In this era of capitalism, every other person is looking forward to gaining profitable returns via investment. At the same time, there are quite a few market instruments to achieve that you might be aware of; the economic world functions with many other lingoes. With proper knowledge of the startup terms discussed in this article, you can build a better venture capitalist glossary and use them the next time you invest. And getting a better understanding of these startup terms can help you cater to the growing needs of your startup.
1. Venture Capitalist
While talking about the venture capitalist glossary, knowing the term itself is crucial. A Venture capitalist is a firm or an individual looking for young companies with returns on investment to fund them for their capital requirements. Some good examples in India are Sequoia Capital, Tiger Global Management, Matrix Partners, Accel, and Blume Ventures.
2. Angel Investor
Also known as Business Angels, Angel Investors are highly influential and self-established firms or individuals who are on the lookout for startups that have just started to fund their capital needs. Some Angel Investors in India are Rajan Anandan, Anupam Mittal, Dheeraj Jain, T.V. Mohandas Pai, Sandeep Tandon, Girish Mathrubootham, Anand Ladsariya, and Anand Chandrasekaran.
The acquisition is where the capitalist or investors purchase the controlling stake of a young business venture with or without an agreement. Some good examples in India are Zee Entertainment – Sony India Merger and Indus Tower – Bharti Infratel Merger.
In startup terms, Agile means to use the set of substructures and operations based on the Manifesto for Agile Software Development to perform software development activities. It helps companies deliver value to the audience in less time and with less hassle. They work on the principle of long-term goals and short-term plans.
Benchmarks are an objective correlation. When starting a new venture, companies set a bunch of benchmarks. The benchmark may be an amount they aim to achieve or a set of audiences. It helps track growth.
6. Bridge Loan
While the primary funding provided by investors or business angles is enough to execute the operations, there are monetary needs between these events. A bridge loan helps to bridge the vent between those events and activities. It is also called a Swing Loan and is for short-term capital needs.
7. Board of Directors
To run a venture successfully, the ownership of it must be in good hands. The Board of directors is a bunch of reliable investors chosen by the shareholders to execute and guide the venture throughout its development.
8. Boot Strapping
It can be risky and pressuring for a young startup to take help from venture capitalists. So they ask their knowns to provide them with few initial capital needs and test the growth of their business without any hassle of deadlines.
9. Burn Rate
The rate at which a firm spends its total funds is called its Burn Rate. The money spent monthly is its Gross Burn Rate, and the difference between the money spent and the returns is its Net Burn Rate.
10. Cash Flow
The amount of cash transferred from an investor to a business venture in the form of debt and comes back to the investor in the form of interest or shares in a time being is called Cash Flow. It is negative when the debt exceeds the money earned or positive when a business is profitable.
In startup terms, the money or cash that flows between an investor and the company is called Capital. It can be used for assets like pieces of equipment owned, intellectual property, or ownership of the business venture.
12. Capital under management
When we study the venture capitalist glossary, we read about the cash or assets of an individual that is under the control of an investor; these are known as Capital under Management. These are also the assets that these capitalists provide funds for.
13. Convertible Debt
When a business owner agrees with the venture capital investor to borrow cash, they both do so, intending to get returns in the form of a few common shares by a particular date and at a rate. This form of capital-related agreement is called Convertible Debt.
14. Debt Financing
Debt Financing is the antagonist of Equity financing, and instead of sharing ownership of a few stocks with the investor, a business owner sells owned debt equipment to the capitalist. The debt equipment sold here can also be fixed-income units like bills or bonds.
When a young business venture enters the market with an innovative technology or startup and challenges the prices, technologies and audience of the existing market, it causes Disruption. This phenomenon is the driving force of the capitalist world and leads to development in the economy.
16. Equity Financing
In Equity Financing, a company sells its shares to the capitalist in return for debt for its capital needs. It does not demand repayment via interest but rather demands either a share of profit or all shares as a payment instrument.
Incubators are capitalists that catalyze young business ventures with innovative ideas. They help a company develop in its early stages for profit or non-profit purposes.
18. Lead Investor
The funds for investment are provided through sectional portions in different rounds. The Lead Investor of any round is the person who provides most of the funding for that period.
19. Non-Disclosure Agreement
NDA is a type of secret affair between a business and an investor, where they both agree to keep confidential information like trade secrets within themselves. Breaking an NDA can cause serious legal actions and financial penalties. It provides a legal structure that serves as means to protect crucial information from being stolen by a third party.
20. Return On Investment
ROI is one of the most important terms in the venture capital glossary. When a capitalist invests in a business or startup, they get money back in the form of shares or a profit share; this amount is called Return On Investment. It helps the investors fulfill their debt on time, and the business venture keeps track of its growth.
When business steps into the market, its growth and development are measured and called its scalability. To grow its revenue, a company must be prepared for inflation in demand and market risks and have a proper infrastructure with professionals to coordinate the plan efficiently.
The technologies like the consumer, biotechnology, enterprise, and clean technology come under the market in which venture capitalists tend to invest. These are the financial sectors that a young business venture or a startup is considered to be in.
When a company has just walked into the market, it is called a startup. It is in its early stages and demands better care. These enter the market intending to fulfill a need of the audience which is not being taken care of yet. The company mostly remains a startup until it has established itself as a successful venture, but there is no hard and fast rule to determine that.
It is a term given to startups that have a valuation of more than one billion dollars. Recent examples of unicorns in Indian startups are Games24x7, Amagi, Xpressbees, and Physics Wallah.
Vesting is referred to the period in which the ownership of all the shares of a company is in an individual hand. It provides a retirement plan to every employer by offering each a certain amount of shares for different periods. Vesting is used by companies to motivate employees to work for them for longer periods.
The Final Words
If you are a budding entrepreneur looking to start your startup, then a clear understanding of these startup terms is essential. Save this venture capitalist glossary, as it will always come in handy whenever you need it.
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