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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Later Stage - A stage of company growth characterized by viable products, a developed market, significant customers, sustained revenue growth, and both profits and positive cash flow from operations. Later-stage companies would generally be candidates for an IPO. Investments in the C round or after qualify as later stage.³

Later-stage Company - This is a company that is considered to be in its mature stages of development. Unlike early and expansion-stage companies, later-stage companies already have successful commercialized products and services that are publically available as well as a significant generated cash flow. Many venture capitalists tend to invest in mature companies since they are less risky, are already established, have proven to be a financial success.⁴

Law of Large Numbers - A theorem that suggests that the average of results obtained from a large number of trials should be close to the expected value, assuring stable long-term results for the averages of random events. When applied to angel investing, it suggests that large portfolios of investments, made consistently over time, will return significantly positive results.⁷

LBO - Leveraged Buyout

Lead Investor - The primary investor of a syndicated round of financing. This investor is typically the largest investor of the syndicated round and ususally structures and leads the negotiation of terms related to the investment's documentation.⁶

Leveraged Buyout -

(LBO) A takeover of a company, using a combination of equity and borrowed funds. Generally, the target company’s assets act as the collateral for the loans taken out by the acquiring group. The acquiring group then repays the loan from the cash flow of the acquired company. For example, a group of investors may borrow funds, using the assets of the company as collateral, in order to take over a company. Or the management of the company may use this vehicle as a means to regain control of the company by converting a company from public to private. In most LBOs, public shareholders receive a premium to the market price of the shares.³
(LBO) This is a type of aggressive business practice whereby investors or a larger corporation utilizes borrowed funds (junk bonds, traditional bank loans, etc.) or debt to finance its acquisition. The high debt-to-equity ratio enables the investors to “buyout” a smaller company with very little cash. Leveraged buy-outs can be either friendly or hostile, depending on the negotiations made.⁴

- Synonyms: LBO

LIFO - Last In First Out

Limited Partner - (LP) An investor in a limited partnership who has no voice in the management of the partnership. LPs have limited liability and usually have priority over GPs upon liquidation of the partnership.³
- Synonyms: LP

Limited Partnerships -

An organization comprised of a general partner, who manages a fund, and limited partners, who invest money but have limited liability and are not involved with the day-to-day management of the fund. In the typical venture capital fund, the general partner receives a management fee and a percentage of the profits (or carried interest). The limited partners receive income, capital gains, and tax benefits.³
Limited partnership is a business organization with one or more general partners, who manage the business and assume legal debts and obligations and one or more limited partners, who are liable only to the extent of their investments. Limited partnership is the legal structure used by most venture and private equity funds. Limited partners also enjoy rights to the partnership's cash flow, but are not liable for company obligations.⁵

LinkedIn - A business oriented social media platform which can be found online at www.linkedin.com.⁶

Liquidation -

When a business is bankrupt or terminated, its assets are sold and the proceeds pay creditors. Anything left over is distributed to shareholders.²
1) The process of converting securities into cash. 2) The sale of the assets of a company to one or more acquirers in order to pay off debts. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.³
This is an event that represents the complete or partial closing of a company. In a liquidation event, a company’s assets and material goods (securities) are converted into cash and/or distributed for sale to pay off existing corporate debt.⁴
Liquidation is the sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.⁵

Liquidation Preference - Liquidity preference is the right to receive a specific value for the stock if the business is liquidated.⁵

Liquidation Waterfall - The sequence in which all parties, including investors, employees, creditors, and others receive payments in the event of a company's liquidation through acquisition or bankruptcy.⁷

Liquidity Event -

An event that allows a VC to realize a gain or loss on an investment. The ending of a private equity provider’s involvement in a business venture with a view to realizing an internal return on investment. Most common exit routes include Initial Public Offerings [IPOs], buy backs, trade sales, and secondary buyouts. (See also: Exit Strategy.)³
This occasion represents the common exit strategy of most entrepreneurs and investors. When a corporation is purchased (through a merger or acquisition) or when an IPO is made, equity is converted to cash.⁴
Liquidity event is the way in which an investor plans to close out an investment. Liquidity event is also known as exit strategy.⁵

Litigation - To take legal action or defend a legal right, also known as a lawsuit. A litigation may be settled between two opposing parties but often are settled in a court.
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LLC - Limited Liability Company

Loan to Value - Loan Amount / Value of the Collateral. This ratio is most often used in evaluating the risk of real estate loans, where the appraised value of the property can be more objectively ascertained. The higher the LTV, the riskier the loan. The bank may specify a maximum LTV in order to make a loan.⁶
- Synonyms: LTV

Lock-up Period -

The period of time that certain stockholders have agreed to waive their right to sell their shares of a public company. Investment banks that underwrite initial public offerings generally insist upon lockups for a set period of time, typically 180 days from large shareholders (such as 1% ownership or more) in order to allow an orderly market to develop in the shares. The shareholders that are subject to lockup usually include the management and directors of the company, strategic partners, and such large investors. These shareholders have typically invested prior to the IPO at a significantly lower price to that offered to the public and therefore stand to gain considerable profits. If a shareholder attempts to sell shares that are subject to lockup during the lockup period, the transfer agent will not permit the sale to be completed.³
Lock-Up Period is the period an investor must wait before selling or trading company shares subsequent to an exit, usually in an initial public offering the lock-up period is determined by the underwriters.⁵

Logo - Symbols which identify and represent a company or its’ product or services. It may also be a motto or identifying statement related to a company, its’ product or services.⁶

LOI - Letter of Intent

LP - Limited Partner

LTM - Last Twelve Months

LTV - Lifetime Value

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