MJ Hudson Venture Capital Jargon Buster 2020

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2020 EDITION
Venture Capital Jargon Buster
in association with

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CONTENTS
INTRODUCTION
Contact the Experts
SECTION 1
Investments Terms
SECTION 2
Legal Terms
SECTION 3
Environmental, Social & Governance (ESG) Terms
SECTION 4
Regulatory Terms
INDEX
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25
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43
48

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Welcome to the first edition of MJ Hudson’s Venture Capital Jargon Buster in
association with Founders Intelligence.
In this guide, we will highlight key terms, phrases and words which are
currently the most important and regularly used in Venture Capital (VC) and give
the reader not just definitions, but also where applicable, practical examples and
context.
The idea to create the Venture Capital Jargon Buster stemmed from knowing that there is real value
in understanding the specific ‘language’ of an industry, and how even common phrases across
professional services can have slightly different uses and interpretations industry to industry. This
is the main reason we wanted to create this reference guide specifically focussed on the Venture
Capital Industry, to help demystify some of the frequently used jargon.
This reference guide has been created to be used by anyone, not just people considering VC for the
first-time but also seasoned VCs.
In addition, as with all languages there is constant evolution, which we see clearly at MJ Hudson as
we find ourselves right in the centre of VC, whether that is helping with fund formation, regulatory
consultancy or carrying out due diligence. It is important therefore to also educate and highlight
new terms being used with increasing frequency such as those surrounding Environmental, Social
and Governance (ESG) factors. The terms within this guide are ones that MJ Hudson and Founders
Intelligence use on a regular basis with our clients, the ones which many people get confused about
or the ones most commonly asked to be defined. You may be shocked as to how often we get asked
for simple terms to be explained.
As a holistic alternative asset management consultancy to the VC industry, we have harnessed
the knowledge of numerous divisions within MJ Hudson to come to the final list of 278 words.
Due to Venture Capital being an industry full of variety that we are very happy to have partnered
with Founders Intelligence, as they provide yet another level of insight and knowledge within the
investment section. This just highlights how many people are involved in VC, which is very much a
collaborative industry.
Therefore, this Jargon Buster should leave you with a solid understanding of key VC terminology.
However, do let us know if there are still terms you would love to have busted; we can make sure
they are included in the second edition.
Introduction

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Contact the Experts
If you want to know more about our services and how we can help you. Please see below contacts
for each of the different sections within this guide.
INVESTMENT TERMS
INVESTMENT TERMS
MJ Hudson
Karma Samdup
Co-Managing Partner | Law
karma.samdup@mjhudson.com
DD: +44 20 3463 3220
MJ Hudson
Matthijs Baan
Managing Director | ESG and Responsible Investing
matthijs.baan@mjhudson.com
DD: +31 20 575 5020
MJ Hudson
Mike Booth
Partner | Regulatory Solutions
mike.booth@mjhudson.com
DD: +44 20 3693 7076
Founders Intelligence
Robert Haines
Partner
robert@foundersintelligence.com
T: +44 20 8396 6313
MJ Hudson
Lauren Radford
Vice President | Business Development
lauren.radford@mjhudson.com
DD: +44 207 079 1006
MJ Hudson
Declan Canavan
Managing Director | Business Development
declan.canavan@mjhudson.com
DD: +44 20 3693 7022
LEGAL TERMS
ENVIRONMENTAL
SOCIAL
GOVERNANCE
TERMS
REGULATORY TERMS
GENERAL INQUIRIES

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Robert Haines
Partner
Luke Barnett
Associate | Investment Advisory
MJ Hudson
Simon Radford
Manager
It has been great to partner with MJ Hudson to compile this Jargon Buster. The venture world is
awash with jargon, sometimes propagated by founders and VCs to make their activities sound more
complicated than they are. This resource is intended to help break down the buzzwords that cloud
understanding of how to invest, partner with, and work alongside start-ups.
At Founders Intelligence, we use the insights afforded by our network in the venture and start-up
world to help corporate clients build a set of beliefs about the future of their industries, and define
and execute the strategies for delivering creative growth.
We are a team of entrepreneurs that work hard to separate the signal from the noise in the venture
world and, as such, this Jargon Buster felt like a very natural thing to partner up on.
Having spent 7 years building a business at the intersection of the corporate and venture world
we have a strong point of view on how corporates should organise themselves to deliver creative
growth, and how founders should make the most of those opportunities when they do. We are
proud to call Unilever, Silverlake, Sky, BP, Visa, and Facebook clients, and believe strongly that our
entrepreneur-powered, bottom-up methodology, powered by a vast network of innovators and
entrepreneurs, is the answer to delivering high-ambition, sustainable growth.
MJ Hudson has been providing advisers and wealth managers with independent due diligence and
investment advisory services for tax-advantaged investments for over 35 years. We know how com-
plex it can be to navigate this space and be able to make the right investment
decisions. The first hurdle for investors and advisers shouldn’t be the difficulty of “jargon”;
whether that be very simple terms, or the more involved or interpretive terms regularly used.
For better performance through better research is only true, if clients of our research can
digest and maximise their comprehension of every aspect of our analysis.
Introduction
INVESTMENTTERMS

