accredited investor:
The SEC designation for an individual or entity meeting any of the criteria listed below. Certain restricted offerings, limited partnerships, and angel investor networks are open only to accredited investors. SEC criteria: Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer or general partner of a general partner of that issuer. Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000. Any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase of the securities is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment. Any organization that was not formed for the purpose of acquiring the securities being sold, with total assets in excess of $5,000,000. And, any entity in which all of the equity owners are Accredited Investors. opposite of nonaccredited investor.

add-on service:
The non-monetary services provided by a venture capitalist, such as helping to assemble a management team and helping to prepare the company for an IPO.

adventure capitalist:
An entrepreneur who helps other entrepreneurs financially, and often plays an active role in the company's operations (such as by occupying a seat on the board of directors).

angel:
An individual who provides capital to one or more startup companies. The individual is usually affluent or has a personal stake in the success of the venture. Such investments are characterized by high levels of risk and a potentially large return on investment. also called angel investor.

angel investor:
An individual who provides capital to one or more startup companies. The individual is usually affluent or has a personal stake in the success of the venture. Such investments are characterized by high levels of risk and a potentially large return on investment.

blind pool:
A form of limited partnership which doesn't specify what investment opportunities the general partner plans to pursue.

civilian unemployment rate:
The number of unemployed people divided by the total size of the labor force, expressed as a percentage. People who are jobless, looking for jobs, and available for work are considered unemployed. The labor force is defined as people who are either employed or unemployed.

corporate venture capital:
A subsidiary of a large corporation which makes venture capital investments.

deal:
Definition 1: A proposal for financing a business creation or expansion.
Definition 2: More generally, any contract or arrangement.

deal flow:
The rate at which investment offers are presented to funding institutions.

death valley curve:
Colloquial term for the period of time before after start-up companies receive venture capital funds but before start-up companies generate revenues. Death valley curves refer to the fact that a startup is more likely to fail before it can establish a steady stream of revenue.

direct financing:
Financing without the use of underwriting.

due diligence:
The process of investigation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.

entrepreneur:
An individual who starts his/her own business.

exit strategy:
The way in which an investor plans to close out an investment. For example, a venture capitalist or angel investor may look to an IPO or acquisition as his/her exit strategy. also called liquidity event.

financier:
Definition 1: One who makes a living participating in commercial financing activities. A financier may be someone who provides venture capital or another investment in a company, and then (if everything goes well), receives their money back plus interest or a certain percentage of the company's profits.

Definition 2: Anyone who handles money, particularly in large quantities; this could include brokers or accountants.

financing:
Providing the necessary capital.

first-round financing:
The first investment in a company made by external investors.

full ratchet:
In venture capital, an investor protection provision which specifies that options and convertible securities may be exercised relative to the lowest price at which securities were issued since the issuance of the option or convertible security. The full ratchet guarantee prevents dilution, since the proportionate ownership would stay the same as when the investment was initially made.

fund:
Definition 1: To finance or underwrite.
Definition 2: An investment company or mutual fund.

ground floor:
The first stage of a new venture or investment opportunity.

income limited partnership:
A type of limited partnership established mostly to generate incomes otherwise unachievable by each party separately. Real estate or oil and gas limited partnerships are two examples of these. Profits made from this agreement can be taxable in most cases.

incubator:
A company or facility designed to foster entrepreneurship and help startup companies, usually technology-related, to grow through the use of shared resources, management expertise, and intellectual capital.

invisible venture capital:
Venture capital from angel investors.

lead investor:
A company's principal provider of capital, such as the entity which originates and structures a syndicated deal.

limited partner:
see limited partnership

limited partnership:
A business organization with one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments. Limited partners also enjoy rights to the partnership's cash flow, but are not liable for company obligations.

liquidation preference:
Definition 1: In venture capital, the right to receive a specific value for the stock if the business is liquidated.
Definition 2: More generally, the order in which creditors are paid off if the business is liquidated.

liquidity event:
The way in which an investor plans to close out an investment. For example, a venture capitalist or angel investor may look to an IPO or acquisition as his/her exit strategy. also called exit strategy.

low-income housing limited partnership:
A limited partnership established to invest in housing complexes for low-to-medium income tenants. These types of partnerships offer special tax credits through Form 8586. Tax credits can amount to 130-150% of the invested amount over a 10 year period. Cash inflows generated from rent can pay for themselves over long periods of time, typically 15 years. However, the amount of rent charged cannot exceed the amount specified by the statute of limitations.

