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ACCELERATOR

A business programme that supports early-stage, growth-driven companies through education, mentorship and financing.

ACQUISITION

In an acquisition, one company purchases the other outright, and the acquired firm does not change its legal name or structure, but is now owned by the parent company.

ACTIVE INVESTING

An investment strategy that involves ongoing buying and selling activity by the investor. Active investors purchase investments and continuously monitor their activity to exploit profitable conditions.

ANGEL INVESTOR

A high net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. Also known as a private investor, seed investor, or angel funder.

ANGEL ROUND

A series of investment from individual, high net worth individuals.

ANTI-DILUTION

A clause in an option, security, or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares of any future issue of the security.

APPENDICES

The place in a business plan to include any additional documents that give the reader a feel for the product, marketing, services, and so on.

ARTICLES OF INCORPORATION

A company formation filing applicable to corporate entities. This document records the creation of the corporation.

ASSET AND REVENUE-BASED FINANCING (INVENTORY AND INVOICE)

Debt financing that secures the loan through inventory and/or outstanding invoices. This structure is a suitable option for businesses which move physical goods.

ASSET AND REVENUE-BASED FINANCING (SENIOR SECURED)

Debt financing that secures the loan through assets owned by the company. They have a higher priority of repayment in the event of default.

AUTHORITATIVE STANDARDS AND NORMS

Refers to a range of rules set historically that are generally accepted in the kind of negotiation you are about to have.

B2B

Business-to-business (B2B) is a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer, rather than between a company and an individual consumer.

B2C

Business-to-consumer (B2C) refers to the process of selling products and services directly between a business and consumers who are the end-users of its products or services.

BERKUS METHOD

A valuation method that evolves in context. It assigns a financial value to each major element of risk faced by all young companies, after crediting the entrepreneur some basic value for the quality and potential of the idea itself.

BEST ALTERNATIVE TO A NEGOTIATED SETTLEMENT (BATNA)

The most advantageous alternative course of action a party can take if negotiations fail and an agreement cannot be reached (the "no deal" option).

BREAK EVEN ANALYSIS

A financial tool that helps determine the stage at which a company, service, or product will be profitable — i.e. the number of products or services a company should sell to cover its costs (particularly fixed costs).

BUSINESS MODEL

A company's plan for making a profit. It identifies the products or services the business will sell, the target market it has identified, and the expenses it anticipates.

CALL OPTION

A financial contract that gives the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset at a specified price within a specific time period.

CAP TABLE

A spreadsheet or table that shows the equity capitalisation for a company, often including all of a company's equity ownership capital.

CAPITALISATION TABLE

A table showing the equity ownership capitalisation for a company, as well as past and current valuations. Commonly used for start-ups and early-stage businesses.

CLAWBACK

An option in a term sheet that allows retrieval of a portion of equity based on performance.

CLAWBACKS

A contractual provision whereby money or benefits already given out must be returned due to special circumstances, such as having been received as the result of a financial crime.

COLLATERAL

An asset that a lender accepts as security for a loan. May take the form of real estate or other assets, depending on the purpose of the loan, and acts as protection for the lender.

COME ALONG (DRAG ALONG)

A provision that enables a majority shareholder to force a minority shareholder to join in the sale of a company, on the same price, terms, and conditions as any other seller.

COME-ALONG

A clause that gives certain shareholders, usually majority shareholders, the right to force other shareholders to sell their shares when those shareholders decide to sell theirs.

COMPETITIVE ADVANTAGE

Factors that allow a company to produce goods or services better or more cheaply than its rivals, generating more sales or superior margins compared to market rivals.

CONCESSIONS

Small moves made from the aspirational base to get into a zone where parties can agree.

CONDITIONS PRECEDENT

A condition or event that must come to pass before a specific contract is considered in effect or any obligations are expected of either party.

CONVERTIBLE NOTE

Also known as convertible debt, this is a loan agreement often used by seed investors who wish to delay establishing a startup's valuation until a later round of funding or milestone. Structured as a loan with the intention of converting to equity.

COVENANT

A promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out, or that certain thresholds will be met.

DCF METHOD

Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment today, based on projections of its future cash flows.

DEBT (general)

A sum of money that is owed or due. Funding that founders or a business borrows, which needs to be repaid within a certain period, usually with interest. Can be secured or unsecured.

DEBT (as a financing instrument)

Financing through debt means taking a loan which gets repaid over time. Pure debt deals can be made by securing them to inventory, receivables, or other assets.