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Similar to an Incubator (definition below), accelerators
provide mentors to help early stage companies
build out an initial business, over a set time frame of
between a few weeks and a few months.
This is when a company asks HMRC if a particular
investment that it seeks to make will meet the
requirements for a tax-advantaged investment scheme.
It does not say whether a particular investor will meet
the requirements.
Where a company acquires a young start-up mainly to
acquire the talent that the young company possesses,
rather than mainly the intellectual property which that
company has produced.
An adviser fee is a fee paid by investors for professional
advisory services. It can be charged as a percentage
of total assets or it may be associated with a broker-
dealer transaction.
ACCELERATOR
ADVANCE ASSURANCE
ACQUIHIRE
ADVISER CHARGE
INVESTMENTTERMS
The Aggregator Business Model is a network model
where the company collects the information about
a particular good/service providers, makes the
providers their partners, and sells their services under
its own brand, allowing consumers to more readily
compare the products of different providers.
AGGREGATOR
An agile company is one that is able to frequently and
quickly implement changes to its products, services,
business and commercial model, allowing it to respond
quickly to client/market demands.
Artificial Intelligence. The use of computer systems
able to perform tasks normally requiring human
intelligence, such as decision-making, speech
recognition (see NLP, below) and translation between
languages.
AGILE
AI
INVESTMENT TERMS
(Formerly the Alternative Investment Market) is a
sub-market of the London Stock Exchange that was
launched in 1995. It allows smaller companies to float
shares with a more flexible regulatory system than is
applicable to the main market.
AIM

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An alternative investment is an investment or fund that
invests in asset classes other than stocks, bonds, and
cash.
An angel investor is an affluent individual who
provides capital for a business start-up, usually in
exchange for convertible debt or ownership equity.
They often invest at the earliest funding rounds after
friends and family.
Annual Management Charge. A fee charged by
investment managers, each year, to cover managing
the portfolio, as well as the funds invested. This is
typically calculated as a percentage of the funds
invested. In theory, the more actively managed a fund
is, the greater the annual management charge. In some
cases, this is charged up front, whilst in others it is
deferred until the fund has exited several investments.
Application Programming Interface—is a “go-between”
that enables a software program to interact with
other software, often “pulling” information from
one programme to populate another. In the context
of trading, an API often refers to the interface that
enables your software to connect with a broker to
obtain real-time pricing data or place trades.
Annually Recurring Revenue (ARR) is a key metric
used by SaaS (see definition below) or subscription
businesses that have defined contract lengths for
their customers. ARR is the value of the contracted
recurring revenue normalised to a one-year period.
ALTERNATIVE INVESTMENT
ANGEL INVESTOR
AMC
API
ARR
INVESTMENTTERMS
A fee charged to investee companies by a fund
manager to cover the cost of sourcing the deal, and
carrying out the necessary due diligence for the
investment.
ARRANGEMENT FEE
Document that specifies the regulations for a
company’s operations and defines the company’s
purpose.
ARTICLES OF ASSOCIATION
Alpha, is typically considered the return achieved
through active investment management. Alpha gauges
the performance of an investment against a market
index or benchmark which is considered to represent
the market’s return as a whole.
ALPHA

