Venture capital, private equity and M&A glossary

Investors that attempt to generate returns that mirror the returns of a predetermined benchmark. Passive investors tend to be less attentive to firm-specific performance and governance issues. The written, founding document of a limited partnership that defines the authority of the general partner, the rights of limited partners, and the key terms of the agreement. An investor in a VC/PE fund who is not typically engaged in the day-to-day management of the investment, which is the role of the General Partner . LPs have limited liability, meaning their personal assets can’t typically be used to settle the fund’s debts. The tendency for a private equity fund to experience negative returns in its initial years and then post increasingly positive returns as the fund matures. When a new financing round occurs and new shares are issued, existing investors will experience a reduction in their ownership percentage if they are excluded from the new round. These investors can also experience a valuation reduction if the new round is priced below the previous round. Capital for expansion, acquisition or working capital in the form of instruments such as loans, bonds, bills, notes and securitization. Debt can be listed or private placement, secured or unsecured, subordinated or unsubordinated.

Chapter 11The part of the Bankruptcy Code that provides for reorganization of a bankrupt company’s assets. Cash PositionThe amount of cash available to a company at a given point in time. Carried Interest PaidThe amount of carried interest paid as of the current period. AmortizationAn Accounting procedure that gradually reduces the book value of a tangible or a definite intangible asset through periodic charges to income.

Initial Public Offerings: Lockup Agreements

A buy and build strategy is a process utilized by private equity firms to expand their operations and increase returns. It involves acquiring a platform company that can be further built upon over time through add-ons and other strategies. A membership interest is a security that represents an ownership interest—or equity—in a limited liability company , represented on a company’s cap tableeither by percentages or by units. An LLC may assign different levels of voting and economic rights to members by issuing different classes of membership interest. The Investment Company Act—often referred to as the before ‘40 Act—regulates investment companies. The Investment Company Act focuses on public disclosure about pooled investment vehicles and their investment objectives, as well as on investment company structure and operations. A funding round is when a company raises money from investors on the same or similar terms within a specific time period. Rounds are often referred to by stage, starting with a seed round, followed by Series A and successively lettered Series rounds. A company’s valuation generally increases with each successive funding round, and the purchase price per share increases accordingly. Private funds and their advisers are subject to other federal securities laws.

An acronym that stands for Environmental, Social, and Governance. This term refers generally to responsible investment practices. Private equity managers implement ESG factors in the investment process by ameliorating ESG risks or expanding these opportunities to improve portfolio companies. ESG differs from impact investing, where the main investment goal is increasing social benefits, rather than generating a financial return. A private equity investment fund is a vehicle for enabling pooled investment by a number of investors in equity and equity-related securities of companies. A term used to describe the year of fund formation and first takedown of capital. The concept of vintage year is used when benchmarking the performance of different private equity funds. Institutions or individuals contributing capital to a private equity fund. Limited partners typically are pension funds, private foundations, university endowments and high net worth individuals. Free Cash Flow Free cash flow measures how much cash an asset generates through operations after subtracting the cost of expenditures.

Simple Agreement for Future Equity SAFE

Small-scale lending to people without access to conventional finance, usually by individuals or small businesses. Rate of interest charged on short-term loans made between banks. The foreign exchange market where banks exchange different currencies. Sectors with stocks that have high dividend yield compared to a benchmark average. An attempt by the government to boost the money supply in the economy through fiscal policies in order to reverse a deflationary trend. The fluctuation of the economy between expansion and contraction .

For example, a seller may represent that all accounts receivables reflected on a balance sheet are valid, earned and collectible in the ordinary course of business. A contract that forbids a business seller from entering into a similar line of business. A document that protects a buyer and seller from the unauthorized use or disclosure of either party’s sensitive https://www.beaxy.com/faq/where-can-i-see-the-depth-chart/ or proprietary information. The reduction of the value of an intangible asset (such as goodwill, intellectual property, patents, etc.) by spreading its cost over the useful life of the asset. The capital a Limited Partner has agreed to commit to a fund across its lifespan. This section contains information about HVPE as a company, who we are and what we do.

