I graduate from college with an engineering degree. I knew almost nothing about money or the economy or finance. Then I went to business school. (Okay, I worked for a few years in between.) About half-way through my first year, I realized that I had spent my entire life knowing nothing about what made the world go ’round. No, not love (no love at b-school). Money!

Most importantly, I learned that you can program Excel spreadsheet six ways to Sunday, but if you can’t speak the language of money, no one will take you seriously. So I started on a mission to learn how people talk about money including watching movies like Wall Street, reading books like Barbarians at the Gate (also a movie) and Liar’s Poker.

Of course, many years later, I’ve forgotten what I didn’t know, and I forget that entrepreneurs often have great ideas, but don’t have the finance language for moving through the investment world. So here are a few basic definitions when you are looking for money.

Investor – someone who exchanges money for a share of your company.

Angel – an individual who invests a decent chunk of money in your company ($100-500K) in exchange for some ownership. They tend to be entrepreneurs who have made it big themselves and are often less demanding and interfering than venture capitalists. (This is not always true, by the way.)

Venture Capitalist – a person who is a partner in a venture capital (VC) firm who helps find, select, and manage investments made by the VC firm. In general, VCs get their money from limited partners (these can be anyone from rich investors to corporations to pension funds). The limited partners do not have a say in the investments.

Associate – a junior person at the VC firm who holds no power, but will arrogantly act like they do. If you spend a lot of time with an associate, you are probably wasting it.

Principal – a associate whose been promoted. The power of this person depends on the firm. Still not a decision maker, but can blackball you.

One Pager – a one page (usually front and back) describing your company. Includes some history, mini financials, management description, product description, and business strategy. Your business plan in miniature.

Executive Summary – like the one pager, but a little longer. Your abbreviated business plan.

Your Business Plan – a 20-30 page document that will only be read by the associate. It still has to be good though or they’ll think your not taking this seriously.

Pitch Deck – otherwise known as a presentation (see I told you the lingo was different). Usually a Powerpoint presentation that you use when you present to the VCs. If they are really interested, you probably won’t get past the first couple slides. Make those slides count!
I graduate from college with an engineering degree. I knew almost nothing about money or the economy or finance. Then I went to business school. (Okay, I worked for a few years in between.) About half-way through my first year, I realized that I had spent my entire life knowing nothing about what made the world go ’round. No, not love (no love at b-school). Money!

Most importantly, I learned that you can program Excel spreadsheet six ways to Sunday, but if you can’t speak the language of money, no one will take you seriously. So I started on a mission to learn how people talk about money including watching movies like Wall Street, reading books like Barbarians at the Gate (also a movie) and Liar’s Poker.

Of course, many years later, I’ve forgotten what I didn’t know, and I forget that entrepreneurs often have great ideas, but don’t have the finance language for moving through the investment world. So here are a few basic definitions when you are looking for money.

Investor – someone who exchanges money for a share of your company.

Angel – an individual who invests a decent chunk of money in your company ($100-500K) in exchange for some ownership. They tend to be entrepreneurs who have made it big themselves and are often less demanding and interfering than venture capitalists. (This is not always true, by the way.)

Venture Capitalist – a person who is a partner in a venture capital (VC) firm who helps find, select, and manage investments made by the VC firm. In general, VCs get their money from limited partners (these can be anyone from rich investors to corporations to pension funds). The limited partners do not have a say in the investments.

Associate – a junior person at the VC firm who holds no power, but will arrogantly act like they do. If you spend a lot of time with an associate, you are probably wasting it.

Principal – a associate whose been promoted. The power of this person depends on the firm. Still not a decision maker, but can blackball you.

One Pager – a one page (usually front and back) describing your company. Includes some history, mini financials, management description, product description, and business strategy. Your business plan in miniature.

Executive Summary – like the one pager, but a little longer. Your abbreviated business plan.

Your Business Plan – a 20-30 page document that will only be read by the associate. It still has to be good though or they’ll think your not taking this seriously.

Pitch Deck – otherwise known as a presentation (see I told you the lingo was different). Usually a Powerpoint presentation that you use when you present to the VCs. If they are really interested, you probably won’t get past the first couple slides. Make those slides count!

Term-sheet – a non-binding offer of the terms under which the VC is willing to invest (see Elements of a Term-sheet).

Pre-Money Valuation – what the VC thinks your company is worth prior to their investment. This will be different than what you think it is worth (see Valuation (for a Venture Capital Investment)).

Post-Money Valuation – what your company was worth before the investment (Pre-Money) plus the investment. Your pre-money was $5 million, the investment is $5 million. Your post-money valuation is $10 million and the VC owns half.

Well, this is a decent list to start. If I think of other VC terms needing defining that are not otherwise defined on the site, I’ll add them here.

Good luck.
Term-sheet – a non-binding offer of the terms under which the VC is willing to invest (see Elements of a Term-sheet).

Pre-Money Valuation – what the VC thinks your company is worth prior to their investment. This will be different than what you think it is worth (see Valuation (for a Venture Capital Investment)).

Post-Money Valuation – what your company was worth before the investment (Pre-Money) plus the investment. Your pre-money was $5 million, the investment is $5 million. Your post-money valuation is $10 million and the VC owns half.

Well, this is a decent list to start.

Good luck.

Author: C. Worrall
Article Source: EzineArticles.com
Provided by: Duty on LCD/Plasma TV

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