Refers to a guarantee that no one will be liable for an event if particular precautions are taken or if certain limitations are adhered to as prescribed by law.
Sarbanes-Oxley Act of 2002
An act that was passed to provide investors with protection from fraudulent accounting practices and other illegal practices by corporations.
Refers to the capability of a business to respond positively or favorably and thus, continue with expansion; this is a feature or characteristic that venture capitalists look for in companies they plan to finance.
A situation in which a startup grows rapidly while their operational and financial controls are maintained.
A C-corporation that elects with the IRS for pass through taxation.
A method by which investors and entrepreneurs collaborate to find and acquire a target company.
Refers to a situation where a private equity firm sells its stake in a company to another private equity firm.
Allows investors and co-founders to sell securities and other assets to other investors, versus buying from the company itself.
Describes the sale of stock in a particular company from an investor, versus a sale from the company itself.
Debt that is secured or supported by assets as collateral.
Securities Act of 1933
Passed as a consequence of the 1929 market crash, with the goals of (1) requiring investors receive financial information about securities that are being offered for public sale and (2) preventing or prohibiting misrepresentations and fraud in the sale of securities.
Securities and Exchange Commission (SEC)
Governmental regulatory body that is tasked with enforcing securities laws such as the Securities Act of 1933.
Securities Exchange Act of 1934
A law established by the SEC, authorizing the SEC to oversee all aspects of the securities sector; this involves the authority to register and regulate brokerage firms and transfer agents, in addition to overseeing the nation’s securities self regulatory organizations.
Financial resource, such as stock, bonds, and notes, which represents an equity or interest in a company.
Describes the securing of debt by legally claiming collateral that has been offered to the lender.
The initial investment given to a startup by angel investors, friends, and/or family to get the company to the initial or seed stage.
Describes a financing that is at a lower level than a full-fledged financing; also known as light preferred.
The starting stage in the development of a startup; the company is recently incorporated and its founders are creating the product and/or service through the use of seed capital given by angel investors, family, and/or friends.
Higher priority debt than other debt, like junior debt; the holder of senior debt will be paid first in the case of a liquidation of a company or asset.
Securities with preferential claim over common stock, commonly during the bankruptcy or liquidation of the company.
Series A Preferred Stock
Category of stock that a startup company commonly issues to angel investors and venture capital firms during a Series A financing round.
Series A Round
Refers to a financing round where angel investors and/or venture capital firms initially invest in a startup company.
Series AA Round
Refers to an angel investors financing round using Series AA Preferred Shares.
Series B Round
The round of equity financing that is closed after a company’s Series A round.
Series Seed Financing
Refers to a small financing round, typically the first that a startup experiences, that happens before a Series A financing.
A document governing the association between the shareholders of a company. It includes particular rights, such as the right to transfer shares, the rights of first refusal, etc.
Describes a corporation with no ongoing business or operations and no important assets.
A document of agreement between an investor and a company, which gives the investor additional rights not given to other investors and not included in the deal documents.
Single Trigger Acceleration
Acceleration (full or partial) of a co-founders vesting schedule after the startup experiences a “change of control.”
Sliding Fee Scale
Changing or variable costs for products, services, and/or taxes as determined by a person’s ability to pay.
Small Business Administration
A government agency tasked with assisting small businesses and enhancing the overall economy via distribution of information and events.
Small Business Innovation Research Program
A program run by the Small Business Administration that legally mandates for 2.5% of large federal agency research budgets to be reserved for small businesses.
Small Business Investment Company
A licensed company of the Small Business Administration that is tasked with augmenting venture capitalists and private equity firms involved in startup investments.
The sole owner of a business who pays personal income tax on the proceeds or profits from the business as if it was part or all of his or her income.
Special Purpose Acquisition Company
A program that raises funds with the purpose of buying a pre-existing corporation. This corporation does not need to be known during the investment period.
Special Purpose Vehicle
Commonly a subsidiary of a larger corporation; its function is to acquire and/or manage particular assets.
The development or creation of an independent company via the sale or distribution of shares of an existing business or part of a parent company.
An event by which there are at least two series of preferred stock, including a series with senior liquidation preference relative to other series.
A board that is set up for the purpose of preventing a hostile takeover, by staggering the board seats that are up for a vote each year (this ensures that only a fraction of the directors or board seats are up for a vote at one time).
An individual or entity that is chosen by a bankrupt company to make the first bid on that company’s assets, in order to prevent the company’s assets from being sold at a large discount due to low-ball bids.
A company that is in the initial or early stages of development and operations.
Refers to those who own the stock of a corporation.
Refers to consent associated with a certain corporation transaction, which belongs to the stockholders of a startup
An equity interest, which allows the recipient the authority or right to purchase stock in a startup at a pre-determined exercise amount.
A company’s incentive equity plan where the Board of Directors are allowed to issue stock options or restricted stock to employees and advisors of the startup.
Stock Purchase Agreement
A legal document of agreement created between a startup company and a shareholder; it regulates the transfer and sale of a startup’s stock to that shareholder by determining how much stock is to be purchased, the price, and the method of payment. These types of agreements are either restricted or non-restricted.
Process of splitting a startup company’s outstanding stock into multiple shares; current stockholders will then be given additional shares proportional to their current holdings.
An investment made by an established company in a startup for the purpose of gaining access to the startup’s business or technology.
Price that a stock option is exercised at, usually per share exercise.
Low priority debt in relation to other debt of a startup; in the event of liquidation, this debt is not prioritized.
A document indicating an investor’s investment into a startup.
A legal entity that has stock that is at least 50% owned by another company.
Describes a prolific and successful angel investor with extensive experience.
A voting decision where more than a simple majority is necessary.
Super Pro Rata Rights
Rights allowing investors to purchase sufficient shares in future financing rounds in order to maintain their ownership of a startup company, as well as to purchase shares in an amount that would increase their current equity stake.
A startup’s equity that a co-fonder earns as a result of that co-founders hard work.
Refers to the combined efforts of different financial entities, such as venture capitalist, investment banks, and private equity firms, in conducting a large transaction that individual entities would not be equipped to handle.