Advisor: An individual or firm who will assist a Company in raising capital, will include individuals, brokers, and investment banks.

Angel: An individual high net worth investor who makes investments in early stage or high risk private companies.

Capital: The assets used to finance a business, typically debt and equity.

Capital Structure: The relationship of various pieces of capital in a business, including debt, preferred equity and common equity.

Cash Flow: The amount of cash a company can generate from sales after covering expenses.  A positive cash flow means that a company is generating excess cash after covering its expenses.

Common Equity: The residual ownership of a business.  Common equity holders will not typically receive a pay out until all other forms of capital have been satisfied, but they have the potential to experience the most upside.

Entrepreneur: An individual who builds and creates a new enterprise, they typically hold a large ownership stake in the business that they are building.

Equity Line: A type of financing structure, where a Company can draw funds from a line provided by an investor.  Each time the Company draws funds off of the line, they will issue equity to the investor in return/

Intellectual Property: The defendable ideas of a business.  Intellectual property often takes the form of patents, trademarks, and copyrights, but can also include trade secrets (i.e. the secret formula).

IPO: An Initial Public Offering (IPO) is the first time a company sells equity to the public.  An IPO is typically facilitated by an investment banker and will provide the company a significant amount of cash through the shares they sell.

Liquidity Event: An event where equity holders in a private company have the ability of selling their interest to a third party.  This can take place via the sell of the entire company to a third party, or a public offering of the company’s stock.

Mergers & Acquisition (M&A): The transaction of buying and selling of an entire company.

Private Company: A company which has no public shareholders (this does not mean that there are not multiple private shareholders).

Preferred Equity: Equity which has a specific right above common equity.  This can be either through the requirement of the company to pay preferred shareholders a dividend, preference in the liquidation of a company, or additional voting rights.

Pro Forma: A projected financial statement based on stated assumptions, can either be based on future performance or can be a projection of how a  company would have performed if an acquisition or divestiture had taken place.

Public Company: A company which has sold securities to the public.  In the United States, a public company is regulated by the Securities and Exchange Commission.

Reverse IPO: A transaction where a private company purchase a public company which has essentially no assets or operations, and merges into the public company.  The result is a publicly trade company with the operations and assets of the private company.

Risk - Return: A trade off an investor examines when making the decision to invest in an asset.  For an increased level of risk, an investor will require a higher potential return.

Tranch: A smaller part of an investment.  An investor can either invest in a company at multiple times, or a transaction can have different parts to it (i.e. debt and equity).

Venture Capital: A financing option for high growth / high risk companies.  Typically administered by a venture capital fund (which manages a large pool of capital) by professional investors who invest in a number of companies, seeking to maximize their return while diversifying their risk.

Warrant: A future option to participate in an investment at previously determined terms.  Similar in structure to a stock option, but often granted by a company to an outside investor or advisor.