Angel Investing Buzz Words

If you are new to angel investing, you might get hit by some buzz words. Here are some:

1. Deal Flow 📈: The rate at which investment opportunities are presented to investors.

   Example: "Our deal flow has increased, and we're now seeing 10 new startup pitches each week."

2. Valuation 💰: Determining the current worth of a company.

   Example: "The startup's valuation is $5 million after the recent funding round."

3. Term Sheet 📜: A document outlining the terms and conditions of an investment.

   Example: "We just signed the term sheet, which details our $1 million investment."

4. Cap Table 📊: A document showing the ownership stakes in a company.

   Example: "According to the cap table, the founders own 60% of the company."

5. Exit Strategy 🚪: A plan for how investors will sell their stake and realize a return.

   Example: "Our exit strategy involves selling the company to a larger tech firm."

6. Due Diligence 🔍: Thoroughly evaluating a business before investing.

   Example: "We're in the due diligence phase, verifying the startup's financials and market potential."

7. Burn Rate 🔥: The rate at which a company is spending its capital.

   Example: "With our current burn rate, we have enough cash to last six months."

8. Runway 🛫: The amount of time a company can operate before running out of cash.

   Example: "Our runway is 12 months, giving us time to scale our operations."

9. Equity Financing 📈: Raising capital through the sale of shares.

   Example: "They secured $2 million in equity financing by selling 20% of the company."

10. Convertible Note 📄➡️📊: A type of short-term debt that converts into equity.

    Example: "We invested using a convertible note that will convert to shares in the next funding round."

11. Seed Capital 🌱: Initial funding to start a business or develop a new product.

    Example: "They used seed capital to develop their prototype and launch their first product."

12. Series A, B, C 💸: Different stages of investment rounds as a startup grows.

    Example: "After a successful Series A round, they're now preparing for Series B to expand their market reach."

13. Angel Group 👼👼: A network of angel investors who pool resources.

    Example: "The angel group invested $500,000 collectively in the new fintech startup."

14. Portfolio Company 📂: A company that has received investment from a particular investor or firm.

    Example: "This edtech startup is one of our portfolio companies."

15. Scalability 📈➡️🚀: The potential for a company to grow and manage increased demand.

    Example: "We invested because their business model shows great scalability potential."

16. Exit Multiple 🔢🚪: The ratio of the investment exit price to the original investment amount.

    Example: "We achieved a 5x exit multiple on our investment in the healthcare startup."

17. Post-Money Valuation 💵+💸: The value of a company immediately after receiving funding.

    Example: "After the $1 million investment, the post-money valuation is $10 million."

18. Pre-Money Valuation 💵: The value of a company before receiving funding.

    Example: "The pre-money valuation was $9 million before the investment."

19. ROI (Return on Investment) 📈💵: A measure of the profitability of an investment.

    Example: "Our ROI was 300%, tripling our initial investment."

20. LP (Limited Partner) 👤💵: An investor in a venture capital or private equity fund, without active management.

    Example: "As an LP, he invested $100,000 in the venture capital fund."

21. GP (General Partner) 👥📊: A partner responsible for managing the fund and making investment decisions.

    Example: "The GP decided to invest in a promising biotech startup."

22. Vesting 📅➡️📊: Earning rights over stock or options over time.

    Example: "Her shares will vest over four years, with 25% vesting each year."

23. Dilution 💧📉: Reduction in ownership percentage due to the issuance of new shares.

    Example: "Issuing new shares to raise capital caused some dilution of existing investors' ownership."

24. Pivot 🔄: A significant change in a startup's business model or strategy.

    Example: "They decided to pivot from a B2C to a B2B model to better meet market demand."

25. MVP (Minimum Viable Product) 🛠️🚀: A product with the minimum features necessary to start learning about customers.

    Example: "They launched an MVP to test market interest before developing a full product."

by Gopal Chitaure

July 29th, 2024