GLOSSARY

Whether you are an aspiring investor or are already investing in women understanding the terminology helps. We’ve compiled a simplified list of terminology about investing in women.


Venture: The dictionary defines this as a risky or daring journey or undertaking. At Venture:F "venture" has a multitude of meanings; a new business or business activity; an investment opportunity; an ad-venture; venturing forth or moving ahead.

Accredited Investor: Investing comes with risk and in order to protect you from taking too great of a risk the Securities and Exchange commission (SEC) has established criteria in order to invest in a fund or privately held company. To be an accredited investor, your net worth must exceed $1 million (not including your home) or you must have an income of great than $200,000 in each of the last two calendar years or $300,000 jointly with your spouse, with an anticipated continuation of similar earnings. 

Alternative Investment or Assets: This is the term investors and financial advisors use when referring to assets that fall outside conventional equity/income/cash categories (stocks and bonds). Private equity or venture capital, hedge funds, real estate, commodities, and tangible assets (artwork, jewelry) are all considered alternatives. (source: Investopedia)

Angel Investing: An angel investor is an accredited investor who provides initial seed money or early investment for a startup in exchange for a convertible note or ownership equity in the company. Angels can also invest via crowdfunding. 

Angel Investing Community: An angel investing community looks at and evaluates early stage investment opportunities together. A community can be a good place to learn about investing and share leads on investment opportunities.  Discover our vetted list of Angel Investing Communities. (coming soon)

Assets Under Management (AUM): AUM is the sum of the market value for all of the investments managed by a fund or family of funds, a venture capital firm, a brokerage company, or an individual registered as an investment advisor or portfolio manager. (source: Investopedia)

Boot Strap: Self-funding or building a company utilizing whatever income the company is currently generating.

Carried interest, or “carry”: The percentage of a private fund's investment profits that a fund manager receives as compensation. Used primarily by private equity funds, including venture capital funds, carry is one of the primary ways fund managers are paid. (Source: Carta)

Convertible Note: A convertible note is issued when a startup is too early for equity valuation (which means its too soon to tell what the estimated value of the company is and therefore value of shares in the company cannot yet be determined). The note converts to equity once the company has hit a certain milestone and valuation can be determined. 

Crowdfunding: There are numerous crowdfunding platforms that provide investment opportunity at a lower investment rate. Startups use crowdfunding platforms to raise funds online. Discover our vetted list of Crowdfunding Platforms. (coming soon)

Due Diligence: The analysis and research done by an investor or fund to determine the value of the investment opportunity.  Due diligence is the process a fund undertakes to appraise a company and assess its viability as an investment for the fund. The fund partners evaluate the founders, the company, its assets, liabilities, and the market opportunity or TAM (total addressable market).

Dry Powder: A term for capital that has been committed but not yet invested. It's a cash reserve that's waiting to be allocated to a specific investment

Equity: The shares an investor holds in a startup. Equity values fluctuate contingent on the startups most recent valuation. The equity value upon exit determines how much an investor makes as a return on their investment. 

Exit: The point at which a company is acquired by another company or goes public (shares are traded on the stock exchange). An exit is the opportunity where investors in the company will see a return on their investment. The estimated expectation is 7-10 years to see a return on venture investments. 

Fiduciary - A fiduciary financial advisor manages their clients' investments in a way that is aligned with the clients' best interests. They must follow certain rules and regulations. Some financial advisors can act in a fiduciary capacity, but be careful — this does not mean that all advisors are fiduciaries. (source: Nerdwallet)

Fiduciary Responsibility: The legal or ethical responsibility of your fiduciary (financial) advisor to act in your best interest.

Follow On: an additional investment made by an existing investor in a startup after the initial funding round. Follow-on investments are also known as "doubling down" on investments. They can be in the form of debt or equity, and are a critical part of startup and business financing.

Fund: A pool of money set aside for a specific purpose, managed by fund managers on behalf of investors / clients.

