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Venture Capital Concepts, Part 3

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What is an "Exit Route?"
* The method through which an investor exit an investment. The exit route may occur by the investor taking cash, company debt.

What is an "Exit Strategy" for a VC firm?
* The way a venture capitalist (VC) or business owner plans to use to get out of a preciously made investment.

What is a "Financier?"
* An individual or financial institution that lends and manages money in commercial financing activities.

What is "First Stage Capital?"
* Money provided an entrepreneur to start up a company after the product is proven. The money is used to start production and product but not market expansion.

What is "First Round Financing?"
* The first investment in a company by outside investors.

What is a "Follow On?"
* Follow up investments by current investors.

What is a "Fund of Funds?"
* A mutual fund that directs in other mutual funds creating greater fund diversification.

What is a "Ground Floor?"
* Term used to describe the first stage of a new venture or investment.

What is an "Incubator?"
* An incubator is a company, often non-profit, designed to help startup companies grow through the use of management expertise and intellectual capital.

What is an "Institutional Investor?"
* Companies like insurance companies and pension funds that collect money from clients and investors and invest in the markets and on occasion charitable activities.

What is an "Investment Bank?"
* A financial intermediary that provides services to businesses such as raising capital by helping issue securities and assisting companies merge together.

What is "Invisible Venture Capital?"
* Venture capital provided by angel investors.

What is an "IPO?"
* An initial public offering is the first sale of stock by a private company. IPOs can be large offerings sold through large stock markets such as The New York Stock Exchange, or offered private investors.

What is the "Internal Rate of Return" (IRR)?"
* It is the interest rate adjusts the net present value of all potential or actual cash flows equal zero. Most often used in capital budgeting, the IRR gives the rate of return if a company invested in themselves rather than in other investments.

What is a "Leveraged Buy Out" (LBO)?
* Acquisition of a business using debt and equity with the debt to be repaid with cash flow from the business.

What is a "Lead Investor?"
* A company's original capital investor that structures a syndicated deal.

What is a "Limited Partnership?"
* A business structure comprised of at least one general partner who manages and assumes all legal debts of the business. Limited partners are only liable to the amount they have placed in the investment. Limited partners receive the benefits of cash flow, rate of returns, and tax benefits, if any, but are not liable if the business fails.

What is "Liquidation Preference?"
* The right a stock holder owns to receive a predetermined value for their stock if a company is liquidated.

What is a "Liquidity Event?"
* A liquidity event, also known as an exit strategy, is the planned process and investors will use to get out of an investment.


ABOUT THE AUTHOR: DR. BRENT LUNDELL
Dr. Brent Lundell owns http://www.GainStreamGroup.com, 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.

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