Startup Funding Jargon

from Startup Blawg 07 Aug 13 enhanced by Peter/CXO Wiz4biz 2/14

What does it mean? Angel investor. Crowdfunding. Incubator. Anyone new to the Startup world quickly encounters a dizzying array of jargon. To bring your vocabulary up to speed as quickly as your company, here is a quick guide to some common startup terms:

Accelerator – A program, normally lasting a few months, designed to help startups grow rapidly. Accelerators usually require startups to apply for acceptance into a “class,” which consists of a group of startups who will proceed through the program together, folliowing a schedule with fixed beginning & ending dates. Accelerator programs typically provide startups with some combination of business education, mentoring, office space & funding, often, but not always, in exchange for stock in the startup.

Accredited Investor – A type of investor defined by the federal securities laws to include certain institutional investors, such as banks, insurance companies & employee benefit plans, as well as a natural person: (a) who has an individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million, excluding the value of the primary residence of such person; or (b) 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.

Angel Investor – A high net-worth individual who invests in a startup, seed-stage or early-stage company in return for an ownership stake. Angel investors usually invest their own money (unlike venture capital firms, who, for the most part, invest other people’s money) and may do this individually or as part of an angel group. The amount a typical Angel invests in a single company usually ranges from $5000 to $100,000, but can go much higher.

Angel Round – A round of startup financing received from angel investors.

Benefit Corporation or Public Benefit Corporation – A new type of corporation created by state statutes to use private enterprise to create a public benefit. Unlike traditional corporations, benefit corporations must consider non-financial, as well as financial, interests when making decisions and must report on their overall social and environmental performance using accepted standards. (Check to see if your State has this program.

Boot-Strapping – Using personal assets (and other resources) + operating revenues to start & grow a company.

Bridge Loan – A short-term loan, usually provided by the underwriter of a company’s IPO, to pay operating expenses and/or the costs of the IPO or maintain the operations before IPO.

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