Glossary

the speed ramp that takes startups from adolescence to something resembling early adulthood. Accelerator programs typically last three to six months (as opposed to incubators, which have longer time spans) and are meant to help startups that are already performing scale up and create the organizational framework that they’ll need to thrive.

Defined by Rule 501 of Regulation D, an individual (i.e. non-corporate) "accredited investor" is a either a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase OR a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

The interest due on preferred stock or a bond since the last interest payment was made.

The process of gaining control, possession or ownership of a private portfolio company by an operating company or conglomerate.

Accelerated Cost Recovery System. The IRS approved method of calculating depreciation expense for tax purposes. Also known as Accelerated Depreciation.

American Depositary Receipt (ADR's). A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.

A group of external advisors to a private equity group or portfolio company. Advice provided varies from overall strategy to portfolio valuation. Less formal than a Board of Directors.

The amount of securities assigned to an investor, broker, or underwriter in an offering. An allocation can be equal to or less than the amount indicated by the investor during the subscription process depending on market demand for the securities.

This term describes non-traditional asset classes. They include private equity, venture capital, hedge funds and real estate. Alternative assets are generally more risky than traditional assets, but they should, in theory, generate higher returns for investors.

An Accounting procedure that gradually reduces the book value of an intangible asset through periodic charges to income.

Alternative Minimum Tax. A tax designed to prevent wealthy investors from using tax shelters to avoid income tax. The calculation of the AMT takes into account tax preference items.

Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.

A person who provides backing to very early-stage businesses or business concepts. Angel investors are typically entrepreneurs who have become wealthy, often in technology-related industries.

Contractual measures that allow investors to keep a constant share of a firm's equity in light of subsequent equity issues. These may give investors preemptive rights to purchase new stock at the offering price. [See Full Ratchet and weighted Average]

defense against dilution: these provisions are designed to protect investors by issuing them additional shares in future funding rounds or by lowering the conversion price for their preferred shares, thus giving them more common shares.

Antidilution provisions retroactively reduce the per share purchase price of preferred stock if the company sells stock in the future at a lower prices. This is effected by increasing the conversion rate of the preferred and accordingly increasing the number of shares of common stock into which a share of preferred stock converts. There are two main types of antidilution protection: weighted average antidilution protection and ratchet antidilution protection.

Usually an outsider hired by a syndicate of angel investors to perform due diligence on investment opportunities and coordinate allotment of investment duties among members. Archangels typically have no financial commitment to the syndicate.

Loan, typically from a commercial bank, that is backed by asset collateral, often belonging to the entrepreneurial firm or the entrepreneur.

the VC is the management, and they’re sitting on top of a whole pile of money; this is the money that they have available for venture investments.

Immediate conversion of an investor's priority shares to ordinary shares at the time of a company's underwriting before an offering of its stock on an exchange.

The arithmetic mean of the internal rate of return.