VCpedia by Leta Capital

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a

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ARR (annual recurring revenue)

ARR (annual recurring revenue)

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an essential SaaS business metric that shows how much recurring revenue you can expect, based on yearly subscriptions.

Angel investor

Angel investor

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is a person who lnvests in startups in the early stages with their own money and resources. These types of investments are rarely met, due to the risk uncertainty. Therefore, most angel investors are searching for a higher rate of return than those determined by traditional investment opportunities.

Anti-dilution provisions

Anti-dilution provisions

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are clauses in the agreement that give shareholders the right to keep their ownership percentages in case new shares are issued.

b

b

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Burn rate

Burn rate

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is used by startups and investors to track the amount of monthly cash that a company spends before it starts generating its own income.

Bootstrapping

Bootstrapping

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starting a business with money and resources from the founders’ own pockets.

c

c

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Cap Table (Capitalization table)

Cap Table (Capitalization table)

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a table providing a shareholders structure, the history of changes and all parameters which can influence it in the future.

Capital Call

Capital Call

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when a fund makes an investment and messages its LPs to put capital into the fund account to invest in the portfolio companies.

Convertible loan

Convertible loan

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a financial instrument typically used for investments in early-stage companies and startups.

d

d

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Due diligence

Due diligence

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an analysis an investor makes of all the facts and figures of a potential investment. Can include an investigation of financial records and a measure of potential ROI.

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e

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Elevator pitch

Elevator pitch

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a concise presentation given from an entrepreneur to a potential investor about an investment opportunity. The presentation should be concise enough to be shared during an elevator ride

Exit

Exit

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the sale or exchange of a company ownership for cash, debt, or equity.

f

f

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Fund of funds

Fund of funds

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these are larger institutional platforms that invest in many different funds. This allows institutional investors to get allocations in some funds that they perhaps otherwise wouldn’t be able to. This entity is often referred to as a Limited Partner to the venture capital funds.

Fully Diluted

Fully Diluted

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shares are the total common shares of a company counting not only shares that are currently issued or outstanding but also shares that could be claimed through the conversion of convertible preferred stock or through the exercise of outstanding options and warrants.

g

g

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General Partners (GPs)

General Partners (GPs)

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partners in a VC firm who are commonly managing a fund and are actively involved in the day-to-day operations of the business.

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h

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High Net Worth Individuals (HNWIs)

High Net Worth Individuals (HNWIs)

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High net worth individuals (HNWIs) are generally defined as individuals who have at least $1 million in liquid assets.

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i

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Investment Syndicate

Investment Syndicate

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a group of investors that agree to participate in an investment round of funding for a company.

Incubator firm

Incubator firm

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is a company or organization that support startups and early-stage companies.

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j

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JOBS Act - Jumpstart Our Business Startups Act

JOBS Act - Jumpstart Our Business Startups Act

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Includes several provisions related to early stage companies, including new regulation regarding the maximum number of shareholders private companies are allowed and changes to the method in which companies can solicit private investors.

k

k

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l

l

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Limited Partners (LPs)

Limited Partners (LPs)

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the investors who add their money to a VC fund and let General Partners invest that money for them.

Liquidation

Liquidation

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An event that could result in either investors or debt holders to receive cash from the company, either through acquisition or a sale of assets.

Letter of Intent (LOI)

Letter of Intent (LOI)

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is a document declaring the preliminary commitment/interest of one party to do business with another.

m

m

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Management Fee

Management Fee

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the fees that a fund will charge its limited partners each year. Venture capital fund management fees typically range from 1–3% annually (usually 2%) and are generally charged based on committed capital during the investment period, and then invested capital after the investment period has finished.

n

n

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Net revenue

Net revenue

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the total amount of income you earn from business operations minus any adjustments, such as accounting for returns, refunds, and discounts.

Non-disclosure agreement (NDA)

Non-disclosure agreement (NDA)

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an agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being shared with outside parties.

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o

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Operating Income

Operating Income

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is the amount of profit realized from a business's ongoing operations and is calculated by subtracting operating expenses from a company's gross income.

Option pool - employee stock ownership plan (ESOP)

Option pool - employee stock ownership plan (ESOP)

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number of shares of common stock which has been reserved for early investors or employees of a start-up.

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p

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Pre-money valuation

Pre-money valuation

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the value of a company not including external funding or the latest round of funding.

Post-money valuation

Post-money valuation

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how much the company is worth after it receives the money and investments into it.

Pitch deck

Pitch deck

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is a presentation deck that is used to pitch your idea or company to investors or other audiences.

P&L report

P&L report

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sums up the income and expenses that were generated during a certain period of time, usually a month or a quarter.

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q

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r

r

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Revenue/Gross revenue

Revenue/Gross revenue

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all income from a sale is accounted for on the income statement. There is no consideration for any expenditures from any source.

Run rate

Run rate

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the financial performance of a company, using current financial information as a predictor of future performance.

s

s

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SAFE Note

SAFE Note

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SAFE notes (or Simple Agreement for Future Equity) are a simpler option than convertible notes. SAFE notes are documents that early-stage companies use to help raise pre-seed or seed capital. Essentially, a SAFE note acts as a legally binding promise to allow an investor to purchase a specified number of shares for an agreed-upon price at some point in the future. In simple terms, an investor will give a startup money and receive a promise to get equity, usually at a predetermined price when certain milestones are met.

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t

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Term Sheet

Term Sheet

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a document that includes the basic terms of a company’s fundraising round (or any investment).

Target Market

Target Market

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group of potential customers to whom a company wants to sell its products and services.

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u

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Unicorn

Unicorn

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is a privately held startup valued at over US$1 billion (such name implies the mythical animal to represent the statistical rarity of such successful ventures).

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v

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Valuation

Valuation

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the analytical process of determining the current (or projected) worth of an asset or a company.

Valuation Cap

Valuation Cap

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a way to reward early stage investors for taking on additional risk. The valuation cap sets the maximum price that the loan will convert into equity.

Venture firm

Venture firm

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a firm that manages venture capital funds. A venture capital firm may have several funds under its management. For example, Leta Capital has two funds under management.

Venture fund

Venture fund

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a sum of money investors (LPs) commit for investment in early-stage companies. Usually has limited size and limited life time.

Vesting schedule

Vesting schedule

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a motivation program established by an employer to give employees the right to certain asset classes. Employers use such type of incentive to reward loyal employees who remain with the company for a long period. There are 3 types of vesting schedules: milestone-based vesting (based on the achievement and performance of certain milestones in a company); time-based vesting (employees earn their percentage of stock options over time according to a cliff or schedule); hybrid vesting.

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w

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Warrant

Warrant

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the right to purchase stock at a later date at a fixed price. Similar to stock options, but usually given to investors, not employees.

x

x

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y

y

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z

z

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