GLOSSARY. Angel investor /business angel is an individual who provides capital to one or more startup companies

Angel investor /business angel is an individual who provides capital to one or more startup companies. Unlike a partner, the angel investor is rarely involved in management. Angel investors can usually add value through their contacts and expertise.

Business plan - This is a legal document that business owner’s use in detailing their business idea(s) as well as their company’s overall financial objectives. Many investors heavily rely on an entrepreneur’s business plan when deciding to invest in a company.

Buyout i s defined as the purchase of a company or a controlling interest of a corporation's shares or product line or some business. A leveraged buyout is accomplished with borrowed money or by issuing more stock.

Due diligence is the process of investigation and evaluation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.

Executive summary is a very important component of a company’s business plan. It concisely summarizes the proposed business idea(s) and the fundamental objectives of the company. Upon review, the investor(s) should have a precise understanding of the prospective company’s mission. The executive summary determines if the company is viable enough for investment.

Expansion stage company- generally refers to a company that is three years old or more. During this period of development, a company may already have been successful commercializing many of their products and services but may not generate desired profit. An enterprise that is in its expansion stage may resort to seeking additional sources of capital to minimize the risk of failure.

First Stage Capital is the money provided to entrepreneur who has a proven product, to start commercial production and marketing, not covering market expansion, de-risking, acquisition costs.

Follow-On is a subsequent investment made by an investor who has made a previous investment in the company, generally a later stage investment in comparison to the initial investment.

Leveraged Buy-out or LBO is a type of aggressive business practice whereby investors or a larger corporation utilizes borrowed funds (junk bonds, traditional bank loans, etc.) or debt to finance its acquisition. The high debt-to-equity ratio enables the investors to “buyout” a smaller company with very little cash. Leveraged buy-outs can be either friendly or hostile, depending on the negotiations made. The debt is secured by the assets of the business. In LBO, the acquiring company uses its own assets as collateral for the loan in hopes that the future cash flows will cover the loan payments.

Mezzanine Financing is a late-stage venture capital, usually the final round of financing prior to an IPO. Mezzanine Financing is for a company expecting to go public.

Return On Investment (ROI) or Rate of Return (ROR) or Rate of Profit. It is the amount of money that is gained in a past or existing investment.

Risk capital are funds made available for startup firms and small businesses with exceptional growth potential.

Second Stage Capital is the capital provided to expand marketing and meet growing working capital need of an enterprise that has commenced production but does not have positive cash flows sufficient to take care of its growing needs.

Seed Capital is the initial set of capital for newly-formed or start-up companies. It’s usually quite small because the venture is still in the idea or conceptual stage.

Startup is a new business venture in its earliest stage of development. This is the initial phase of a company’s development whereby a prospective business is currently developing new products and services which have not been fully tested and introduced to the public.

Third Stage Capital is the capital provided to an enterprise that has established commercial production and basic marketing set-up, typically for market expansion, acquisitions, product development, etc.

Track record is the past record of the accomplishments and failures of a person, business, etc.

Turnaround is the term used when the poor performance of a company or the business experiences a positive reversal.

Venture Capital is the money and resources made available to startup firms and small businesses with exceptional growth potential. Most venture capital money comes from an organized group of wealthy investors.

Venture Capital Firm is an investment company that invests its shareholders' money in startups and other risky but potentially very profitable ventures.

Venture capital funds pool and manage money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential.

Venture Capitalist is a term used of a group of high-net worth investors who invest in later stage companies. Unlike angel investors who use their own personal money, venture capitalists pool money from different sources for their investments.

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