At present, PVCCs operate according to some legislative specifications in British Columbia and Quebec. OversubscriptionOccurs when demand for shares exceeds the supply or number of shares offered for sale. As a result, the underwriters or investment bankers must allocate the shares among investors. In private placements, this occurs when a deal is in great demand because of the company’s growth prospects. New IssueA stock or bond offered to the public for the first time.

Allvue’s complete suite of back-, middle-, and front-office solutions for growing VCs offers everything a fund manager needs to run their operations and businesses successfully – regardless of size or strategy. A subscription agreement is an application by an investor to engage in a debt or equity securities transaction, whereby the issuing company agrees to sell securities at a specified price to the investor. The investor in turn agrees to pay that price for the securities. A subscription agreement for an equity transaction should be accompanied by a signature page to the company’s governing documents (operating agreement,limited partnership agreement, shareholders agreement, etc.). In a debt offering, the subscription agreement should be accompanied by a promissory note.

Corporate bond

Crowdfunding usually is conducted through a platform on the internet, such as Kickstarter, GoFundMe or Indiegogo. Co-investment, or co-invest, occurs when an LP invests directly into a fund’s portfolio company alongside the fund. This is usually accomplished via a special purpose vehicle established by the GP of the fund for this purpose, and the GP may charge a reduced management fee ​and/or carried interest on this SPV. Write-offThe act of changing the value of an asset to an expense or a loss. A write-off is used to reduce or eliminate the value an asset and reduce profits. The write-down of a portfolio asset to the value of zero, with the result that the private equity investor or investors go without proceeds upon disposition. Vesting SchedulesTimetables for stock grants and options mandating that entrepreneurs earn their equity stakes over a number of years, rather than upon conversion of the stock options.

• Firms that meet the qualifications are requested to make a formal presentation to the board of trustees and senior staff members.
• A DSCR above 1 indicates there is sufficient cash flow from income to cover all debt costs and below 1 indicates there is an insufficient amount of income available to cover debts.
• An individual that solicits and represents business owners that are considering selling their business and acts as an intermediary between sellers and buyers.
• Liquidation generally means the ceasing of a company’s business activity and the winding down of operations.

The conditional small issues securities exemption of the Securities Act of 1933 is allowed if the offering is a maximum of $5,000,000 U.S. Redeemable Preferred StockRedeemable preferred stock, also known as exploding preferred, at the holder’s option after five years, which in turn gives the holders leverage to induce the company to arrange a liquidity event. The threat of creditor status can move the founders off the dime if a liquidity event is not occurring with sufficient rapidity. ReconfirmationThe act a broker/dealer makes with an investor to confirm a transaction. RecallableThe total amount of distributions that may be recalled by the fund at a future date. Pay to PlayA “Pay to Play” provision is a requirement for an existing investor to participate in a subsequent investment round, especially a Down Round. Paid-in to Capital Committed The ratio of contributions to date measured against its committed capital. NASDAQAn automated information network which provides brokers and dealers with price quotations on securities traded over the counter. Middle MarketA generic term used to describe the universe of well-established, and mostly private, companies in traditional sectors that form the demand side of much buyout and mezzanine activity.

Less than 10 percent of all start-ups annually, these entrepreneurial firms are the backbone of the U.S. economy. Lower QuartileThe point at which 75% of all returns in a group are greater and 25% are lower. Initial Investment DateThe date a fund completed its first contribution of capital to an underlying holding. Holding CompanyCorporation that owns the securities of another, in most cases with voting control. Golden HandcuffsThis occurs when an employee is required to relinquish unvested stock when terminating his employment contract early. Fully Diluted Earnings Per ShareEarnings per share expressed as if all outstanding convertible securities and warrants have been exercised. Expansion FinancingCapital provided to a company to facilitate its growth and development objectives. DistributionsCash and/or securities paid out to the Limited Partners from the Limited Partnership.

