| I graduate from college with an engineering degree. I | | | | Of course, many years later, I've forgotten what I |
| knew almost nothing about money or the economy | | | | didn't know, and I forget that entrepreneurs often |
| or finance. Then I went to business school. (Okay, I | | | | have great ideas, but don't have the finance language |
| worked for a few years in between.) About half-way | | | | for moving through the investment world. So here |
| through my first year, I realized that I had spent my | | | | are a few basic definitions when you are looking for |
| entire life knowing nothing about what made the | | | | money. |
| world go 'round. No, not love (no love at b-school). | | | | Investor - someone who exchanges money for a |
| Money! | | | | share of your company. |
| Most importantly, I learned that you can program | | | | Angel - an individual who invests a decent chunk of |
| Excel spreadsheet six ways to Sunday, but if you | | | | money in your company ($100-500K) in exchange for |
| can't speak the language of money, no one will take | | | | some ownership. They tend to be entrepreneurs |
| you seriously. So I started on a mission to learn how | | | | who have made it big themselves and are often less |
| people talk about money including watching movies | | | | demanding and interfering than venture capitalists. |
| like Wall Street, reading books like Barbarians at the | | | | (This is not always true, by the way.) |
| Gate (also a movie) and Liar's Poker. | | | | Venture Capitalist - a person who is a partner in a |
| Of course, many years later, I've forgotten what I | | | | venture capital (VC) firm who helps find, select, and |
| didn't know, and I forget that entrepreneurs often | | | | manage investments made by the VC firm. In |
| have great ideas, but don't have the finance language | | | | general, VCs get their money from limited partners |
| for moving through the investment world. So here | | | | (these can be anyone from rich investors to |
| are a few basic definitions when you are looking for | | | | corporations to pension funds). The limited partners |
| money. | | | | do not have a say in the investments. |
| Investor - someone who exchanges money for a | | | | Associate - a junior person at the VC firm who holds |
| share of your company. | | | | no power, but will arrogantly act like they do. If you |
| Angel - an individual who invests a decent chunk of | | | | spend a lot of time with an associate, you are |
| money in your company ($100-500K) in exchange for | | | | probably wasting it. |
| some ownership. They tend to be entrepreneurs | | | | Principal - a associate whose been promoted. The |
| who have made it big themselves and are often less | | | | power of this person depends on the firm. Still not a |
| demanding and interfering than venture capitalists. | | | | decision maker, but can blackball you. |
| (This is not always true, by the way.) | | | | One Pager - a one page (usually front and back) |
| Venture Capitalist - a person who is a partner in a | | | | describing your company. Includes some history, mini |
| venture capital (VC) firm who helps find, select, and | | | | financials, management description, product |
| manage investments made by the VC firm. In | | | | description, and business strategy. Your business plan |
| general, VCs get their money from limited partners | | | | in miniature. |
| (these can be anyone from rich investors to | | | | Executive Summary - like the one pager, but a little |
| corporations to pension funds). The limited partners | | | | longer. Your abbreviated business plan. |
| do not have a say in the investments. | | | | Your Business Plan - a 20-30 page document that will |
| Associate - a junior person at the VC firm who holds | | | | only be read by the associate. It still has to be good |
| no power, but will arrogantly act like they do. If you | | | | though or they'll think your not taking this seriously. |
| spend a lot of time with an associate, you are | | | | Pitch Deck - otherwise known as a presentation (see |
| probably wasting it. | | | | I told you the lingo was different). Usually a |
| Principal - a associate whose been promoted. The | | | | Powerpoint presentation that you use when you |
| power of this person depends on the firm. Still not a | | | | present to the VCs. If they are really interested, you |
| decision maker, but can blackball you. | | | | probably won't get past the first couple slides. Make |
| One Pager - a one page (usually front and back) | | | | those slides count! |
| describing your company. Includes some history, mini | | | | Term-sheet - a non-binding offer of the terms under |
| financials, management description, product | | | | which the VC is willing to invest (see Elements of a |
| description, and business strategy. Your business plan | | | | Term-sheet). |
| in miniature. | | | | Pre-Money Valuation - what the VC thinks your |
| Executive Summary - like the one pager, but a little | | | | company is worth prior to their investment. This will |
| longer. Your abbreviated business plan. | | | | be different than what you think it is worth (see |
| Your Business Plan - a 20-30 page document that will | | | | Valuation (for a Venture Capital Investment)). |
| only be read by the associate. It still has to be good | | | | Post-Money Valuation - what your company was |
| though or they'll think your not taking this seriously. | | | | worth before the investment (Pre-Money) plus the |
| Pitch Deck - otherwise known as a presentation (see | | | | investment. Your pre-money was $5 million, the |
| I told you the lingo was different). Usually a | | | | investment is $5 million. Your post-money valuation is |
| Powerpoint presentation that you use when you | | | | $10 million and the VC owns half. |
| present to the VCs. If they are really interested, you | | | | Well, this is a decent list to start. If I think of other |
| probably won't get past the first couple slides. Make | | | | VC terms needing defining that are not otherwise |
| those slides count! | | | | defined on the site, I'll add them here. |
| I graduate from college with an engineering degree. I | | | | Good luck. |
| knew almost nothing about money or the economy | | | | Term-sheet - a non-binding offer of the terms under |
| or finance. Then I went to business school. (Okay, I | | | | which the VC is willing to invest (see Elements of a |
| worked for a few years in between.) About half-way | | | | Term-sheet). |
| through my first year, I realized that I had spent my | | | | Pre-Money Valuation - what the VC thinks your |
| entire life knowing nothing about what made the | | | | company is worth prior to their investment. This will |
| world go 'round. No, not love (no love at b-school). | | | | be different than what you think it is worth (see |
| Money! | | | | Valuation (for a Venture Capital Investment)). |
| Most importantly, I learned that you can program | | | | Post-Money Valuation - what your company was |
| Excel spreadsheet six ways to Sunday, but if you | | | | worth before the investment (Pre-Money) plus the |
| can't speak the language of money, no one will take | | | | investment. Your pre-money was $5 million, the |
| you seriously. So I started on a mission to learn how | | | | investment is $5 million. Your post-money valuation is |
| people talk about money including watching movies | | | | $10 million and the VC owns half. |
| like Wall Street, reading books like Barbarians at the | | | | Well, this is a decent list to start. |
| Gate (also a movie) and Liar's Poker. | | | | Good luck. |