February 11, 2008 Here are a few basic definitions when you are looking for money.
Investor - someone who exchanges money for a share of your company.
Angel - an individual who invests a decent chunk of money in your company ($100-500K) in exchange for some ownership. They tend to be entrepreneurs who have made it big themselves and are often less demanding and interfering than venture capitalists. (This is not always true, by the way.)
Venture Capitalist - a person who is a partner in a venture capital (VC) firm who helps find, select, and manage investments made by the VC firm. In general, VCs get their money from limited partners (these can be anyone from rich investors to corporations to pension funds). The limited partners do not have a say in the investments.
Associate - a junior person at the VC firm who holds no power, but will arrogantly act like they do. If you spend a lot of time with an associate, you are probably wasting it.
Principal - a associate whose been promoted. The power of this person depends on the firm. Still not a decision maker, but can blackball you.
One Pager - a one page (usually front and back) describing your company. Includes some history, mini financials, management description, product description, and business strategy. Your business plan in miniature.
Executive Summary - like the one pager, but a little longer. Your abbreviated business plan.
Your Business Plan - a 20-30 page document that will only be read by the associate. It still has to be good though or they’ll think your not taking this seriously.
Here are a few basic definitions when you are looking for money.
Investor - someone who exchanges money for a share of your company.
Angel - an individual who invests a decent chunk of money in your company ($100-500K) in exchange for some ownership. They tend to be entrepreneurs who have made it big themselves and are often less demanding and interfering than venture capitalists. (This is not always true, by the way.)
Venture Capitalist - a person who is a partner in a venture capital (VC) firm who helps find, select, and manage investments made by the VC firm. In general, VCs get their money from limited partners (these can be anyone from rich investors to corporations to pension funds). The limited partners do not have a say in the investments.
Associate - a junior person at the VC firm who holds no power, but will arrogantly act like they do. If you spend a lot of time with an associate, you are probably wasting it.
Principal - a associate whose been promoted. The power of this person depends on the firm. Still not a decision maker, but can blackball you.
One Pager - a one page (usually front and back) describing your company. Includes some history, mini financials, management description, product description, and business strategy. Your business plan in miniature.
Executive Summary - like the one pager, but a little longer. Your abbreviated business plan.
Your Business Plan - a 20-30 page document that will only be read by the associate. It still has to be good though or they’ll think your not taking this seriously.
Pitch Deck - otherwise known as a presentation (see I told you the lingo was different). Usually a Powerpoint presentation that you use when you present to the VCs. If they are really interested, you probably won’t get past the first couple slides. Make those slides count!
Term-sheet - a non-binding offer of the terms under which the VC is willing to invest (see Elements of a Term-sheet).
Pre-Money Valuation - what the VC thinks your company is worth prior to their investment. This will be different than what you think it is worth (see Valuation (for a Venture Capital Investment)).
Post-Money Valuation - what your company was worth before the investment (Pre-Money) plus the investment. Your pre-money was $5 million, the investment is $5 million. Your post-money valuation is $10 million and the VC owns half.
Well, this is a decent list to start. If I think of other VC terms needing defining that are not otherwise defined on the site, I’ll add them here.
Good luck. Term-sheet - a non-binding offer of the terms under which the VC is willing to invest (see Elements of a Term-sheet).
Pre-Money Valuation - what the VC thinks your company is worth prior to their investment. This will be different than what you think it is worth (see Valuation (for a Venture Capital Investment)).
Post-Money Valuation - what your company was worth before the investment (Pre-Money) plus the investment. Your pre-money was $5 million, the investment is $5 million. Your post-money valuation is $10 million and the VC owns half.
