A portfolio organization is the one which a venture capital firm has already invested in. Before it happens, an angel investor is performing due diligence, or either thorough detailed company analysis. It is a sort of quick introduction for the opportunity of investment, displaying certain complex legal documents that may come in your path while starting your business.
Angel Investor
An individual providing early capital to a new startup company. Often, this happens as in the form of equity ownership or convertible debt. It is ordinary for angel investors to form that permits them to group their resources.
Working Capital
In terms of accounting, working capital = current assets – current liabilities. Current assets have short term which can quickly converted into cash, mainly accounts inventory and receivable. On the other hand, current liabilities have certain obligations that may due within a year, mainly accounts payable as well as short term debt.
Private Equity
Private equity is actually an umbrella term for huge money raised directly from recognized institutions & individuals and pooled in a fund that mostly invests in certain range of business ventures. For considerable long-term gains, attraction is the potential. Generally the fund is placed as a limited partnership, with the investors as limited partners and a private equity firm as the general partner.
Excess Inventory
Companies that manufacture goods and re-sellers that keep their warehouse stocked with products may get affected by this problem. If the too much product is manufactured, then it might end up sitting on shelves and will tying up cash flow also.
Pre-money and post-money valuation
One of the more challenging tasks of a younger company is to assess its actual value—how much it’s worth. Though not impossible, it’s not always a simple task.
Convertible Debt
Convertible debt is rather simple: the company receives a loan, and promises that the debt it accrues will then be converted into equity at a later date—when the company is financed in the future. It’s a concept that is both loved and abhorred, but it does allow a means for a young company to secure investment, and it prevents the investor from being diluted in later rounds.
Debt Financing
Using loan for getting hold of capital for starting a business venture is termed as Debt financing. Debt financing is the cash to be repaid either in the form of loan, line of credit, credit card or merchant cash advance.
Equipment Financing
Equipment financing is created for the purchasing business equipment. Your venture makes payments on the borrowed money and as soon as the debt is paid again then you own that equipment clear and free. This permits the lender to place a claim to assets of your business like the equipment itself in case you default.
Exit Strategy
All through the life span of an organization and as it will continue to expand, it’s quite common to hear about what its strategy for exit process should be like and it will further help an investor see good ROI
Moreover, there are several more than this but these are few that are good to start with. And don’t let all the VC jargon intimidate entrepreneurs.
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