Venture Capital, Private Equity And M&a Glossary

Money market funds are required to provide the SEC with a monthly electronic filing of more detailed portfolio holdings information on Form N-MFP. Weighted average maturity – the average time remaining until the maturity of assets in a portfolio. The average time to expiry of leases across the portfolio weighted by contracted rental income. To hold a lower weighting of an individual security, asset class, sector, or geographical region than a portfolio’s benchmark. The European Union has issued directives that allow carefully regulated funds to operate freely throughout the EU. A fund operating in line with the directives is known as an Undertaking for Collective Investment in Transferable Securities scheme.

• Senior classesWith regard to securities, describes the classes with the highest priority to receive the payments from the underlying mortgage loans.
• Dividend-ex dateThe first date on which a person purchasing the stock is no longer eligible to receive the most recently announced dividend.
• For example, a stock option is a derivative that derives its value from the price movement of the reference stock.
• It is a measure of a company’s profitability as it shows how much profit a company generates relative to the money shareholders have invested.
• Secondary, or follow-on, offeringA stock offering made by an existing public company.

Public equity is deemed to be extremely liquid since there are many buyers and sellers, while stock in private companies is generally much less liquid since the buyers and sellers are more limited. This document is used to clarify understanding of both the customer and founder and often used to show investors. The act of publicly soliciting investors, usually through advertising or any other non-controlled method of a public offering. If a company or issuer engages in public solicitation, it may eliminate certain safe harbors that were previously afforded to them under current securities regulation. When a fund makes an investment and messages the LPs to put capital into the fund account to invest in the portfolio companies. Contractual clause that protects an investor from having their investment as a percentage of ownership significantly reduced in subsequent rounds of fundraising. Normally the bulk of your purchase price is paid in permanent capital, with the rest being paid by senior debt then management rollover. They are the people and companies who invested in the PE fund that your business is being bought buy.

Company

The total amount the funds sought to raise when they began fund raising. The total amount of assets that the Limited Partner has under management. Working capital for the initial expansion of a company which is producing and shipping, and has growing accounts receivable and inventories. Although the company has clearly made progress, it may not yet be showing a profit. A measure of the cumulative amount invested relative to the amount of capital committed to the fund. The amount of the next investment the company is expects to receive.

If a private equity firm has invested in a particular company in the past, and then provides additional funding at a later stage, this is known as ‘follow-on funding’. Equity financing– Companies seeking to raise finance may use equity financing instead of or in addition to debt financing. To raise equity finance, a company creates new ordinary shares and sells them for cash. The new share owners become part-owners of the company and share in the risks and rewards of the company’s business. Capital gain– When an asset is sold for more than the initial purchase cost, the profit is known as the capital gain. This is the opposite to capital loss, which occurs when an asset is sold for less than the initial purchase price. Capital gain refers strictly to the gain achieved once an asset has been sold – an unrealised capital gain refers to an asset that could potentially produce a gain if it was sold. An investor will not necessarily receive the full value of the capital gain – capital gains are often taxed; the exact amount will depend on the specific tax regime. Venture capital Professional equity co-invested with the entrepreneur to fund an early stage (seed and start-up) or expansion venture. Offsetting the high risk the investor takes is the expectation of higher-than-average return on the investment.

Emerging Manager Spotlight: Mac Conwell Of Rarebreed Ventures

There are a handful of major “credit rating agencies” (e.g. Moody’s and S&P) who rate the ability of a country or company to pay back its debt. One common definition of residual value for private equity investment is the value of non-exited investments reported by funds. Private equity-sponsored funds tend to report this figure on a quarterly basis. Residual value is more important for limited partners than it is for general partners because it demonstrates the current market or fair value of the remaining equity owned by limited partners only. The partnership’sgeneral partnermakes investments, monitors them and finallyexitsthem for a return on behalf the investors – limited partners. Early-stage finance– This is the realm of the venture capital – as opposed to the private equity – firm.

Accredited Investor – a wealthy investor who meets certain SEC requirements for net worth and income. The right of investors to have a nonvoting representative attend meetings of the Board of Directors of the company and committees of the Board. Contractually defined limitations on an individual’s ability to sell or transfer their shares in the company. A contract that sets out how the company will be operated and the shareholders’ obligation and rights. When stock is returned to a company by departed employees whose stock has not yet vested.

Multiple Of Money Invested Mom

Separate accountA relationship where an investment manager or adviser is retained by a single pension plan sponsor to source real estate product under a stated investment policy exclusively for that sponsor. SecuritizationThe process of converting an illiquid asset, such as a mortgage loan, into a tradable form, such as mortgage-backed securities. Return on equityThe income available to common stockholders for the trailing 12 months divided by the average common equity, expressed as a percentage. Return on assetsThe income after taxes for the trailing 12 months divided by the average total assets, expressed as a percentage.

Metrics used to gauge a company’s performance, financial health and expectations for future earnings eg, price to earnings (P/E) ratio and return on equity . This measures a portfolio’s risk-adjusted performance by quantifying its excess return (as measured by returns above the risk-free rate) per unit of realised risk. The ratio is designed to measure how far a portfolio’s return can be attributed to fund manager skill as opposed to excessive risk taking. Typically defined as the yield on a three-month US Treasury bill (a short-term money market instrument). When the market price of a security is thought to be more than its underlying value, it is said to be ‘trading at a premium’. Within investment trusts, this is the amount by which the price per share of an investment trust is higher than the value of its underlying net asset value.

