The Book of Jargon®

Acronym for Initial Public Offering.

Acronym for Internal Revenue Code.

A type of Option that can be granted under an Equity Incentive Plan to Employees only. ISOs qualify for special tax treatment under the IRC. ISOs generally are not taxed upon grant or exercise, but rather upon disposition of the Shares acquired upon exercise of the ISO as long as certain conditions are met. Also known as a way to attract young bright employees.

A Financial Statement on which a company reports its results of operations over a period of time (usually monthly, quarterly or annually). Also commonly referred to as a Profit and Loss Statement, or P&L Statement. Think of an Income Statement as a movie and a Balance Sheet as a snapshot as of a specific moment in time (usually the last day of the period being reported).

The act of officially forming a corporation by filing a Certificate of Incorporation with the secretary of state of the state of Incorporation.

Organization set up to help Startups with their initial investments and strategies. Incubators typically assist by providing their Startups with office space, management support and other resources. Incubators often require a percentage of the Startup’s Equity in exchange for their assistance and investment. Similar to an Accelerator, but Incubators are generally more willing to give companies a longer runway for development.

A hybrid between an Accelerator and Incubator, essentially providing the same services but at a slightly longer timeline than an Accelerator, and shorter than an Incubator.

An agreement in which a company agrees to indemnify its Directors and Officers for actions taken in their capacity as such in order to reduce the potential for personal liability. Startups typically enter these agreements in connection with their first Equity Financing.

Rights a company gives to certain Investors (usually “Major Investors” (e.g., those that make investments above a specified threshold typically set forth in an Investor Rights Agreement)) to receive regular Financial Statements and have access to inspect the books and records of a company. See also Inspection Rights.

In a transaction with multiple Closings, Initial Close is the first Closing.

The first Registered Public Offering of shares of Common Stock of a company. Following an Initial Public Offering (also known as an IPO) in the US, a company becomes an SEC Reporting Company(if it wasn’t already).

A Financing Round led by existing Investors in the company.

A type of Information Right given to certain Investors (usually Investors that make investments above a specified threshold typically set forth in an Investor Rights Agreement) to have access to inspect the books and records of a company and meet and talk to certain executives of the company.

Investors that are organized for the purpose of investing in multiple companies.

Property that a company owns that while not physical, is of value for its inherent intellectual worth. Examples include Copyrights, Patents, Service Marks, Trademarks and Trade Secrets.

Additional amount added to a loan that accrues over time (typically expressed as a percentage), which the company needs to repay to the lender.

The compounded rate of return of an investment. As an example, if you invest US$100 on day one, and on Day 365 you liquidate your investment and receive US$150, then your IRR was 50%. Investment funds generally have an IRR hurdle they target for investments. For example, if an IRR hurdle is 25%, then an Investor would want their investment to return an annual compounded return equal to at least 25%, and prior to an investment the Investor would want to calculate the total expected exit value, total investment amount and total time to Exit and work backward to see if the investment would, based on those assumptions, yield an IRR that meets their investment hurdle.

The federal statutory tax law in the United States, published as Title 26 of the Unites States Code.

Letter laying out the terms of an Investors proposed investment in a company, similar to a letter of intent or a Term Sheet.

Representations made by Investors to the company in connection with their investment (usually found in a Stock Purchase Agreement or other Equityor debt grant documentation), which typically relate to securities law compliance and Accredited Investor status.

A person or entity who puts money in a company either to purchase Equity or make a loan to the company and get repaid or converted into Equity upon a triggering event in the future.

An agreement that a company typically enters into when it issues Preferred Stock to Investors in a VC Financing, which sets out, among other things, certain Registration Rights, Information Rights and Participation Rights for Investors.

The gross price at which Shares of Stock are sold, usually expressed on a per Share basis.

The number of Shares of Stock actually sold by a company and held by Stockholders, excluding Shares that may be issued at a later time upon the conversion/exercise of Options, Warrants, Convertible Promissory Notes or other Convertible Securities.

The company that is the Seller (or Issuer) of Securities.