Glossary

A procedure in which a firm can sell its accounts receivable invoices to a factoring firm, which pays a percentage of the invoices immediately, and the remainder (minus a service fee) when the accounts receivable are actually paid off by the firm's customers.

An ERISA term, it is the United States Department of Labor's Final Regulation relating to the definition of "plan assets" in (29 C.F.R. §2510.3-101).

A person who helps to arrange a transaction.

the advantage of getting into a market first and getting a big share of the customers.

the first investment in a company made by outside investors.

The act of buying shares in an IPO and selling them immediately for a profit. Brokerage firms underwriting new stock issues tend to discourage flipping, and will often try to allocate shares to investors who intend to hold on to the shares for some time. However, the temptation to flip a new issue once it has risen in price sharply is too irresistible for many investors who have been allocated shares in a hot issue.

When a firm's shares start trading on a formal stock exchange, such as the NASDAQ or the NYSE. This is probably the most profitable exit route for entrepreneurs and their financial backers.

Companies often require several rounds of funding. 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'.

think of this as doubling down on a good bet: people who invested in a company already throw in more money for another round.

This is the annual report that most reporting companies file with the Commission. It provides a comprehensive overview of the registrant's business. The report must be filed within 90 days after the end of the company's fiscal year.

This is the annual report filed by reporting "small business issuers." It provides a comprehensive overview of the company's business, although its requirements call for slightly less detailed information than required by Form 10-K. The report must be filed within 90 days after the end of the company's fiscal year.

The form can be used to register securities for which no other form is authorized or prescribed, except securities of foreign governments or political sub-divisions thereof.

This is a simplified optional registration form that may be used by companies that have been required to report under the '34 Act for a minimum of three years and have timely filed all required reports during the 12 calendar months and any portion of the month immediately preceding the filing of the registration statement. Unlike Form S-1, it permits incorporation by reference from the company's annual report to stockholders (or annual report on Form 10-K) and periodic reports. Delivery of these incorporated documents as well as the prospectus to investors may be required.

This form may be used by "small business issuers" to register securities to be sold for cash. This form requires less detailed information about the issuer's business than Form S-1.

Shares owned by a company's founders upon its establishment.

The cash flow of a company available to service the capital structure of the firm. Typically measured as operating cash flow less capital expenditures and tax obligations.

a form of antidilution protection that sets the conversion price for preferred stock in relation to the price of a new round of shares, regardless of how many new shares are issued. Ex.: If there were 100 shares of stock issued during the first round at $1 per share, even if the company only issues 10 more shares during the next round, but they do it at 50 cents per share (this would be a down round), then the new conversion price is 50 cents. Compare with weighted average.

The sale of a single share at a price less than the favored investors paid reduces the conversion price of the favored investors' convertible preferred stock "to the penny". For example, from $1.00 to 50 cents, regardless of the number of lower priced shares sold.

Earnings per share expressed as if all outstanding convertible securities and warrants have been exercised.

The number of shares representing total company ownership, including common shares and current conversion or exercised value of the preferred shares, options, warrants, and other convertible securities.

The age of a fund (in years) from its first takedown to the time an IRR is calculated.

The indicated area of specialization of a venture capital fund usually expressed as Balanced, Seed and Early Stage, Later Stage, Mezzanine or Leveraged Buyout (LBO).

A fund set up to distribute investments among a selection of private equity fund managers, who in turn invest the capital directly. Fund of funds are specialist private equity investors and have existing relationships with firms. They may be able to provide investors with a route to investing in particular funds that would otherwise be closed to them. Investing in fund of funds can also help spread the risk of investing in private equity because they invest the capital in a variety of funds.

The total amount of capital committed by the investors of a venture capital fund.