the holder to shares in a startup, generally in the form of preferred stock, if and
A person is called a Sophisticated Investor if he has a preexisting personal or business relationship with the Company or its partners, officers, directors or
A Special Purpose Vehicle (SPV) is a separate legal entity that is created by an organization for a specific purpose. The SPV is a separate
The operating partner handles finding, buying, managing, and running the property to execute the investment plan.
A subsequent closing is a closing that occurs after the first closing. It is an opportunity to buy into an investment after the offering has
A NNN (triple net) lease is when tenants pay rent plus property taxes, insurance, and maintenance. This usually gives investors more predictable and steady income.
A unicorn is a privately-held company that is valued at over $1 billion in their latest venture capital financing round. Related Terms: Private Equity, Net
Vacancy rate is the share of a property’s space that isn’t rented. Higher vacancy usually means lower demand and more risk of lost income.
The valuation cap sets the maximum price at which your convertible security will convert into equity. To translate that into a share price, you divide
Venture capital is a form of financing that provides funds to early-stage, emerging companies with high growth potential, in exchange for equity or an ownership
WALT (Weighted Average Lease Term) shows the average time tenants have left on their leases, weighted by how much rent they pay. A longer WALT
A warrant is a security that entitles the holder to buy stock of a company at a fixed price, which is known as exercise price,
Yield shows the yearly income you earn from a property as a percentage of what you invested. It focuses on rental income and doesn’t include
