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.
Early Exit -
An approach to angel investing popularized by author Basil Peters, in which the goal of an investment is the sale of a company within a few years without requiring additional large investments from VCs, thereby providing high relative returns without requiring companies to be home runs.7
Early Stage -
- The key characteristic is market development. The business is focused on sales and marketing and proving business viability.2
- A state of a company that typically has completed its seed stage and has a founding or core senior management team, has proven its concept or completed its beta test, has minimal revenues, and no positive earnings or cash flows.3
- This term generally refers to a young enterprise that is three years old or younger. During this phase, a company is still in its novel stages of development. They could be in the process of experimenting with new products or services that they intend to market in the near future and/or may have viable products that are already available to the public.4
Earnings Before Interest, Taxes, Depreciation, and Amortization -
A measure of cash flow calculated as:= Revenue - Expenses (excluding tax, interest, depreciation, and amortization). EBITDA looks at the cash flow of a company. By not including interest, taxes, depreciation, and amortization, we can clearly see the amount of money a company brings in. This is especially useful when one company is considering a takeover of another because the EBITDA would cover any loan payments needed to finance the takeover.3
EBIT -
Earnings Before Interest and Taxes
Economies of Scale -
Economic principle that, as the volume of production increases, the cost of producing each unit decreases.3
Elevator Pitch -
An elevator pitch is a brief presentation, typically 30 – 60 seconds in duration, presenting the entrepreneur’s concept / solution, business model, “go to market” strategy and value proposition to potential angel or venture capital investors, in order to obtain the attention of the investors, such that they are compelled to learn more about the opportunity.6
Employee Agreements -
Include as a foundation Non-Disclosure Agreements, (NDAs), also known as Confidentiality Agreements, and are formal legal agreements between an employer and an employee. The NDAs’ purpose is to provide a process under which employees maintain the company’s confidential or sensitive information, such that it is not shared or accessible by third parties. Depending on the level of their position within the company, an employee’s agreement may also include Non-compete clauses, which, depending on the jurisdiction may prevent an employee from directly competing against the employer should they cease their employment. Similarly, Non-solicitation clauses which prevent employees from soliciting employees or customers, should they cease their employment, may be included. Intellectual Property Assignment clauses assigning rights of discoveries during an employee’s tenure to the company and Freedom from Conflict of Interests clauses validating the employee is free from conflicting relationships with third parties are also typical in the employment agreements of certain employees.6
Employee Retirement Income Security Act -
ERISA shall mean the United States Employee Retirement Income Security Act of 1974, as amended, including the regulations promulgated thereunder.3
Employee Stock Option Plan -
(ESOP) A plan established by a company whereby a certain number of shares is reserved for purchase and issuance to key employees. Such shares usually vest over a certain period of time to serve as an incentive for employees to build long-term value for the company.3
Employee Stock Ownership Plan -
A trust fund established by a company to purchase stock on behalf of employees.3
Employer Identification Number -
An EIN or employer identification number is a unique, nine-digit identification number utilized by the Internal Revenue Service, (IRS) and assigned to business entities to identify employers as part of the tax reporting process. In order to obtain an EIN, business entities must file or apply to the IRS.6
Entrepreneur -
A person who organizes and operates a business or businesses, taking on greater than normal financial risks to do so. Entrepreneurs are the founders of startups and are the people angel investors support.7
EOD -
End of Day
EOI -
Expression of Interest
EOM -
End of Message
EOW -
End of Week
EPS -
Earnings per Share
Equity -
- Ownership in the capital of a Company. In corporations, it is called “stock”; in limited partnerships or LLCs, it is called “interests” or “units.”3
- This designation is given to a stockholder’s ownership in a company. The amount of ownership is obtained when an individual or corporation purchases one or more shares of stock (equity shares). The more equity purchased, the greater the ownership.4
Equity Financing -
Equity financing is a term used for company's issuance of shares of common or preferred stock to raise money. Equity financing is commonly done when its per share prices are high-the most money that can be raised for the smallest number of shares.5
Equity Kicker -
Option for private equity investors to purchase shares at a discount. Typically associated with mezzanine financings where a small number of shares or warrants are added to what is primarily a debt financing.3
Equity Offerings -
Equity Offerings is raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.5
Equity Seed Round -
When an entrepreneur first sells a part of his or her business - and therefore a proportional part of the good things (like profits) and the not-so-good things (like losses) - to an investor. Equity investments, unlike loans, do not need to be paid back.7
Escrow -
When a third party holds value during a transaction, releasing it only when a specified condition has been fulfilled.7
ESP -
Email Service Provider
ETA -
Estimated Time of Arrival
European Business Angels Network -
(EBAN) The European equivalent of America’s Angel Capital Association. See http://www.eban.org for more information.1
EV -
Enterprise Value
Exchange Act -
[“34 Act”] Regulates periodic reporting by companies with publicly traded securities, companies with more than 500 shareholders, and brokers and dealers in securities.3
Executive Summary -
An executive summary is a one to two page document which provides an overview of a startup entrepreneur’s business opportunity. It summarizes the key points of the startup’s business plan with a focus on obtaining investor interest, for potential investment. The goal of the executive summary is to grab the attention of the investor, such that they desire to learn more about the opportunity.6
Exercise Price -
The price at which an option or warrant can be exercised.3
Exit -
Exit is the sale or exchange of a significant amount of company ownership for cash, debt, or equity of another company.5
Exit Route -
An exit route is the method by which an investor would realize an investment.9
Exit Strategy -
- A fund’s intended method for liquidating its holdings while achieving the maximum possible return. These strategies depend on the exit climates, 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 recapitalization.3
- This is a company’s negotiated approach whereby investors are given an event or time within the development of their company to receive their return on investment (ROI). This can be achieved through a liquidity event, where their equity is converted into cash.4
- Exit Strategy is the way in which a venture capitalist or business owner intends to use to get out of an investment that he/she has made. Exit Strategy is also called liquidity event.5
Expansion Stage Company -
This term generally refers to a company that is three years old or more. During this period of development, a company may already have been successful commercializing many of their products and services but may not generate desired profit. An enterprise that is in its expansion stage may resort to seeking additional sources of capital to minimize the risk of failure. Many venture capitalists invest during this stage of a company’s development.4
Expenses -
The cost a business incurs during operations in order to generate revenue. In normal circumstances, most of these are cash expenses; examples include wages, payments to vendors, and rent. Other expenses are non-cash, like depreciation, which decreases net revenue, but is not a cash outlay. These are governed by FASB and IRS accounting standards.6
Notes:
- Source: Crowdfunding Professional Association website
- Source: 37 Angels website
- Source: Angel Capital Association website
- Source: Go4Funding website
- Source: FundingPost website
- Source: FundingSage, LLC
- Source: Angel Investing, by David S. Rose
- Source: Institutional Limited Partners Association website
- Source: Venture Choice website