DEBT-BASED REVENUE SHARE AGREEMENT

A loan which is repaid using a percentage of monthly revenue.

DILUTION

Occurs when a company issues new stock, resulting in a decrease in an existing stockholder's ownership percentage of that company.

DISBURSEMENT

The act of paying out money — e.g. money paid out to run a business, cash expenditures, dividend payments, or amounts a lawyer pays out on a client's behalf in a transaction.

DISCLOSURE LETTER

A key document in many sale and purchase of business transactions. Provides the buyer with specific information about the business being acquired, to assist with due diligence.

DISCOUNT FACTOR

A factor which, when multiplied by a predicted future cash flow from a loan or other debt, gives its present value.

DIVIDENDS

A reward, cash or otherwise, that a company gives to its shareholders. Decided by the board of directors and requires shareholders' approval.

DOWN ROUND

When a company raises funding at a lower valuation than previous funding rounds. Sometimes protected against by an anti-dilution clause.

DRAG-ALONG RIGHTS

A provision that enables a majority shareholder to force a minority shareholder to join in the sale of a company, on the same price, terms, and conditions as any other seller.

DUE DILIGENCE

An investigation or audit of a potential investment or product to confirm all facts, which might include reviewing financial records.

EARLY EXIT

A contingency plan applied by an angel investor, venture capitalist, business owner or trader to liquidate financial assets and safely exit the market, usually within two or three years of investment.

EARN-OUT

The option to pay more for equity later, i.e. on certain performance.

EARNINGS BEFORE INTEREST DEPRECIATION AND AMORTISATION (EBITDA)

A measure of a company's overall financial performance, used as an alternative to simple earnings or net income. Can be misleading because it strips out the cost of capital investments like property, plant, and equipment.

EARNOUTS

A contractual provision stating that the seller of a business obtains additional compensation in future if the business achieves certain financial goals, usually stated as a percentage of gross sales or earnings.

EMPLOYEE SHARE OWNERSHIP PLAN (ESOP)

An allocation of options that can be granted to employees or key people in the form of company shares, allowing them to buy an ownership stake at a locked-in, often attractive price. Used by early-stage startups for talent attraction, retention, and alignment.

ENTERPRISE VALUE

Value to shareholders and other providers of capital to the business (Enterprise Value = Equity Value + Debt Value − Cash).

EQUITY (general)

A degree of ownership in any asset after subtracting all debts associated with that asset, representing the shareholder's stake in the company.

EQUITY (as a financing instrument)

Equity financing entails giving a portion of equity to investors in exchange for an agreed-upon value.

EQUITY CROWDFUNDING

The process whereby a "crowd" of people invest in an early-stage unlisted company in exchange for shares in that company.

EQUITY VALUE

The value of a company's shares and loans made available to the business. Calculated by adding enterprise value to non-operating assets, then subtracting debt net of cash available.

EQUITY-BASED REVENUE SHARE AGREEMENT

An agreement using a predetermined distribution structure where investors gain a portion of revenues for a specified period, or for return on investment.

ESCROW

A financial instrument whereby an asset or money is held by a third party on behalf of two other parties completing a transaction.

EXCHANGE CONTROLS

Government-imposed limitations on the purchase and/or sale of currencies.

EXCLUSIVITY PERIOD

A length of time (usually 30 to 60 days) during which a seller is prohibited from pursuing the sale of a firm with parties other than the prospective buyer with whom they've signed a letter of intent.

EXIT ROADMAP

A comprehensive road map addressing all the business, personal, financial, legal, tax and value-creation issues involved in transitioning a privately owned business.

EXITS

The point at which an investor (usually a venture capitalist) sells their stake in a firm to realise gains or losses. Generally planned at the time of the investment decision.

FICA

The Financial Intelligence Centre Act (South Africa), which aims to ensure financial institutions know with whom they are doing business, preserve transaction paper trails, and report possible money laundering to investigation authorities.

FINANCIAL FORECAST

An estimate of future financial outcomes for a company, including future income and expenses, generally over the next year.

FOUNDER VESTING

The concept that a founder's total ownership in a company is agreed to in the present and earned over time, similar to a salary or other time-based compensation.

FSB (FINANCIAL SERVICES BOARD)

An international body that monitors and makes recommendations about the global financial system.

GOVERNANCE

Refers to the way in which companies are governed and to what purpose — who has power and accountability, and who makes decisions.

ICO

Initial Coin Offering, the cryptocurrency industry's equivalent of an IPO. A company raises funds by launching a new coin, app, or service; investors buy in and receive a new cryptocurrency token that may have product utility or represent a stake in the project.

