Disclosures

  • SeedInvest’s due diligence process is no guarantee of success or future results. All investors should carefully review each investment opportunity and cancel their subscription within the allotted time-frame if they do not feel comfortable making any specific investment based on their own DD. Learn more about due diligence on the SeedInvest Blog (https://www.seedinvest.com/blog/angel-investing/how-to-assess-an-investment) and our vetting process in our FAQs (https://intercom.help/seedinvest/en/).

  • SeedInvest’s selection criteria does not suggest higher quality investment opportunities nor does it imply that investors will generate positive returns in investment opportunities on SeedInvest. Learn more about due diligence on the SeedInvest Blog (https://www.seedinvest.com/blog/angel-investing/how-to-assess-an-investment) and our vetting process in our FAQs (https://intercom.help/seedinvest/en/).

  • Diversification is only across multiple early-stage investment opportunities within the asset class. There is no guarantee that this program will lead to a well-balanced portfolio of companies across industry types or stages across the asset class. In addition, enrolling in this program will not lead to diversification across your entire investment portfolio. In order to achieve diversification, we do not recommend you allocate more than 10% of your entire investment portfolio to alternative assets.

  • Testimonials may not be representative of the experience of others and are no guarantee of future performance or success. No individuals were compensated in exchange for their testimonials.

SeedInvest Glossary

This is a glossary of terms related to SeedInvest.

A
Accelerator

A program that provides more established startups with the resources, mentorship, and introductions needed to become self-sufficient and/or funded companies.

Accredited Investor*

An individual investor with an annual salary of at least $200,000 or at least $1 million in investable assets.

Acquisition

A business strategy in which a company purchases most or all of another company to take control of its assets and operations.

Advisor Shares

A type of company stock given to startup advisors in lieu of cash compensation in exchange for their insights and skill.

Allocation

The process of distributing financial resources across different parts of a business in a way that drives efficiency and maximizes profits.

Alternative Assets

Any investment vehicle outside of traditional asset categories like stocks, bonds, or cash. This can include real estate, collectibles, cryptocurrency, art, wine, startups, and other similar assets.

Angel Investor*

An investor who invests their own money into early stage companies, typically in exchange for equity.

Angel Round

A round of financing raised through individuals or groups of high-net-worth investors who invest their own funds in exchange for an ownership stake in the company.

Annual Recurring Revenue (ARR)

Revenue a company can expect to receive on a recurring annualized basis in exchange for providing a product or service on an ongoing basis.

Anti-Dilution Clause

A provision often included in convertible preferred stocks that shields holders from their shares losing value due to additional securities being issued in subsequent rounds.

Audit*

An official inspection of an organization or individual’s various accounts, records, and financial documents, usually conducted by an independent third-party.

B
Bootstrapping

The act of a company self-funding its early-stage operations using existing resources without taking on any investor capital.

Bridge Loan

A form of short-term financing used by startups to cover short-term liquidity needs, typically repaid in no more than 3 years.

Bridge Round

A small round of venture financing intended to carry an organization through to its next larger fundraise.

Burn Rate

The speed at which a startup spends its raised capital to fund its business operations and cover its overhead before achieving profitability.

C
C Corporation

Thought of as the default incorporated business structure, sometimes called a regular corporation, it’s a type of company owned by shareholders that is taxed separately from its owners.

Capitalization (Cap) Table

A document, usually a spreadsheet, which enumerates a company’s securities and details who owns them.

Carried Interest (Carry)

The share of investment profits paid to the general partners of an investment fund.

Churn Rate

The rate at which businesses lose customers over a given period of time.

Cliff

Term for a minimum amount of time an employee must be part of a company to be entitled to company shares or other benefits, typically one year.

Common Stock*

A standard type of security representing ownership equity in a company, granting holders rights like shareholder voting.

Convertible Note*

A short-term debt instrument that allows early-stage startups to borrow money and repay it with equity or company shares at an agreed-upon future date.

Customer Acquisition Cost (CAC)

The approximate amount a business must spend to earn a new customer.

Customer Relationship Management (CRM)

A system, typically software based, designed to help companies track and monitor interactions with its customers to provide them with a better experience.

D
Dilution

When the issuance of new company shares decreases existing stockholders’ percentage of ownership.

Due Diligence*

The process of investigating a company and terms prior to deciding to invest. Due diligence generally includes reviewing documents, speaking to management, and researching the company.

E
Elevator Pitch

A brief and succinct sales pitch of a product or service that encapsulates its purpose or value.

Equity Crowdfunding

The process of raising startup capital from a large number of investors who each contribute a small amount for a proportional share of equity.

Exit Strategy

A business owner or investor’s strategic plan to divest from their position in an asset at a certain point.

F
Family Office

An investment firm that manages the assets and investments of high-net-worth individuals and families.

Form C

A required form companies raising funds through Regulation CF must file with the SEC detailing the terms of the offering, including the amount of funds being raised, the purpose of those funds, and the names of any company officers or directors.

Founder Shares

Low-priced common stock typically distributed among the founding team of an organization, usually carrying certain privileges.

G
Gamification

The addition of games or game-like features into everyday activities to create a more engaging experience for users of a product or service.

General Partner (GP)*

A business owner with day-to-day responsibility for a company’s operations and who has unlimited liability for their portion of its debts. GPs can run venture funds.

Go-To-Market Strategy (GTM)

A plan of action by which an organization intends to release its finished product, including how it will be developed, marketed, and sold to their end customers.

I
Incubator

A program that supports the development of early-stage startups, providing knowledge and other resources to transform a great idea into a viable business.

IPO

When a private company becomes publicly listed on a stock exchange; Initial Public Offering.

J
Jobs Act

The 2012 U.S. law enacted by Congress and signed by President Barack Obama legalizing equity crowdfunding.

