Venture Capital Concepts, Part 2

How do you calculate capital gain on stock?
* The net sales price less your investment (adjusted tax basis) on the stock.

Are capital gains short or long-term?
* Capital gains for tax purposes are calculated on assets held for over a year. By specific definition a capital gain is the net increase on any security.

What is "Capital Under Management?"
* Capital under management is the amount of capital available to a venture capital management firm for venture investments.

How is the civilian "Unemployment Rate" calculated?
* Divide the number of people unemployed by the total size of the labor force expressed as a percentage.

Who is considered unemployed?
* Jobless people who are looking for jobs and available for work.

How is the "Labor Force" defined?
* The labor force is defined as people who are either employed or unemployed.

What is a "Closing?"
* Closing is the final event to complete a financial transaction, such as buying a home or committing to a venture capital investment at which time all the legal documents are signed and the funds are transferred.

What is a "Convertible?"
* A convertible is a category of corporate securities, usually bonds or preferred stock, which can be traded for a predefined number of common shares of stock at a predetermined price.

Who are "Convertibles" most appropriate for?
* For investors (1) seeking higher income than dividends paid from common stock and (2) greater appreciation potential than bonds.

What is a "Convertible Security" usually designed for?
* To act as a sweetener that enhances the marketability of common or preferred stock.

What is "Corporate Venture Capital?"
* A subsidiary of a large corporation that makes venture capital investments.

What is "Corporate Venturing?"
* Corporate Venturing is a practice of a large company, taking a minority equity position in a smaller company in a related field.

What Is "Deal Flow?"
* The rate of time rate at which offers are presented to funding institutions.

What Is "Debt Financing?"
* Debt financing occurs when a company raises working capital or capital expenditure funds by selling bonds or notes to institutional investors and/or individuals.

What Is a "Drive by Deal?"
* A deal in which a venture capitalist invests in a startup company with the goal of exiting the investment quickly and provides no assistance other than financial to the startup company.

What Is "Due Diligence?"
* The process investors go through evaluating the details of a potential investment to determine if the business is worth investing time and money in.

What is "Equity Financing?"
* When a company issues shares of common or preferred stock to raise money.

When is "Equity Financing" commonly done?
* When the company's stock per share prices are sufficiently high so that the most money can be raised for the smallest number of shares sold.

What is an "Equity Offering?"
* The process of raising funds through selling or trading a service for common or preferred stock.

What is an "Exit?"
* The sale or exchange of company ownership for cash, debt, or other forms of company equity.

Dr. Brent Lundell owns, a venture capital sourcing and consulting company, and is a partner in The Guinn Consultancy Group, Inc. The Guinn Consultancy Group provides a wide array of business services, including seminars, webinars, and venture capital sourcing services. See the group website at or contact them for additional information at 800-335-9269.

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