Venture Capital Terms
The process of investigation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.
Employee Stock Ownership Plan (ESOP)
A trust established by a corporation for the allocation of some of its stock to its employees over time, intended to motivate employees, and often providing tax benefits to the company. Also called stock purchase plan.
Additional funds put in a company, by either a new shareholder or an existing one, received in a separate or later tranche within the frame of a single series or round of investment. In many cases, the original round deadline is extended to a later date, allowing new shareholders to invest in the company under the same terms as investors in the earlier round.
An investment entity that has no cash or cash equivalents for new investments. It makes follow-on investments only.
A round of investment in a company that includes only current shareholders (all or some) to provide the company with additional funding, usually without changing the terms the shareholders enjoyed prior to the round.
A company's principal provider of capital, such as the entity, which originates and structures a syndicated deal.
The right, but not obligation, to buy (call option) or sell (put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (strike price) during a specified period of time. For public companies stock options, the amount is usually 100 shares. Also called option contract.
Money used for the initial investment in a project or startup company, for proof-of-concept, market research, or initial product development. Also called seed financing or seed money.
In venture capital, a document summarizing the details of a potential venture capital investment, which serves as the basis for a final business agreement.
A financing vehicle for infrastructure and equipment needs, in cases when a company doesn't qualify for bank or traditional leasing financing or when additional venture capital may either be unavailable or trigger unwanted penalties in the original venture-capital agreement.
A middle ground of financing for firms that need equity capital, don't want or can't get sufficient bank financing, but that are not yet ready to go public with their products or services.
A certificate, usually issued along with a bond or preferred stock, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price at the time of issuance, for an extended period, of several years or for an unlimited period. Also called subscription warrant.
To charge an asset amount to expense or loss, in order to reduce the asset value.