Speak Like A Fundraiser: 28 Financial Terms Everyone Should Know

‍Angel

• Typically used by Start-Ups or early stage-businesses, an angel investor invests their own personal capital usually in exchange for an equity (shares) in the company.

Audit

• An audit of a company is an independent financial review of the company.

Bootstrapping

• Bootstrapping is the term used when a founder uses their personal finances to start and build a company without relying on external investments.  

Balance Sheet

• A balance sheet is a financial statement that provides a snapshot of a company’s assets, liabilities and the owner’s equity – it typically follows this equation:
• Assets = Liabilities + Shareholder’s Equity
• It’s a useful summary to evaluation a company’s profitability and financial health.

Burn Rate

• The burn rate is the speed at which a company spends its available capital. It is usually calculated every month and measures how long a company will last on its available cash.

Bridge Financing / Bridging loan‍

• Bridge financing or a bridging loan is a short-term debt funding solution used by companies to cover immediate cash flow issues. These types of loan bridge the gap until more long-term financing is secured.  

Buy out

• A Buy Out is where a an entity gains the controlling interest in a company either by purchasing its entire equity or more than 50% of the share capital (i.e. through a share purchase agreement), effectively transferring control from the current shareholders to the buyers.

Cap Table

• A capitalised table (Cap Table) is a document that details the company’s equity ownership structure. It keeps track of and lists all of the shareholders, the number and types of securities owned, and percentage of interest in the company. It’s a very usually document when taking on investors.

Capital

• Capital is the financial assets or resources that a company uses to fund its operations.  

Cash flow

• Cash flow is the net movement of cash into and out of a business over a specific period. It measures the money coming in and going out.

Cash position

• Cash Position is the total amount of cash a company has available at any given time.

Crowdfunding

• Crowdfunding is the process of raising capital for a business by collecting small amounts of money from a large number of people (i.e. the public). Typically done through online platforms.

Debt financing

• Debt financing is when a company raising capital through borrowing money from a lender, such as a bank or private investors, rather than selling shares (a stake) in the company. The key is it is a debt, and therefore repayable, usually with interest.

Dilution

• Dilution is a term used when a company allots additional shares, which in turn decreases the ownership percentage of the existing shareholders thereby diluting their shareholding.

Dividends

• Dividends are a distribution of a company’s profits to its shareholders as a share of the profits. The amount and frequency of a dividend depends on the company, its articles of association, the type of shares a shareholder has and the terms of a shareholders agreement.

Equity

• Equity represents the shares in a company that are given to the investors/founder. The shares are supposed to represent the individual’s ownership value in a company: equity = assets – liabilities.

Exit

• An exit is when a shareholder sells their shares in a company to gain a return on their investments- they exit the company.

Equity fundraising

• Equity fundraising is the process of giving shares to investors for their investment.

Forecast

• A forecast is a budget in motion, so it adjusts based on what is happening in a company throughout the year.

Funding Rounds (Pre-Seed, Seed, Series A/B/C/D, IPO)

• Funding rounds are stages in which a start-up or company raisings capital from investors to support its development. Each round aligns with specific goals in a company’s lifecycle.

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Liquidity

• Liquidity is the term used to determine how easily assets can be converted into cash.

Pledge

• A Pledge is an investor’s commitment to give funds to a company. The company can then look at all of the pledges it has received to determine how much money is likely to come into the company.

Profit Margin

• Profit Margin is the metric which measures the percentage of revenue a company remaining as profit after all of its expenses have been paid. There are two forms:
• Gross profit margin = total revenue – cost of goods/services sold
• Net profit margin = total revenue – operating expenses, taxes, admin costs, interests and depreciation

Return on Investment (ROI)

• ROI is a metric used to determine the profitability of an investment by comparing the net profit generated to the initial cost of the investment. If ROI is high, this is a positive sign for the company and can justify future investments.

Revenue

• Revenue is all the income flowing into a company.

Unicorn

• A unicorn is a term used to describe a private start-up valued at more than 1 billion USD. The word unicorn is used to emphasise how the rarity of such high-valued start-ups are.

Venture Capital ‍

• Venture Capital is private equity financing invested in a start-up or early-stage company with high-growth potential.

Venture Debt‍

• Venture Debt is a type of loan specifically designed for start-ups or early stage companies that have already raised venture capital funding but need the additional cash. It is a high-risk loan only provided by specialised lenders.

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