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INVESTMENTTERMS
Asset allocation attempts to balance risk versus
reward by adjusting the percentage of each asset in an
investment portfolio according to the investor’s risk
tolerance, goals, and investment time frame.
ASSET ALLOCATION
A security whose income payments and hence value
are derived from and collateralised by a specified pool
of underlying assets. “Asset-backed” investments were
popular as a way of mitigating risk before the changes
from the government’s “Patient Capital Review” as
even if equity investments were nullified, assets could
be sold in order to provide some return to investors.
ASSET-BACKED
AUM stands for Assets Under Management. The total
value of the funds and investments that an investment
fund directly manages, such as its own fund.
AUA stands for Assets Under Advisement. When the firm
is responsible for the allocation of funds which do not
technically belong to it, such as when acting as the
investment adviser for a fund managed by another firm.
AUM
AUA
B2B stands for “Business to Business”. A business
model in which a company sees its primary customer
as other businesses. Each transaction tends to require
a lot of work to secure, however revenues tend to
be larger and more stable than the many, smaller
revenues typical in direct-to-consumer businesses.
B2B
B2B2C stands for “Business to Business to Consumer”
(i.e. companies who have consumers as the end
customer but sell their services to other businesses to
better target them. For example, companies who help
retailers identify and target potential customers would
count as B2B2C).
B2C stands for “Business to Consumer”. A business
model in which a company has consumers as its end
customer.
B2B2C
B2C
When there are fixed costs that must be incurred
by a new entrant, regardless of production or sales
activities, into a market that incumbents do not have
or have not had to incur. Typically these costs put
them at a competitive disadvantage to exisiting parties
within the industry. High barriers to entry tend to
allow markets to have less competition and put less
pressure on profit margins.
BARRIER TO ENTRY
A discount that signals to market investors that the
securities in the fund may be valued below their
comprehensive Net Asset Value (definition below).
The highest price that a buyer (also called the “bidder”)
is willing to pay for an asset.
BID DISCOUNT TO NAV
BID PRICE

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INVESTMENTTERMS
A category of technologies that are at the very
forefront of technological development.
BLEEDING EDGE
Blockchain is the decentralised storage of information
(the “block”) in a public database (the “chain”).
Blockchain allows multiple users to enter information
about individual transactions and then orgainses the
information into blocks. There is no single holder of
the ledger, increasing the transparency of information
stored. Blockchain also forms the basis of certain
cryptocurrencies, such as Bitcoin.
BLOCKCHAIN
A start-up that grows its business with little or no
venture capital or outside investment. A bootstrapped
start-up will instead fund its operations by relying
on the founders’ personal wealth and the revenue
generated by the company.
BOOTSTRAPPING
BR stands for Business Relief, which was formerly
known as British Property Relief (BPR). It has been a
part of inheritance tax legislation since 1976. Once
qualifying assets have been owned for at least two
years, they can be passed on, free from inheritance
tax, on the death of the owner. Assets that qualify for
Business Relief include agricultural land, forestry,
trading businesses, and certain qualifying companies,
quoted on AIM.
The point at which a company is no longer losing
money and begins to generate a profit.
BR OR BPR
BREAKEVEN
A form of short-term financing that is meant to get a
company from A to B, where B is the point at which a
more permanent form of financing can be secured.
Software development term to describe software that
is built on top of existing software. Brownfield software
development is often contrasted with “greenfield”
software development, which involves creating a
software program from scratch.
British Business Bank plc is a government-owned
economic development bank. Its aim is to increase the
supply of credit to small and medium enterprises as
well as providing business advice services.
BRIDGING FINANCE
BROWNFIELD
BRITISH BUSINESS BANK
Biotechnology is the use of living (or formerly living)
systems to find solutions for treating disease, growing
more food, or increasing productivity.
BIOTECH

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INVESTMENTTERMS
A company buying shares in itself from other investors.
For example, investor wanting to take their invested
funds out of a Venture Capital Trust (VCT), and the VCT
then using its own cash reserves to buy the relevant
shares off of the investor. This typically occurs at
a discount, often pre-determined, such that the
amount paid to the investor will be slightly below the
estimated market value of the shares.
BVCA stands for The British Venture Capital Association.
The industry association for venture investing in the UK.
CAC stands for “Customer Acquisition Cost”. It
describes the average marketing and promotion costs
of attracting each new customer. This is often assessed
alongside the “LTV” (lifetime value, see definition
below) of a customer, inorder to evaluate the unit
economics of a start-ups business model.
BUYBACK
BVCA
CAC
Capitalisation Table, most commmonly called the Cap
Table. Typcially utilised by start-ups and early-stage
companies, cap tables include all of a company’s equity
ownership capital, such as common equity shares,
preferred equity shares, warrants, and convertible
equity.
CAP TABLE
An investment strategy which aims first and foremost
to maintain the value of the funds invested. A capital
preservation strategy seeks to reduce investment risk.
CAPITAL PRESERVATION
Also known as “Carry”, this is a key component
of renumeration for VC fund managers. As well as
receiving an annual management fee from their
investors and a return on their own capital invested
(alongside external investors into their fund), VC
fund managers will typically receive a performance-
related reward, calculated as a percentage of the
profits generated for external investors into the fund.
Typically, this will be around 20% of these profits, often
above a “Hurdle” of around 8%.
CARRIED INTEREST (CARRY)
In a private equity or venture capital setting, cash-on-
cash return describes the exit value of an investment
divided by the initial investment amount.
A metric commonly tracked by SaaS businesses, churn
rate describes the annual percentage rate at which
customers stop subscribing to a service.
In a start-up setting, employee stock options vesting
packages will often include a cliff, which is the point
after which shares begin to vest.
A start-up’s burn rate is the rate at which a company
is depleting its cash reserves. Divide the capital
amount by the burn rate to determine the lifespan of a
company (at least until the next funding round).
CASH-ON-CASH RETURN
CHURN RATE
CLIFF
CASH BURN RATE

