PRIVATE EQUITY GLOSSARY OF TERMS, UNIQUE DEFINITIONS AND EXPLANATIONS

The memorandum of understanding is a common agreement between startups who are pre-product and potential customers to define commitment, interest, terms, and pricing in writing prior to delivering the good or service. LOI and MOU agreements are used interchangeably and usually non-binding. At times the MOU is used in partnerships to define working relationships where no financial exchange is yet made. This document is usually also used to clarify understanding of both the customer and founder and often used to show investors. Wealthy individuals that invest in startups in their early stages of development or seed round of fundraising. You can receive a maximum of £150,000 through SEIS investments.

• In the case of a financial market, an index measures the change of an imaginary basket of investments representing all or a portion of that market.
• Cumulative Net The cumulative amount of total net cash flows with both contributions and distributions .
• Cumulative Dividends are often waived if the Preferred Stock converts to Common Stock prior to an IPO but may be included in the aggregate value of Preferred Stock applied to the Conversion Ratio for other purposes.
• Thus representing the total available capital that could still be deployed at any given time.
• In return, the private equity firm usually receives a stake in the business.

This will include analysis of performance, comparison to benchmarks, meeting with fund’s management team, detailed analysis of the funds track record, reference checks, and a report based on the analysis. The combined holdings of stock, bond, commodity, real estate and other investments by an individual or institutional investor. Venture Capital or VC investors are very different to private equity investors. They invest in startup and early stage investments, pre-revenue, pre-profit, often even pre-product. Investors’ monies are pooled together and invested according to set investment guidelines.

Form ADV

While we aim to point you to useful external websites, we cannot be responsible for their content, opinions, advice or accuracy, even if you utilise the services on the linked site to invest in our products. Securities with terms that allow for the adjustment of the interest rate on set dates. Markets’ reaction following the US Federal Reserve Chairman’s comments in May 2013, which suggested that the US was considering tapering the rate of its bond buying programme . A prolonged period of low or no economic growth within an economy. Software as a Service is subscription-based software accessed over the internet rather than installed on individual computers.

An exempt offering—sometimes referred to as a private offering—is commonly used to describe the offer and sale of securities that is exempt from registration under the Securities Act. Each exemption has specific requirements that a company must meet. An RBIC is a privately-owned investment fund that is licensed and regulated by the U.S. RBICs use the money raised from investors to make debt and equity investments in qualifying small businesses located primarily in rural areas. A limited partner is an investor who commits capital to a private fund.

WAM weighted average maturity

Representations and warranties (aka “reps and warranties”) are factual statements made by a party or parties in an agreement that are relied on by the other party or parties. There are many additional reps and warranties that the company may make to the investor. An investment bank is a financial organization that advises companies and governments on their fundraising activities. An investment bank will act as a manager of a company’s initial public offering or follow-on public offering, debt issuances and other complex financial transactions.

Leveraged buyout – Leverage means debt and a leveraged buyout uses debt to partially fund the purchase of the equity. Because many of the target companies have strong cash flows, investors can secure debt against the company’s cash flows and boost their overall returns. Because startup and venture investments look and behave differently than private equity investments, investors treat these as separate asset classes. Angel investing- Investments in newly formed companies, often based on a strong belief in the people, idea, and market potential. Sometimes angel investors have strategic expertise in the field of their investments and can mentor or advise the companies in which they invest.

Contract form

React is an open-source, front-end library for building user interfaces or UI components. It is maintained by Facebook and a community of individual Developers and companies. React can be used as a base in the development of single-page or mobile applications. A Product Manager is a professional responsible for the development of products for an organisation. Product Managers own the business strategy behind a product, specify its functional requirements, and generally manage the launch of features. A Minimum Viable Product is a version of a product with just enough features to be usable by early customers who can then provide feedback for future product development. A focus on MVP development potentially avoids lengthy and unnecessary work. Demographic is an expression that is frequently used in marketing to describe the age, gender, income, schooling and occupation of your ideal customers. Crowdsourcing allows you to obtain information or input into a particular project by enlisting the services of a large number of people, either paid or unpaid, typically via the internet.

In return, the LP receives distributions , periodic notifications of the fund’s progress, and participates in fund update calls and/or annual meetings. The purpose of these vehicles is to give the investor in the fund-of-funds more opportunity and diversity in private equity investments. The weighted average IRR for funds with vintages within a 15 year time span running from 3 to 18 years ago. The cumulative IRR does not include the performance of a fund whose vintage was in the last three years since that fund is likely still investing rather than recouping investment and, therefore, its IRR is not yet relevant. Based on a percentage of return, it is usually payable to the fund manager only after certain conditions have been met in regards to the performance of the fund.

A measure that can help determine whether an actively-managed portfolio has added value in relation to risk taken relative to a benchmark index. Alpha is the difference between a portfolio’s return and its benchmark’s return after adjusting for the level of risk taken. Financial models are commonly used to determine the valuation of a company or to compare it to its peers. They also function as part of a company’s strategic planning process. Data signals are key data points dealmakers can use to help determine the growth trajectory and investment readiness of pre-transacted companies. Private company intelligence platforms are tools used by deal teams to take a more strategic and data-driven approach to deal sourcing by identifying, monitoring, and connecting with privately held, pre-transacted companies. New school dealmaking uses data, technology, and process to take a proactive, structured approach to finding and closing deals. Over time, it creates a virtuous cycle in which a firm is able to develop unique market expertise, build a differentiated reputation and brand, and land deals that add significant value to their network and portfolio. A hurdle rate is the minimum return that a company or investor must receive in order to make an investment or start a project. Committed capital is the amount that an investor has agreed to put toward an investment fund.

Thus, even in offerings of less than one million dollars, we recommend that issuers rely on Rule 506 rather than Rule 504 when possible, to avoid being subject to state registration requirements. Read more about how do you mine litecoin here. A Broker-dealer is an individual or firm that purchases or sellssecuritiesfor itself or on behalf of others, often acting as aplacement agent. Broker-dealers must be registered with FINRA and are subject to extensive regulation. Only registered broker-dealers are permitted accept commissions or othertransaction-based compensationfor making capital introductions. So-called “finders” or unregisteredplacement agentsthat make capital introductions are not permitted to accept any form oftransaction-based compensationfor capital raising efforts.

General Partner GP

Unit trustA type of managed fund whose value is directly linked to the value of the fund’s underlying investments and which is structured as a trust, rather than as a company. SICAVIn French, it stands for société d’investissement https://www.beaxy.com/blog/beaxy-exchange-announces-a-partnership-with-gunbot/ à capital variable. It is the western European version of an open-ended collective investment fund, much like an OEIC. Common in Luxembourg, Switzerland, Italy and France, and regulated by regulators in the European Union.

The term used to describe investment in a company held by a private equity manager. The amount of capital that the fund manager contributes to its own fund in the same way that a limited partner does. This can be an important way in which limited partners can ensure that their interests are aligned with those of the general partner. Partners (i.e., the individuals or the institutional investors who provide capital to the fund).