What’s worse than sitting at an angel investment event and feeling like the people around you are speaking a completely different language? Angel and early-stage venture investing does have its own lexicon and jargon, but fortunately there are useful glossaries of terms online to become fluent. Here are 3 Useful Resources, plus some extra definitions I’ve added for clarification:
- 37 Angels. 37 Angels is a New York-based community of 50+ women investors. At the heart of their mission is early-stage investment education. It’s no surprise then that they have a very concise, elegant glossary of terms on their website.
- Angel Resource Institute. Part of the Ewing Marion Kauffman Foundation, the Angel Resource Institute encourages and supports angel investing across the United States. Their glossary provides some technical and process definitions.
- Female Funders. This relatively new organization focused on angel investing education in Canada provides a more detailed glossary, including a “why you need to know” section with each definition.
Some definitions vary across geographic borders, in particular when it comes to describing investment stages, so I’ve included some clarification around the terms seed stage and late-seed stage. Another term that I’m frequently asked about include round. Lastly, a really useful way of describing the potential returns from angel investments is in terms of a multiple.
Seed stage – this is typically the first round of external investment capital that a venture raises, after friends, family, and founders. Companies may be revenue-generating at this stage or not (increasingly, companies are becoming subject to greater scrutiny by investors, so I think more and more companies raising seed stage capital will be expected to be generating some level of revenue).
Late seed stage – some companies raise seed stage investment in more than one stage. A late seed stage is often the round of investment just before the company raises Series A investment.
Round – also “investment round” or “funding round”. Describes a complete course of investment, defined by a start and end date, and specific terms of the investment (such as share price, valuation, types of shares or securities being offered).
Multiple – also “investment multiple”. One way that investors’ returns are described, in reference to the amount of the original investment. For example, expecting or hoping for $100,000 back on a $25,000 can be described as a 4x multiple.