Entrepreneur Dictionary for Startups

The entrepreneur dictionary for startups contains terms and definitions commonly used by entrepreneurs, investors, accelerators, and others who interact with startup ventures and startup financing.
For more entrepreneur resources check out our Acronyms for Startups, Infographics, or Startup FAQ.

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D&O Insurance - Insurance obtained by portfolio companies to cover the costs of legal expenses associated with claims against its' board members and protect them from lawsuits.⁶
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Daily Active Users - Distinct website users who engage with a site's offerings or services in a given day.⁶
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DCF - Discounted Cash Flow

DD - Due Diligence

De Facto - To proceed with an action without legal authority but may be recognized as legally valid. De Facto may apply to a company that operates as a corporation even though they may have not taken the steps or documentation to become incorporated. In some cases, courts will treat the company as though it were legal to protect those who believed the business was legal.
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Dead Pool - Where companies that die go.⁷

Deal Flow - Deal flow (dealflow) is the rate at which investment offers are presented to funding institutions.⁵

Deal Lead - The investor or investment organization taking primary responsibility for organizing an investment round in a company. The deal lead typically finds the company, negotiates the terms of the investment, invests the largest amount, and serves as the primary liaison between the company and the other investors.⁷

Deal Structure - The framework of a deal between investors and a startup company which is typically outlined in a term sheet and defined in detail in Purchase Agreements and related documentation, providing the rights and obligations of the parties.⁶

Debenture -

A debt instrument; basically the same as a Promissory Note.³
(promissory note)This designation is a legal document detailing the terms of repayment and interest that a borrower is responsible for. It also details the principal amount owed and the maturity date. For example, financial institutions can approve qualified applicants for loans. They send out debenture or promissory statements to borrowers as a reminder of their legal contract.⁴

Debt -

Any obligation by one person to pay another. May be a primary (direct) obligation as in a Note, or a secondary (contingent) obligation as in a guaranty.³
This is an amount of money that a borrower owes to an individual, investor, or lending institution. In the finance world, the word “debt” is often associated with interest payments. For example, when an individual has a credit card limit of $5,000, the lender, usually a bank, is willing to lend the credit card holder $5,000 of credit. If the lender uses $500 of that total amount, they are now considered to be in $500 debt until the total amount is paid. Partial payment of an owed amount always encompasses interest.⁴

Debt Financing - Debt Financing means when a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay principal and interest on the debt.⁵

Debt Instrument - Any instrument evidencing the obligation of the maker to pay the holder of the debt instrument. Includes Bonds, Debentures and Notes of all kinds.³

Debt Table - A debt table is a table providing a summary and analysis of a startup’s debt, by type. It includes details related to the interest rates for each instrument as well as debt service requirements.⁶

Deficiency Letter - A letter sent by the SEC to the issuer of a new issue regarding omissions of material fact in the registration statement.³

Demand Registration - Resale registration that gives the investor the right to require the Company to file a Registration Statement registering the resale of the securities issued to the investor in a private offering.³

Demand Rights - Contemplate that the company must initiate and pursue the registration of a public offering including, although not necessarily limited to, the shares proffered by the requesting shareholder(s).³

Demo Day - Where the graduating class of Incubators and Accelerators is given a chance to pitch to investors. ²

Depreciation -

An expense recorded to reduce the value of a long-term tangible asset. Since it is a non-cash expense, it increases free cash flow while decreasing the amount of a company’s reported earnings.³
This term refers to the gradual loss in value of currency, stocks, and material goods. For example, biotechnology can “depreciate” over the course of 4 years.⁴

DFCF - Debt Free Cash Flow

Dilution - Issuing more shares of a company dilutes the value of holdings of existing shareholders.² A reduction in the percentage ownership of a given shareholder in a company caused by the issuance of new shares.³

Dilution Protection - Mainly applies to convertible securities. Standard provision whereby the conversion ratio is changed accordingly in the case of a stock dividend or extraordinary distribution to avoid dilution of a convertible bondholder’s potential equity position. Adjustment usually requires a split or stock dividend in excess of 5% or issuance of stock below book value. Share Purchase Agreements also typically contain anti-dilution provisions to protect investors in the event that a future round of financing occurs at a valuation that is below the valuation of the current round.³

Director - Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice president and all other operating officers, and decide when dividends should be paid (among other matters).³

Disclosure Document - A booklet outlining the risk factors associated with an investment.³

Discounted Convertible Note - A loan that converts into the same equity security being purchased in a future investment round, but at a discounted price representing a risk premium for early investment.⁷

Diversification - The process of spreading investments among various types of securities and various companies in different fields.³

Dividend - The payments designated by the Board of Directors to be distributed pro-rata among the shares outstanding. On preferred shares, it is generally a fixed amount. On common shares, the dividend varies with the fortune of the company and the amount of cash on hand and may be omitted if business is poor or if the Directors determine to withhold earnings to invest in capital expenditures or research and development.³

Dividend Preference - Preferred stockholders receive dividends before common stockholders. Dividend can be cumulative or non-cumulative.²

DNS - Domain Name Server

Double Bottom Line - In Impact Investing, the goal of measuring a company by its positive societal impact in addition to its financial returns.⁷

Double Dip - Participating preferred stock which entitles a holder to a liquidation preference and also to participate in the residual value.⁹

Down-round - When the valuation of a company at the time of an investment round is lower than its valuation at the conclusion of a previous round.⁷

DR - Debit

Drag-along Rights -

Majority shareholders can force minority shareholders to join in the sale of a company. Minority shareholders will receive same price, terms, and conditions.²
A majority shareholder's right, obligating shareholders whose shares are bound into the shareholders’ agreement to sell their shares into an offer the majority wishes to execute.³

Drip Feed - When investors fund a startup a little bit at a time instead of in a lump sum.⁷

Drive-by Deal - A drive-by deal is slang term often used when referring to a deal in which a venture capitalist invests in a startup with the goal of a quick exit strategy. The VC takes little to no role in the management and monitoring of the startup. ⁹

Dry Powder - Money held in reserve by a venture fund or angel investor in order to be able to make additional investments in a company.⁷

DSCR - Debt Service Coverage Ratio

Due Diligence -

A process undertaken by potential investors — individuals or institutions — to analyze and assess the desirability, value, and potential of an investment opportunity.³
This is the process whereby individuals or groups of people conduct independent investigations regarding a particular matter. In the business world, investors conduct timely due diligence when inquiring about prospective investment endeavors. This may entail a background search of the company’s founders, review of the entrepreneur’s credit scores, and routine follow-up with references and associates, etc. New business owners, on the other hand, are encouraged to also conduct due diligence when finding a potential investor. Through due diligence, both the investor and entrepreneur has the opportunity to diligently analyze and assess each other for the potential of an investment opportunity and partnership.⁴
Due diligence is the process of investigation and evaluation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.⁵

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