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INVESTMENTTERMS
A method of equity valuation wherein ratios from an
industry, peer group, or similar companies are used to
estimate a company’s equity valuation.
The risk that arises due to having a large percentage of
one’s holdings in a particular investment, asset class or
market segment relative to the overall portfolio.
COMPARABLES METHOD
CONCENTRATION RISK
A subset of venture capital wherein corporations
invest corporate funds directly into external start-up
companies. These “CVCs” will often invest in order to
capture some of the upside of partnering with a start-
up in a way that can meaningfully improve a start-
ups’s prospects for success.
CORPORATE VENTURE CAPITAL (CVC)
A phrase popularised by Geoffrey Moore in 1991 that
is used to describe the act of broadening a high-tech
product’s market adoption from the early adopter
subset of consumers to the mass market.
CROSSING THE CHASM
Practice of funding a project or venture by raising
small amounts of capital from a large number of
people.
CROWDFUNDING
A decentralised digital currency that uses blockchain
ledgers to record and validate transactions.
Financial institution that holds customers’ securities
for safekeeping in order to minimise the risk of theft or
loss.
Deal flow refers to the number of investment
opportunities seen by an investment manager.
“Propriety deal flow” or “off-market” deals refer to
deal flow that only the Manager has access to and is
considered a plus as the Manager has less competition
to access deals and less competition might have
beneficial effects in terms of the valuation invested at.
Discounted Cash Flow; a valuation method used to
estimate the value of an investment based on its future
cash flows.
CRYPTOCURRENCY
CUSTODIAN
DEAL FLOW
DCF
In a private equity or venture capital setting, the
closing date means the date on which a fund first
accepts capital commitments from investors.
A minority investment in a company made by investors
alongside a private equity sponsor or venture capital
fund.
CLOSING DATE
CO-INVESTMENT

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INVESTMENTTERMS
In a private equity or venture capital setting, investing
on a deal-by-deal basis involves GPs (“General
Partner”) presenting investors with investment
opportunities on a case-by-case basis for their
consideration. This model provides greater flexibility
to investors than the traditional fund model.
DEAL-BY-DEAL BASIS
Deployment Rate means how quickly a manager can
invest the money raised into investments. VCTs have
to deploy their fundraised money within a certain time
because of government rules, while EIS managers have
to deploy funds within a tax year in order to generate
certificates for investors to claim their EIS tax break.
Dilution happens as further shares are issued and one’s
share in the company dwindles as a percentage. Anti-
dilution rights often allow investors to maintain the
same ownership stake by being allowed to take part in
further funding rounds.
Often investors might take a seat on an investee
company board. In exchange for the cost of
undertaking the work associated with serving on the
company’s board of directors, the investor will often
charge a fee, known as a “director’s fee”.
DEPLOYMENT RATE
DILUTION
DIRECTORS’ FEES
A form of investment management whereby an
investor has granted an investment manager
the ability to identify and execute investment
opportunities on the investor’s behalf, rather than
simply providing investment advice.
A situation wherein a new technology or business
model displaces an established technology or business
model, or even creates an entirely new industry.
Popularised by the late Clayton Christensen in his
seminal book “The Innovator’s Dilemma”.
DISCRETIONARY MANAGEMENT
DISRUPTION
Finance theory shows that a greater number of
investments reduces what is called “idiosyncratic
risk” i.e. the risk that one poorly performing stock
can massively affect a portfolio’s performance. With
sufficient numbers of investments, these bad news
effects can be balanced against unexpected good news
effects and thereby lessen the risk to the portfolio as a
whole.
DIVERSIFICATION
A funding round where the investee company is
raising money at a lower valuation than it had raised
at previously. This can either offer better value for
investors or signal that a company has hit more
challenging times.
DOWN ROUND