Agency Risk

Cost of CapitalThe cost of the funds employed as the result of an investment decision. CorporationA legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses and shields the underlying owners from unlimited liability. Construction loanInterim financing during the developmental phase of a property. ConcessionsCash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses or other monies expended to influence or persuade a tenant to sign a lease. Capital marketsPublic and private markets where businesses or individuals can raise or borrow capital. Capital expendituresInvestment of cash or the creation of a liability to acquire or improve an asset, as distinguished from cash outflows for expense items that are considered part of normal operations. Call datePeriodic or continuous rights given to the lender to cause payment of the total principal balance prior to the maturity date. Building codeThe various laws set forth by the ruling municipality as to the end use of a certain piece of property.

A security which is secured (or ‘backed’) by a collection of mortgages. Investors receive periodic payments derived from the underlying mortgages, similar to coupons. The policies of a central bank, aimed at influencing the level of inflation and growth in an economy. Monetary stimulus refers to a central bank increasing the supply of money and lowering borrowing costs. Monetary tightening refers to central bank activity aimed at curbing inflation and slowing down growth in the economy by raising interest rates and reducing the supply of money. While portfolios are built based on the benchmark, stocks are mainly chosen and weighted based on the managers’ fundamental stock evaluation. An attempt by the government to boost the money supply in the economy through fiscal policies in order to reverse a deflationary trend.

Absolute Return

They will analyse and explain your market, your position in it, the size of it, it’s growth, your customers and your product. Cash available for distribution is a real estate investment trust’s cash-on-hand that is available to be distributed as shareholder dividends. A fund raised by the private equity arm of an industrial/non-financial corporation. A fund raised by the private equity arm of an endowment or a foundation. The Post-Money Valuation is the equity value of a portfolio company including the round of financing.
Presenting the vision and business plan of your startup to VCs with the aim of receiving an investment, usually involves the creation of an accompanying deck . Often referred to as a liquidity event or payday, when the investment is sold turning an equity stake into cash. Allows a majority shareholder to drag a minority shareholder along in a decision to sell the company. This means the minority shareholder (e.g. a founder) is forced to agree to all aspects of the sale, including valuation, if the majority shareholder (e.g. a VC fund) so wishes. Coupon A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Carried Interest Carry, or carried interest, is what the general partner receives as a share of the profits in the project. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. The proportion, usually expressed as a percentage, of a property or property portfolio that is without a tenant. This measures how well a portfolio performs in relation to an index when the index rises.

A benchmark that is calculated by including the returns to all of the assets meeting pre-specified criteria. A financial statement that shows how much profit was earned over the course of a given period , by subtracting expenses from revenues. A style of active management that seeks to outperform by buying stocks of companies that have rapidly growing sales or profits. Portfolios that lie on the Efficient Frontier are said to be efficient, that is, expected to obtain the maximum return per unit of risk taken on. Portfolios that lie below this line as said to be inefficient, that is, expected to obtain something private equity glossary less than the maximum return per unit of risk taken on. A financial statement that shoes what is owned , what is owed to creditors , and what is left over for owners , as of a specific point in time, generally the end of a fiscal quarter or year. Investing to try to beat a benchmark, by picking assets that the manager expects will outperform. Amount, in dollars or percent, by which the value of an investment changed over a measurement period (a year, a quarter, etc.). Backlash against the idolisation of the unicorn, named after a real animal and focused on building a sustainable startup culture.
A term sheet sets the groundwork for building out detailed legal documents. When a company offers up new stock for sale to the public after an IPO. Often occurs when founders step down or desire to move into a lesser role within the company. A stock that carries a fixed dividend that is to be paid out before dividends carried by common stock. The act of a startup quickly changing direction with its business strategy. For example, an enterprise server startup pivoting to become an enterprise cloud company. This describes a business that is targeting another business with its product or services. B2B technology is also sometimes referred to as enterprise technology. This is different from B2C which stands for business to consumer, and involves selling products or services directly to individual customers. This guide will give you a better context to understand the language of startups, venture capitalists, angel investors, and incubators.
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A group of influential individuals, elected by stockholders, chosen to oversee the affairs of a company. Not all startups have a board, but investors typically require a board seat in exchange for an investment in a company. The process whereby a group of venture capitalists will each put in a portion of the amount of money needed to finance a small business. It refers to obtaining capital from investors or venture capital sources. An acquisition of a business using mostly debt and a small amount of equity. A subsequent investment made by an investor who has made a previous investment in the company — generally a later stage investment in comparison to the initial investment. The investigation and evaluation of a management team’s characteristics, investment philosophy, and terms and conditions prior to committing capital to the fund. The amount of capital available to a management team for venture investments. An agreement between the underwriter of stock and certain stockholders that the holders will refrain from selling their stock for a certain period. This prevents these holders from putting too much of the stock on the market and thereby diluting the stock price.

A fund of funds is a pooled investment strategy that invests in other types of funds. Instead of stocks, bonds, or other more traditional types of securities, a fund of funds portfolio contains underlying holdings of other funds. Because of this, fund of funds have unique needs throughout their investment life cycles, from the back office to fundraising to investor reporting. Allvue provides fund of fund managers with a full suite of solutions to help them more easily and efficiently manage their portfolio, operations, and investor relations. Preferred return –This is 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. Company buy-back– The process by which a company buys back the stake held by a financial investor, such as a private equity firm.
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2) The sale of the assets of a company to one or more acquirers in order to pay off debts. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. Institutional InvestorPension funds, insurance companies, endowments, charitable foundations, mutual funds and other non-bank financial institutions that are often key suppliers to private equity funds. Organizations that professionally invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds. GatekeeperSpecialist advisers who assist institutional investors in their private equity allocation decisions. Gatekeepers usually offer tailored services according to their clients’ needs, including private equity fund sourcing and due diligence through to complete discretionary mandates. A professional advisor or intermediary operating in the private equity market on behalf of clients, such as institutional investors.