Glossary

Glossary created by Funderbeam. Contributions from the Business Angel Institute and Invesdor.com

Terms beginning with: A


Accelerators

Privately or publicly funded initiatives that support startups for a predetermined period of time and aim to accelerate their development. Assistance is typically restricted to a few months and involves knowledge-sharing, coaching, or a boot camp.

In return, accelerators receive future revenue or equity. Boot camps often end with demo days where the business concept is presented to potential investors. Related: Incubators

Accredited investor

A term mostly used in the United States, it is defined in the SEC Rule 501 of Regulation D as a wealthy investor/institution to whom the company can sell its securities under the registration exemption.

An accredited investor can be:

1. a bank, insurance company, registered investment company, business development company, or small business investment company;

2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of USD 5 million;

3. a charitable organization, corporation, or partnership with assets exceeding USD 5 million;

4. a director, executive officer, or general partner of the company selling the securities;

5. a business in which all the equity owners are accredited investors;

6. a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds USD 1 million at the time of the purchase, excluding the value of the primary residence of such person;

7. a natural person with income exceeding USD 200,000 in each of the two most recent years or joint income with a spouse exceeding USD 300,000 for those years and a reasonable expectation of the same income level in the current year; or

8. a trust with assets in excess of USD 5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

Advisor

Please see Investor roles

Alternative investments

Investments in a non-traditional asset class. Traditional assets are usually stocks in listed companies, bonds and cash. Examples of alternative investments include real estate, derivatives, and any asset classes that are speculative or very high-risk.

Angel investments

High-risk investments made by business angels, who provide seed financing for startups and also support them with know-how, experience and personal networks. Related: Alternative investments

Angel investors

Please see Business angels

Angel round

Please see Financing rounds

Anti-dilution

A clause that protects the investor by preventing a subsequent issue of equity from being made at a lower price than the investor originally paid. This protects the original investment or value from being diluted. Types of commonly-used anti-dilution protection include full ratchet and weighted average. An anti-dilution clause is often included in the shareholders agreement or investment terms.