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INVESTMENTTERMS
For those investors who pledge money some time
before a fund’s closing date, some managers offer
a discount to initial fees that would otherwise be
charged. This is known as an “early bird” discount.
EARLY BIRD
In a start-up setting, early stage describes a company
with a product or service that is being tested or still in
development.
The Enterprise Investment Scheme is a type of tax-
advantaged investment which provides tax relief to
investors investing in young, high-risk companies.
Each company can raise up to £5 million in a year, and
£12 million over the lifetime of the company, including
amounts received from venture capital schemes. The
company must be within the first seven years of its life.
Investors can gain income tax relief of 30% of funds
invested, for up to £1 million per year (or £2 million if
£1 million of investments are into knowledge-intensive
companies), of relief, provided the investment is held
in new-issue shares of a qualifying company for at
least three years. Tax relief can be gained up-front.
EARLY STAGE
EIS
A sale in which the consumer has chosen only
to receive the specific investment without any
attending financial advice. This tends to be used
when a consumer has sufficient knowledge about the
investments in question that they are able to make
their own investment decisions. Advisors acting on an
execution-only basis are normally paid a fee that is a
percentage of the amount invested.
A seasoned entrepreneur who is employed by a
venture capitl firm to help vet potential investments
and mentor the firm’s portfolio companies.
An investment fund that has no end-date and can
continue to raise funds and invest them in perpetuity.
By comparison, non-evergreen (sometimes called
“closed-ended” or “limited life”) funds have a fixed
duration and, typically, a fixed fundraising window and
a fixed investment period. At the end of its duration,
a non-evergreen fund will be wound down, unless an
extension is agreed.
EXECUTION-ONLY
ENTREPRENEUR IN RESIDENCE (EIR)
EVERGREEN
Price at which the market dictates an asset should
change hands between a willing buyer and a willing
seller.
FAIR MARKET VALUE
A comprehensive appraisal of a business undertaken
by a prospective investor, especially to establish its
assets and liabilities and evaluate its commercial
potential. There are different types of specialist “DD”,
including legal DD, commercial DD, tech DD, etc.
DUE DILIGENCE
Dry powder is a term used in private equity to denote
the amount of money, or pledged commitments, yet to
be deployed into investments by the fund.
DRY POWDER

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INVESTMENTTERMS
Financial Technology. Innovations that seek to disrupt,
improve, and compete with traditional financial
services methods. Such innovations leverage the use of
computers and smartphones, and are heavily reliant on
new software and algorithms. Initially the terminology
was used for innovations to the business systems of
financial institutions, however it is increasingly used to
describe consumer-focussed innovations.
Where an investor invests further money into an
investment that they already have a financial interest
in at a second valuation point.
FINTECH
FOLLOW-ON FUNDING
The entrepreneur who starts a company and normally
starts off as the company’s CEO.
A type of business model that aims to accelerate
adoption of a product or service and involves offering
customers both complimentary and extra-cost
services.
FOUNDER
FREEMIUM
To get started, at the earliest stage of a company’s
development, an entrepreneur will often rely on support
from friends and family to get up and running. Normally,
even the earliest stage investors like to see a Minimum
Viable Product (see definition below), or at least a very
developed business plan, before investing at seed stage,
which means that all money which precedes this tends
to be from people known to the entrepreneur before
they set out on their venture.
FRIENDS, FAMILY, AND FOOLS
Gearing refers to the level of a company’s debt related
to its equity capital, usually expressed in percentage
form. It is a measure of a company’s financial leverage
and shows the extent to which its operations are
funded by lenders versus shareholders.
A type of private equity investment, usually a minority
investment, in relatively mature companies that are
looking for capital to expand or restructure operations,
enter new markets or finance a significant acquisition
without a change of control of the business.
GEARING
GROWTH CAPITAL
A form of business plan that outlines what a business’
growth metrics are and how they will be achieved.
GROWTH PROPOSITION