IDEALIST

A person who is guided more by ideals than by practical considerations.

ILLIQUIDITY PREMIUM

Exists because in illiquid markets, even small trades can move prices substantially, creating risk for investors who might want to sell holdings quickly.

IMPACT-BASED LOAN

A loan where interest rates are determined based on social impact metrics.

IMPACT-BASED REVENUE SHARE AGREEMENT

Similar to a debt-based revenue share agreement, except the founder only gains financial benefits if they meet social impact metrics.

INCUBATOR

A collaborative programme designed to help new startups succeed, by providing workspace, seed funding, mentoring, and training.

INITIAL PUBLIC OFFERING (IPO)

The process of offering shares of a private corporation to the public in new stock issuance.

INTELLECTUAL PROPERTY (IP)

The application of the mind to develop something new or original. Can exist as an invention, brand, design, or artistic creation.

INTERESTS

Refers to the reasons why stances have been taken (in a negotiation).

INTERNAL RATE OF RETURN

A metric used in capital budgeting to estimate the profitability of potential investments — the discount rate that makes a project's net present value (NPV) of cash flows equal to zero.

INVESTMENT ROUND (OR SERIES)

Rounds of venture capital financing by which startup companies obtain investment, generally from venture capitalists and other institutional investors.

KEY-MAN RISK

Risk carried by an organisation that depends to a great extent on one individual for its success, typically found in SMEs.

KISS

The "Keep It Simple Security" — similar to a convertible note, but less restrictive for the founder.

LEAVER CLAUSE

A compulsory share transfer provision in a company's articles of association or shareholders' agreement.

LEVERAGE

In negotiation, the power that one side has to influence the other side to move closer to their negotiating position.

LIQUIDATE

Occurs when an investor closes out their position in a particular asset or security; refers to exiting a business by closing it down.

LIQUIDATION PREFERENCE

A clause in a contract that dictates the payout order in case of a corporate liquidation.

LIQUIDITY DISCOUNT

A discount applied on valuation multiples when comparing a listed company to a private company — usually around 30%, based on research.

LITIGATION

The process of taking a disagreement to a court of law so an official decision can be made.

LOAN

Money that is borrowed, in exchange for repayment of the principal amount plus interest.

LOAN BRIDGE

A measure of a company's overall financial performance, used as an alternative to simple earnings or net income; a measure of profitability.

LOSS AVERSION

People's preference to avoid losing, compared to gaining the equivalent amount.

MARKET CAPITALISATIONS

The value of each listed company, calculated by the stock exchange.

MARKET SHARE

The portion of a market controlled by a particular company or product.

MERGERS

The combination of two firms, which subsequently form a new legal entity under the banner of one corporate name.

MERGERS & ACQUISITIONS (M&AS)

A general term for the consolidation of companies or assets through mergers, acquisitions, consolidations, tender offers, asset purchases and management acquisitions — the process of one company combining with another.

MEZZANINE DEBT

Also known as venture debt, an unsecured loan agreement typically suitable for companies which lack the cash flow to repay conventional debt.

MINIMAL VIABLE PRODUCT (MVP)

A development technique where a new product or website is built with just enough features to satisfy early adopters; the full feature set is developed later based on user feedback.

MULTIPLES APPROACH (OR RATIOS APPROACH)

A valuation theory based on the idea that similar assets sell at similar prices, assuming a ratio comparing value to a firm-specific variable (e.g. operating margins or cash flow) is similar across comparable firms.

NATIONAL CREDIT AMENDMENT (NCA) ACT

Governs the assessment, application and maintenance of credit granted by a credit provider to a consumer within South Africa.

NET ASSETS BASIS OR NET ASSET

A type of business valuation focused on net asset value — total assets minus total liabilities.

NON-BINDING

An agreement with no legal power.

NON-DISCLOSURE AGREEMENT (NDA)

A legally binding contract establishing a confidential relationship, where parties agree not to make sensitive information available to others.

OPTION POOL

Shares of stock reserved for issuance to service providers of a company, pursuant to options and other equity incentives.

ORDINARY SHARE

The basic voting shares of a corporation. Holders typically get one vote per share and receive dividends only at the discretion of company management.

OUTSOURCING

Hiring a party outside a company to perform services or create goods traditionally performed in-house by the company's own staff.

PASSIVE INVESTOR

An investor who does not participate in day-to-day decisions of running a company; in partnerships, may be deemed a limited partner rather than a general partner.