Convertible preferred shares are the most common type of equity used by venture capital investors to invest in companies. Bridge loan — a short-term loan that will eventually be replaced by permanent capital from equity investors or debt lenders. In venture capital, a bridge loan is usually a short-term note that converts to preferred stock. 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. Provide a way for governments and companies to raise money from investors for current spending requirements. In exchange for an upfront payment from investors, a bond will typically commit the issuer to make annual interest payments and to repay the initial investment amount onmaturity at a specified date in the future. The apportionment of a portfolio’s assets between asset classes and/or markets. For example, a fund may hold a combination of shares, bonds and cash. The weightings given vary according to the investment objective and the investment outlook.

Trend followers replicate a trend and stand to gain during both bull and bear market periods. A further strategy is to identify exactly when these changes in trends occur and to profit from them. A class action arises when a group of investors initiates a legal action against a company or ist directors in respect of alleged negligence or illegal behaviour. The case usually involves a claim for compensation in respect of share price losses in a specified period. This is calculated on the basis of current rental income and a property-specific interest rate . Rental income must seem appropriate and obtainable over the long term in order to be fully included in the calculation. The capitalised-income value is the major factor used in valuing income properties. Investment funds which invest in bonds and other fixed or variable interest securities.

Mortgage constantThe ratio of an amortizing mortgage payment to the outstanding mortgage balance. Mortgage brokerA firm or person that serves as an intermediary, helping to facilitate a mortgage transaction between a lender and a borrower. Mid-riseA building with four to eight stories above ground level. In a central business district this might extend to buildings up to 25 stories.

In some cases, a holding company will be created to acquire the new companies. In other cases, an initial acquisition may serve as the platform through which the other acquisitions will be made. ClawbackA clawback obligation represents the general partner’s promise that, over the life of the fund, the managers will not receive a greater share of the fund’s distributions than they bargained for. Generally, this means that the general partner may not keep distributions representing more than a specified percentage (e.g., 20%) of the fund’s cumulative profits, if any.

Read more about converter bitcoin here. The rate of return that the fund must achieve before the fund manager can get paid the carried interest. The period from when a fund is announced to the time when the final closing occurs. During this period, the general partner will present an investor pitch (“Road Show”) as well as negotiate closing document with prospective investors. The total of a fund’s annual fund operating expenses, expressed as a percentage of the fund’s average net assets. You’ll find the total in the fund’s fee table in the prospectus. Fees paid to respond to inquiries from investors and provide them with information about their investments. An investor’s ability and willingness to lose some or all of an investment in exchange for greater potential returns. Asset allocation involves dividing your investments among different categories, such as stocks, bonds, and cash. A bank account, a home, or shares of stock are all examples of assets.

It is expressed as actual loss as a percentage of total invested capital. Gross Asset Value The gross value of real asset investments including both equity and any debt. Default Rate In CEPRES, the default rate is the percentage of deals that are designated as being defaulted investments. Calculated as total numbers of deals have TVPI below 1 divided by total number of deals. CAGR Compound annual growth rate represents an annualized measure of the growth rate of a balance from its initial value to its ending value with an annual compound. When the investment period is less than one year, CAGR is annualized. Average Worst-Performer The mean of the lower quartile (25% worst performing) funds/deals in a selected universe . For example, the TVPI average worst-performer is calculated by dividing the sum of all TVPIs of the lower quartile (25% worst performing) funds/deals by the number of funds/deals selected. Average Best-Performer The mean of the upper quartile (top 25% best performing) funds/deals in a selected universe . For instance, the TVPI average best-performer is calculated by dividing the sum of all TVPIs of the upper quartile funds/deals by the number of funds/deals selected.