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INVESTMENTTERMS
In a private equity or venture capital setting, “Hockey
Stick” is a colloquial term used to describe an
exponential growth curve, usually in relation to a
company’s revenue or enterprise value.
HOCKEY STICK
Amount of time an investment is held by the investor.
An incubator firm is an organisation engaged in the
business of fostering early-stage companies through
the developmental phases until the companies have
sufficient financial, physical and human resources to
function on their own.
Also called an Investment Memorandum (IM). A legal
document that a company presents to potential
investors to explain the objectives, risks, and
investment terms surrounding a funding round.The amount of profit that must be delivered to the
investors into a private equity or venture capital fund,
before a fund manager is eligible to receive Carried
Interest. For private equity funds, this is typically 8%
annually compounding, but this figure is often much
lower (sometimes 0%) for venture capital funds.
HOLDING PERIOD
INCUBATOR
INFORMATION MEMORANDUM
HURDLE RATE
Her Majesty’s Revenue and Customs; a non-ministerial
department of the UK Government responsible for the
collection of taxes, the payment of some forms of state
support and the administration of other regulatory
regimes including the national minimum wage.
HMRC
The interconnection via the Internet of computing
devices embedded in everyday objects, enabling them
to send and receive data.
INTERNET OF THINGS (IOT)
Expressed as a percentage, IRR is a performance
metric often used by investors into venture capital
funds. Whereas a “money multiple” performance
metric only illustrates the ratio of amount invested to
amount returned (disregarding how quickly this return
has been achieved) IRR measures the rate at which
returns have been achieved.
INTERNAL RATE OF RETURN (IRR)

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A company that has received direct investment from
the investor/investment fund in question.
The length of time an investor is aiming to maintain
their portfolio before selling their securities.
Initial Public Offering. A public listing which often has
the desired end result of a venture capital investment.
INVESTEE COMPANY
INVESTMENT HORIZON
IPO
INVESTMENTTERMS
A classification of company that gives it access to
preferential EIS terms. Knowledge Intensive Companies
(KIC) typically are carrying out research, development
and innovation at the time of investment. To qualify
they need to be as their main business, be developing IP
(“Intellectual Property”) and 20% or more of employees
doing the research must have a masters of higher
degree for at least 3 years from date of employment.
KNOWLEDGE INTENSIVE
In a start-up setting, late stage describes a company
that has demonstrated viability as a going concern
and generally has a well-known product with a strong
market presence.
In a venture capital setting, a lead investor is the
venture capitalist or individual that takes charge of an
investment round, and usually has the ability to act on
behalf of the other investors.
LATE STAGE
LEAD INVESTOR
An “investment committee” (or “IC”) is the body
that has ultimate authority to make an investment
decision. Analysts will often submit papers analysing
an investment for the IC’s consideration, who will
then either give their approval or ask the analyst to
reconsider or move onto another opportunity.
INVESTMENT COMMITTEE
A trend line showing an initial loss (negative return)
in the early stages of a fund/investment, followed
by a steep gain. The line approximates the letter “J”,
hence the name. The term is often used to describe
the return curve of a private equity or venture capital
fund, which draws down on an investor’s committed
capital, as it invests, before returning distributions, as
it exits investments.
J-CURVE

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The branches of science concerned with the study of
living organisms and life processes, such as biology.
In a private equity or venture capital setting, a limited
partner is an individual or institutional investor that
commits capital to a fund without taking part in
the active management of the fund. Unlike a fund’s
General Partner (definition below), a Limited Partner
has limited liability.
An exit strategy for a company, which typically
converts the ownership equity held by a company’s
founders and investors into cash. Examples of liquidity
events include mergers, acquisitions, and IPOs.
A tax code provision stipulating that trading losses can
be relieved in a number of ways, such as being carried
forward and offsetting future trading profits of the
same trade.
LTV stands for Lifetime Value; how much revenue the
average customer will generate for the company over
the course of their relationship. This is better than
simply looking at an initial spend or just the retention
rate of a customer.
When Lifetime Value is higher than Customer
Acquisition Cost this means that customers are
generating more revenue than it costs to acquire
them and that scale will help generate profits for
the business. If the LTV/CAC ratio is less than 1.0 the
company is destroying value, if the ratio is greater
than 1.0 it may be creating value, but more analysis is
required.
LIFE SCIENCE
LIMITED PARTNER
LIQUIDITY EVENT
LOSS RELIEF
LTV
LTV/CAC RATIO
INVESTMENTTERMS
A book by Eric Ries which introduces a methodology
for launching a startup where an Minimum Viable
Product (defined below) is produced and iterated based
on feedback from early customers. This helps shows
that there is demand before the product is launched
rather than launching and hoping that “product/
market fit” emerges.
LEAN STARTUP BOOK
In a finance setting, leverage involves the use of debt
instruments instead of equity in the purchase of an
asset.
LEVERAGE

