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Terms & Definitions
Angel Investor:
A high networth individual who invests in early-stage businesses from their personal fortune. In certain countries, tax breaks are used to encourage angel investor activity.
Beta Testing:
Once a company's 'prototype' is functioning successfully, it is tested by a number of experts before the product is placed on the commercial market.
Bridge Financing:
A limited amount of equity or short-term debt financing typically raised within six to 18 months of an anticipated public offering or private placement. Its intended purpose is to "bridge" a company to the next round of financing.
Captive Funds:
A venture capital firm owned by a larger financial institution, such as a bank.
Due Diligence:
The process of in-depth investigation where a VC firm conducts research before it makes a final decision about going forward.
Early Stage:
A company which typically has completed its seed stage and has a founding or core senior management team, has proven its concept or completed its beta test, but which has minimal revenues and no positive earnings or cash flows.
Exit Strategy:
A VC fund's intended method for liquidating its holdings while achieving the maximum possible return. The strategy depends on the exit climate, including market conditions and industry trends. Exit strategies can include selling or distributing the portfolio company's shares after an initial public offering (IPO), a sale of the portfolio company or a recapitalisation.
Fund Size:
The total amount of capital committed by the investors of a venture capital fund.
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