L
Lead Investor

A company’s largest provider of capital, which usually sets the terms for follow-up funding rounds and whose presence in a deal can potentially bring in other investors.

Lifetime Value (LTV)

The estimated amount of revenue a customer is expected to represent to a business over the course of the relationship.

Limited Liability Corporation (LLC)

A legal designation for a business which offers owners pass-through taxation and shields their personal assets from liability in certain cases.

Limited Partner (LP)*

A partial business owner whose personal liability for the firm’s debts cannot exceed their ownership stake or investment. LPs often invest in venture funds.

M
Market Share

The percentage of an industry’s total revenue or sales that’s generated by a single company.

Minimum Viable Product (MVP)

An early iteration of a product or service containing only the basic features required to give early customers a chance to try it out and provide feedback.

Moat

A metaphor representing a company’s ability to set itself apart from its rivals and fend off competition; a long-term competitive advantage.

O
OKRs

Short for objectives and key results, OKRs are goal-setting frameworks put into place to help measure progress and indicate success of company objectives.

P
Par Value

The nominal value, or face value, of a company-issued share certificate, bond, or other security.

Pitch Deck

A brief presentation, often a slideshow, intended to give potential investors a simple yet detailed overview of your business.

Pivot

The act of a company changing directions and shifting its emphasis into a new vertical or market.

Post-Money Valuation

The implied equity value of a company after receiving an injection of outside capital.

Pre-Money Valuation

The value of a business before raising outside investment, typically used to calculate the value of a company’s share price.

Pre-Seed Round

Sometimes called a “friends and family” round, it’s the initial funds raised by a very early stage startup to get their idea off the ground.

Preferred Equity

Shares of company stock that confer special rights and privileges to holders over those who own common stock, such as higher yields or dividends.

Private Equity*

A form of financing in which an investor or group of investors acquire an ownership stake in a privately-held company.

Proof of Concept

An exercise meant to prove that a product, service, or technology has real world potential.

Q
Qualified Small Business Stock (QSBS)

Also known as Section 1202 stock, QSBS stock is a type of company shares owned by employees and investors in small businesses which can be excluded from most capital gains taxes upon sale if held for 5 years or more.

R
Regulation A*

Also known as a “Mini-IPO”, Regulation A allows companies to offer shares to the general public, raising up to $75 million. Issuers must file with the SEC, but the costs and time involved are considerably lower than through the traditional IPO route.

Regulation CF*

Short for Regulation Crowdfunding, Regulation CF is a method of startup financing that allows private companies to raise up to $5 million in capital from the general public, inclusive of accredited and nonaccredited investors.

Regulation D*

An SEC regulation that allows startups to raise an unlimited amount of capital through the sale of securities to accredited investors while remaining exempt from registration requirements.

Retail Investor

A non-professional or non-accredited investor.

Retention

How well a company is able to keep its customers and/or employees, and control its overall turnover rate.

Roadmap

A strategic plan in which a business outlines its end goals and the steps it intends to take to reach them.

Run Rate

An extrapolation of future business performance based on current financial data.

Runway

The number of months a company can remain solvent without raising additional funds.

S
Seed Round

An early round of startup financing, typically pre-revenue, that provides a company with enough working capital to fund operational expenses.

Series A

The first round of external capital provided by venture capital investors who are investing on behalf of third party investors in their fund.

Series B

The second round of startup funding, typically VC funds investing between $1M and $30M. Series B funds are often used to advance a business beyond the development stage.

Series C

Typically the third round of startup financing, Series C is a later-stage investment averaging around $50M which helps companies prepare for rapid growth, acquisitions, or an IPO. Investors joining a Series C have typically participated in previous funding rounds.

Series D

Less common than Series A-C, a Series D round is typically raised by a company looking to raise additional capital from institutional investors following a Series C round, often ahead of a merger or IPO.

Small and Medium Sized Enterprises (SMEs)

Independent, non-subsidiary businesses whose revenue, assets, and personnel fall below a given threshold.

Software-as-a-Service (SaaS)

A model of software licensing and delivery in which software is hosted by a third party on external servers and leased out to businesses on a subscription basis.

Stealth Mode

A term for a startup developing its product in a secretive manner to avoid attention and publicity.

T
Tech Stack

The layers of technology-based tools and applications a company uses to manage and execute its product and marketing strategy.

Term Sheet

A non-binding, often bulleted document outlining the basic conditions and agreements of an investment.

Total Addressable Market (TAM)

A measurement of how much revenue a product or service could generate assuming 100% penetration of a market or segment.

U
Unicorn

A term coined in the VC industry to describe a startup with a valuation of at least $1 billion.

Unit Economics

The amount of profit a company generates from a sale equivalent to a single unit of its product or service.

V
Valuation*

A process used to determine the approximate economic value of a business taking all aspects of the company into consideration.

Value Proposition

A simple statement that summarizes the value your business delivers to its customers and why they should do business with you instead of a competitor.

Venture Capital

A type of equity investment in an early-stage company made by wealthy individuals or investment firms in exchange for an ownership stake.

Vesting

A process by which the rights to an asset are passed to a recipient over a phased schedule, such as company shares or 401(k) matching funds.

W
Warrant Coverage

A type of contract which gives an investor the right to purchase additional company shares at a predetermined future price.

Definitions in the glossary are intended solely to help this website's users understand equity crowdfunding terms. All of the information in this glossary is for education use only. The definitions in this glossary are simplified. Definitions have been carefully compiled and even though we believe for them to be accurate, none of our definitions take precedence over definitions provided by both FINRA and SEC. The definitions provided do not constitute the official use of terms and phrases for regulatory purposes.

* Please visit www.sec.gov for the glossary of key terminology provided by the U.S. Securities and Exchange Commission.

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