19
In a private equity or venture capital setting, a
management fee is a periodic payment that is paid by
an investment fund to the fund’s investment adviser
for investment and portfolio management services.
MANAGEMENT FEE
The market value of a publicly traded company’s
outstanding shares.
MARKET CAPITALISATION
INVESTMENTTERMS
Machine Learning is the use of algorithms and
statistical models to allow computer systems to learn
and improve over time through their own experience.
The final goal is to allow a computer to learn
automatically.
Fee charged by a private equity sponsor to an investor
for the advisory service provided to them.
ML (MACHINE LEARNING)
MONITORING FEES
MRR stands for Monthly Recurring Revenue or, very
simply, a measure of a predictable revenue stream.
The primary purpose of MRR is to permit performance
reporting across dissimilar subscriptions terms.
MVP stands for Minimum Viable Product. Part of
Lean Start-up methodology that a rough version of
a product should be produced to test how various
features are received and if demand exists, as well as
to get live feedback early in product development.
Net Asset Value. The overall value of a portfolio once
liabilities are deducted from the overall value of the
underlying companies.
Term used within the tax legislation of the United
Kingdom that establishes the threshold below which
some or all of the value of a gift, a death estate or
assets held within a trust is subject to a zero rate of
inheritance tax.
NLP stands for Natural Language Processing and is the
process of programming computers to process and
analyse large amounts of natural language data.
In a private equity or venture capital setting, non-
evergreen is another way to describe a closed-ended
investment fund.
MRR
MVP
NAV
NIL RATE BAND
NLP
NON-EVERGREEN
MBO stands for Management Buyout. When a company’s
management buys the company that they have been
managing. Often carried out when a business wants
to sell divisions that are not central to the strategy of
the business. Financing usually comes from personal
funding, private equity, and seller financing. In cases
where company assets are used for debt financing, it is
called a Leverage Management Buyout (LMBO). Before
the 2015 rule changes, MBOs were core to the strategy
followed by a number of VCTs.
MBO

20
Independent office of HM Treasury, part of the
Government of the United Kingdom. The OTS aims to
improve the experience of all those who interact with
the UK tax system.
A diversified portfolio of pooled investor money that
can issue an unlimited number of shares.
OFFICE FOR TAX
SIMPLIFICATION (OTS)
OPEN-END FUND
INVESTMENTTERMS
Option commonly available to underwriters that
allows the sale of additional shares that a company
plans to issue in an initial public offering or
secondary/follow-on offering.
A policy paper wherein the UK Treasury considered
how to support innovative firms to access the finance
that they need to scale up.
Payment made to an investment manager for
generating positive returns.
pipeline is a colloquial term used to describe potential
investment opportunities that the fund currently has
at its disposal.
OVERALLOTMENT FACILITY
PATIENT CAPITAL REVIEW
PERFORMANCE FEE
PIPELINE
In a venture capital setting, a pitch is comprised of
an entrepreneur’s attempt to convince a venture
capitalist that a business idea is worth investing in.
Occurs when a company makes a fundamental change
to their business after determining, usually through
market research, that their product isn’t meeting the
needs of their intended market.
A group of technologies that are used as a base upon
which other applications, processes or technologies
are developed. As a business model, a platform creates
value by facilitating exchanges between two or more
interdependent groups; usually consumers and
producers.
PITCH
PIVOT
PLATFORM
In a private equity or venture capital setting, observer
rights enable investors to attend and observe board
meetings, to receive board packets of information,
to inspect the corporation’s books, records or the
minutes of the board meetings or to attend committee
meetings.
OBSERVER RIGHTS

21
portfolio company is an entity in which a fund has
invested.
PORTFOLIO COMPANY
INVESTMENTTERMS
A trial (often staged in a corporate) to test the ability
of a start-up to do what it claims. A successful “POC”
might often lead to a decision to “scale” the product
more widely into the company on a permanent basis.
In a venture capital setting, a ratchet is a term
whereby, if another VC later pays a lower price for
shares in the start-up, the VC that bought shares
earlier with the ratchet protection gets a price
adjustment to that lower price.
In a finance setting, realisation describes the
conversion of assets, goods, or services into cash or
receivables through a sale.
Often investors do not have the right legal covers in
order to invest money and have to use the services
of a company which does have the requisite FCA
permissions. The investors then act as “Investment
Advisers” to the regulatory manager, identifying
investment opportunities and undertaking fundraising.
PROOF OF CONCEPT (POC)
RATCHET
REALISATION
REGULATORY MANAGER
The potential of loss of part or all of an investment.
RISK-TO-CAPITAL
Return on Investment. Investors look to ensure that,
for each expenditure by an investee company, it
generates more revenue than it costs. Companies with
a high ROI are distinctly preferable to those with a low
(or negative) ROI.
ROI
A term originally coined by Marc Andreesen, which
means “being in a good market with a product that
can satisfy that market”.
PRODUCT/MARKET FIT
The amount of money that is regularly spent on things
required in order to run a business, such as salaries,
heating, lighting, and rent.
Software as a Service. SaaS allows users to connect to
and use cloud-based apps over the Internet. Common
examples are email, calendaring, and office tools.
In a technology setting, saleability describes the ability
of a computer application or product to continue to
function well when it is changed in size or volume in
order to meet a user need.
RUNNING COST
SAAS
SALEABLE