  • Hedge Fund: An alternative asset investment fund that is an actively managed investment pool using a wide range of fund strategies to beat average investment returns for their clients. Hedge funds tend to be more liquid and use riskier strategies, leverage assets, and invest in derivatives such as options and futures. (Source: Investopedia)

  • Mutual Fund: A pool of money with other investors to "mutually" buy stocks, bonds, and other investments. They're run by professional money managers who decide which securities to buy (stocks, bonds, etc.) and when to sell them. (Source: Charles Schwab)

  • Private Equity: Unlike mutual funds or hedge funds, however, private equity firms often focus on long-term investment opportunities in assets that take time to sell with an investment time horizon typically of 10 or more years. An exit for a scaleable start-up can be acquisition by a private equity firm. (Source: Investor.gov)

  • Venture Fund: A venture fund is a pool of money with the specific purpose of investing in privately held companies and scaleable start-ups. 

Fund Partners: The managers of a fund or investors in a fund.

  • General Partner (GP): Fund managers who raise and manage the fund, making investments in privately held companies based upon the fund thesis. 

  • Limited Partner (LP): An investor in a hedge fund, private equity fund, or venture fund. LPs look to the GPs to make the investments on their behalf.

Fund Strategy & Thesis: All venture funds have an investing thesis, or strategy for how and why they invest in privately held companies. A thesis usually includes one or more addressable market focus like “investing in climate change technology” or “women’s healthcare.” A fund strategy includes how much the fund will raise and the “check size” or amount the fund will invest per company.

Investment Rounds: The stages or rounds of fundraising usually marked by a closing date (unless it is a rolling fund).

  • Friends & Family - a initial round of investment in a startup, often led by friends and family

  • Pre-seed - early-stage funding at the very inception of a start-up

  • Seed - the official first fundraise often via a group of angel investors or venture fund

  • Series - each round of funding after the seed stage is labeled alphabetically

    • Series A - typically led by venture funds that invest early stage in startups

    • Series B, C, D etc - typically led by larger funds that invest at later stages as startup contine to scale and grow

Privately Held Company: A privately held company is one whose ownership shares or interests are not publicly traded aka not available on the stock market.

Return on Investment (ROI): The net amount (minus fees, expenses, and the original investment amount) an investor makes on their investment. 

Rolling Fund: A rolling fund does not have a close date and allows fund managers to raise capital quarterly.

Scalable Start-Up: A privately held company, started by one or more founders and backed by investors. The term “scalable” is used because investors are looking for companies that will scale to a point of exit that gives them a return on their investment.

Special Purpose Vehicle (SPV):  A fund raised for the specific purpose of investing in one company.

Stock Market: The exchanges where shares in publicly held companies are bought and sold. There are numerous stock markets throughout the world. The main ones in the United States are the New York Stock Exchange (NYSE) and the NASDAQ. 

Term Sheet: Also called a “letter of intent” a term sheet outlines the terms and conditions of an investment. Term sheets are presented to startups by funds or investing entities as part of the investment process and are then used to create the final legally binding document of the investment agreement. Terms sheets usually include the current valuation of the company as determined by the investing entity according to their firm’s due diligence.  

Total Addressable Market (TAM): This refers to the total market demand for a product or service. It's the most amount of revenue a business can possibly generate by selling their product or service in a specific market.

Valuation: The current value of a company upon exit. Valuation is determined by a number of factors including the TAM but is mainly driven by the most current investor term sheet. 

Valuation Cap: A term used in convertible notes, which are loans given to a startup that can later be turned into shares of the company. Imagine you give a startup some money, and instead of paying you back with cash, they promise to give you shares in the company in the future. The valuation cap sets the maximum value of the company for calculating how many shares you get when that happens. (source Going VC)

Venture Capitalist (VC): A general term for the manager of a venture fund.

Women Owned Certification: Women Owned is an initiative from the Women’s Business Enterprise National Council (WBENC) and WEConnect International to create a movement of support for Women Owned businesses. We support female entrepreneurs and those who do business with them by raising awareness for why, where and how to buy Women Owned.