master limited partnership:
Investment which combines the tax benefits of a limited partnership with the liquidity of publicly traded securities.

mezzanine debt:
Debt that incorporates equity-based options, such as warrants, with a lower-priority debt. Mezzanine debt is actually closer to equity than debt, in that the debt is usually only of importance in the event of bankruptcy. Mezzanine debt is often used to finance acquisitions and buyouts, where it can be used to prioritize new owners ahead of existing owners in the event that a bankruptcy occurs.

mezzanine financing:
Late-stage venture capital, usually the final round of financing prior to an IPO.

mezzanine level:
Venture capital term used to describe a company which is somewhere between startup and IPO. Venture capital committed at this level usually has less risk but less potential appreciation than at the startup level, and more risk but more potential appreciation than in an IPO.

owner-employee:
A sole proprietor or any individual who has ownership of at least one-fifth of the capital and/or profits associated with a given venture.

pari passu:
Often seen in venture capital term sheets, indicating that one series of equity will have the same rights and privileges as another series of equity. ('of equal step' in latin)

pipeline:
The flow of upcoming underwriting deals.

pitch:
The set of activities intended to persuade someone to buy a product or take a specific course of action.

placement agent:
An individual who is hired by a company for the purpose of finding people who are interested in investing in the company. A company will hire a placement agent if it doesn't want to spend too much of its own time searching for investors.

private equity:
Equity securities of companies that are not listed on a public exchange. Transfer of private equity is strictly regulated; therefore, any investor looking to sell his/her stake in a private company has to find a buyer in the absence of a marketplace. Returns on private equity generally occur in three ways: a merger or sale, an initial public offering, or a recapitalization.

private equity fund:
A fund which invests its money in private equity, often in attempts to gain control over companies in order to restructure the company. When the fund gains control of a company, they will usually take the company off the market if it isn't private already, go through a multi-year restructuring process, and then relist the company on the stock market.

private limited partnership:
Limited partnership having no more than 35 limited partners, and thus able to avoid SEC registration.

resyndication limited partnership:
Limited partnership in which existing properties are sold to new partners, for tax benefits of existing partners.

risk:
The quantifiable likelihood of loss or less-than-expected returns. Examples: currency risk, inflation risk, principal risk, country risk, economic risk, mortgage risk, liquidity risk, market risk, opportunity risk, income risk, interest rate risk, prepayment risk, credit risk, unsystematic risk, call risk, business risk, counterparty risk, purchasing-power risk, event risk.

risk capital:
Funds made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided. also called risk capital. also called venture capital (VC).

round of funding:
The stage of financing a start-up company is in. The usual progression is from startup to first round to mezzanine to pre-IPO.

second round:
A second iteration of fundraising for a company. This round comes after a first round of venture capital financing and before the final stages of financing (mezzanine financing).

seed capital:
Money used for the initial investment in a project or startup company, for proof-of-concept, market research, or initial product development. also called seed financing or seed money.

series 22:
An exam required by the Financial Industry Regulatory Authority that must be passed in order to sell a direct participation program such as a limited partnership.

silent partner:
A business partner who provides capital but does not actively participate in the management of operations.

sponsor:
The general partner who organizes and sells the limited partnership.

startup:
A new business venture in its earliest stage of development.

T-Rex fund:
Slang term for a very large venture capital fund. These funds typically have over one billion dollars, and tend to be powerful in their business

term sheet:
In venture capital, a document summarizing the details of a potential venture capital investment which serves as the basis for a final business agreement.

VC:
Venture Capital. Funds made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided. also called risk capital.

venture:
A risky enterprise.

venture capital:
VC. Funds made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided. also called risk capital.

venture capital firm:
An investment company that invests its shareholders' money in startups and other risky but potentially very profitable ventures.

venture capital fund:
A pooled investment that uses the money from third-party investors, such as investment banks or wealthy investors, to invest in business projects. Businesses that seek venture capital often carry more risk, and are either unwilling to pay the interest on bank or market loans or are unable to obtain them.

venture capital limited partnership:
Limited partnership which is formed to invest in small startup businesses with exceptional growth potential.

venture capitalist:
An investor who engages in venture capital projects. Venture capitalists seek opportunities involving businesses that are growing or are in risky market segments, since these businesses generally have a harder time obtaining loans.