a

Acquisition Cost Acquisition cost is the cost a company recognises for property after deducting discounts and adding incidental costs.

Alternative Finance The term used for non-traditional forms of finance.

Angel Investor An investor who provides a business or start-up with capital and in exchange, receives convertible notes or ownership equity.

Articles of Association A document that specifies the regulations for a company’s operations.

Asset Class When market conditions change, groups of investments react in similar ways.

b

Beneficial Shareholder or Owner An investor who owns the economic value and other shareholder benefits attached to shares.

Board of Directors A group of people who oversee company activities. They can be elected or appointed to the board.

Bridging Loans Bridging loans are used to take advantage of a short term opportunity in order to secure long term financing. A bridging loan is obtained by a developer while approval is sought.

B Shares A company’s articles of association define classes of shares (B, C, D, etc.) with specific sets of rights.

Business Plan A document outlining company goals and details of how they will be realised.

Business Traction The progress a start-up company makes as it gains momentum and grows.

c

Campaign The funding period for a specific project in a crowdfunding platform.

Cap Table A table showing the percentage equity of each shareholder of a company.

Class A Shares Typically Class A shares are a specific share class with more voting rights than class B or C.

Convertible Note An investment that starts as debt but converts into equity.

Crowdfunding The funding of projects or ventures by raising money from a large number of people, usually online.

Crowdfunding Platform An online portal where projects are represented and attracts investors, backers and donors.

d

Dilution When assets remain the same and additional shares are issued, reducing the value of a shareholding.

Dividends Company profits (or reserves) that are paid out to its shareholders on a regular basis (typically annually).

Due Diligence The process of comprehensively examining an investment opportunity to ensure that everything is as it seems.

e

Earnings Yield The earnings yield is the inverse of P/E ratio. The earnings yield ratio shows the percentage of each dollar invested in the stock that was earned by the company.

Equity Equity refers to ownership interest in a company in the form of shares or other securities.

Equity Crowdfunding A form of crowdfunding where groups of investors are offered shares in the company in return for their investment.

Escrow Account During a transaction between two parties, this is a temporary pass through account held by a third party.

Exit When investors are given the opportunity to dispose part or all of their shareholding.

f

Financial Forecast An estimate of the future financial outcomes for a company.

Fully Diluted All the shares in issue of a company, including those that are subject to warrants, options or other contractual rights.

Fund A fund is an investment vehicle with money raised to invest across multiple businesses.

g

Growth Stage Beyond the initial seed stage, a business proceeds to the next stage, the growth stage.

h

High Net Worth Individual Wealthy individuals who satisfy certain pre-defined criteria for investments.

i

Illiquid Asset Security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value.

Initial Public Offering (IPO) Where a company has not issued equity to the public before, it is known as an IPO.

Intellectual Property Intangible property that is the result of creativity, such as patents, copyrights, etc.

Internal Rate of Return (IRR) A rate of return that measures and compares the profitability of investments in capital budgeting.

Investment Memorandum (IM) During a funding round, the IM is a legal document given to potential investors to explain the objectives, risks and investment terms.

Issuer A legal entity that develops, registers and sells securities for the purpose of financing.

l

Lead Investor An individual or group who lead a funding round are known as lead investors.

Lender An entity that provides borrowings to lenders for a fixed or variable rate of interest.

Liquidity The availability of liquid assets to a market or company.

m

Market Opportunity A market opportunity exists where there is a forecasted demand in specific market/markets for a particular product or service where customer needs haven’t been satisfied.

Market Risk Due to changes in market factors, this is the risk associated with the value of an investment decreasing as a result.

o

Options A financial derivative security whereby the security provides the buyer the right but not the obligation to buy/sell a security at a predetermined price during a specified period of time.

Ordinary Share A share entitling its holder to dividends which can vary in amount and may even not be issued if company financial forecasts aren’t achieved.

Overfunding When a company decides to continue accepting investments for a specific period, after it has already met its target raise amount.

p

Peer to Peer Finance The direct exchange of money from individuals to other individuals or businesses through a platform.

Pitch Deck A summarised business plan.

Platform This is how some people refer to a crowdfunding website.

Portfolio An individual or group’s financial assets.

Post-investment The period of time after an investment has been made into a company and the cooling off period has expired.

Post-Money Valuation The company’s value post outside investment of financing.

Pre-Money Valuation The company’s value prior to an investment.

Pre-emption The purchase of shares by one person or party before the opportunity is offered to others.

Preference Shares A class of share which gives the shareholder specified preferential rights.

Private Equity Investments made into companies that are not publically traded on a stock exchange.

Professional Investor A person who controls or manages at least $10 million of investment in securities or holds an Australian Financial Services License.

r

Retail Investor Essentially, everyone is a retail investor unless they satisfy one of the requirements to be classified as a wholesale client or sophisticated investor under sections 761G (5), (6) and (7) or section 761GA of the Corporations Act 2001 apply.

Return on Equity (ROE) Return on equity measures the rate of return for ownership equity of stakeholders. It measures the efficiency of profit generation from each unit of shareholder equity.

Return on Investment (ROI) A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

Revenue Model Outlines the products or services that will be created for sale in order to generate revenues.

Risk Risk, in the context of early stage investing, refers to the danger that an investment will lose money.

s

Securities A financial instrument that represents: an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option.

Seed Round The first outside capital raised by a start-up. In many cases, this capital comes from family and friends, angel investors or start-up accelerators, and is rarely more than $250K. Seed capital can be equity or debt.

Series A Funding Series A funding is used by a company to grow or scale its product.

Shareholder An individual who holds shares in a company.

Shareholders’ Agreement A contract/agreement among shareholders of a company that describes rights and obligations.

Share Issue The process by which a company issues new shares to shareholders.

Share Option An investor's right to buy (or sell) shares or securities, at an agreed price within a certain time frame.

Shares A financial asset that typically represents a unit of ownership in a business in the form of physical paper or electronic records. A shareholder does not have direct control over business operations, but does get a portion of any profits in the form of dividends.

Sophisticated Investor A sophisticated investor is one or more of the following: A person or entity that has obtained an accountant’s certificate dated no more than two years ago that the client: (a) Has net assets of at least $2.5 million, or (b) Has a gross income for each of the last two financial years of at least $250,000; and a person or entity that is controlled by a person or entity that meets the requirements of (a) or (b) above. A person or entity who invests where the purchase price of the product is at least $500,000.

Start-up A newly established business.

Start-up Capital The money that is required to start a new business, whether for office space, permits, licenses, inventory, product development and manufacturing, marketing or any other expense.

Stock Portfolio A collection of individual stocks and other financial assets owned by an investor and is either self-managed or managed by financial professionals.

t

Term Sheet A term sheet outlines the basic terms and conditions under which an investment into a company will be made.

v

Valuation The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.

Valuation Cap The valuation cap is associated with convertible notes in the second round of funding. To reward early investors for taking a risk in the first stage of funding, convertible notes can be converted to shares at a discounted price on a predetermined discount rate. Given that the company will have a high valuation.

Venture Capital A sought-after source of funding for start-ups that can make a case to investors that the business will have long-term growth potential. Venture capitalists accrue higher risk, but receive higher returns if they invest in a successful company at an early stage.

Voting Rights Rights granted by the holding of a share(s) in a company that allow voting in certain activities.

w

Warrants A warrant is a security that entitles the holder to buy the underlying stock at a fixed exercise price.