22
INVESTMENTTERMS
In a venture capital setting, the Series A is an
investment round, typically the second one in which a
start-up accepts institutional capital.
A colloquial term used to describe having incurred
risk (monetary or otherwise) through one’s own
involvement in an investment, project, etc.
Small and Medium-Sized Enterprises. There is no
precise definition for what constitutes an SME, but
the determination will often be made on the number
of employees and/or the revenue of the business.
A business with fewer than 250 employees may be
considered an SME, for example.
A newly-established business, which has not yet
reached the maturity of being acquired or listed on an
exchange in an IPO.
A benefit in the form of an option given by a company
to an employee to buy shares in the company at a
discount or at a stated fixed price.
In a venture capital setting, the Series B is an
investment round, typically the third one in which a
start-up accepts institutional capital.
SERIES A
SKIN IN THE GAME
SMES
START-UP
STOCK OPTIONS
SERIES B
The Seed Enterprise Investment Scheme. SEIS is a
tax-advantaged investment which provides tax relief
to investors investing in very early stage companies
that have just begun to trade. Each company can
raise up to £150,000 through SEIS, whilst investors
can claim tax relief on up to £100,000 of investment
every year. There are numerous stringent qualification
requirements for investee companies. All investments
have to be held for at least three years. Investors can
claim tax relief up front.
SEIS
In a start-up setting, a strategic advisor is an individual
who assists in guiding the strategic direction of a
company and typically receives equity in return.
STRATEGIC ADVISOR
An arrangement to receive something regularly by
paying in a scheduled manner. A favoured business
model for many start-ups due to the “sticky” revenues
that such a model often generates.
SUBSCRIPTION
In a venture capital setting, the Seed is an investment
round, typically the first one in which a start-up
accepts institutional capital.
SEED

23
A temporary professional financial services alliance
formed for the purpose of handling a transaction.
Syndication allows companies to pool their resources
and share risks.
Total Addressable Market is the total market demand
for a product or service. The SAM is the “Serviceable
Available Market” and is the segment of the TAM
targeted by the company’s products and services
which is within geographical reach. The SOM is the
“Serviceable Obtainable Market” and is the portion of
SAM that a start-up can capture.
SYNDICATE
TAM
A measure of the total costs associated with managing
and operating an investment fund. The total cost of the
fund is divided by the fund’s total assets to arrive at a
percentage amount.
TER (TOTAL EXPENSE RATIO)
INVESTMENTTERMS
In a start-up setting, traction describes a situation
wherein a company is able to demonstrate that their
product or service is resonating with customers,
usually aided by company-specific metrics and
measurements.
A private start-up company which has come to be
valued above $1 billion. Well-known examples include
Airbnb and Stripe.
Money lent to a company which is not secured against
any of the company’s assets. Therefore the money
which is paid back must come from cash generated
from the company’s assets rather than the sale of the
assets themselves.
An estimation of the worth of something, usually
expressed in financial terms. In Venture Capital
valuation often works differently than for more mature
businesses. Common valuation models include: the
“scorecard methods”, the “venture capital method”
and the “Dave Berkus method”.
TRACTION
UNICORN
UNSECURED LOAN
VALUATION
A document that outlines the terms by which an
investor will make an investment. Term sheets tend
to consist of three sections: funding, corporate
governance, and what happens in the event of a
company liquidation.
The actual rate of return of an investment or a pool of
investments over a given evaluation period.
TERM SHEET
TOTAL RETURN
In a start-up setting, the value proposition describes
an innovation, service, or feature intended to make a
company or product attractive to customers.
VALUE PROPOSITION

24
INVESTMENTTERMS
Can also be known as a “recoupment waterfall”, this
describes the stages of when and how much different
investors get paid out at the end of an investment.
A security that entitles the holder to buy the
underlying stock of the issuing company at a fixed
price up until the expiry date.
WATERFALL
WARRANT
The capital of a business which is used in its day-
to-day trading operations, calculated as the current
assets minus the current liabilities.
WORKING CAPITAL
A term common in private equity, a fund’s “vintage”
is the year in which funds are committed. It can also
be the year in which the first influx of investment
capital is delivered to a company. Analysts often
perform vintage analysis so that different funds can be
compared in the context of similar market conditions.
VINTAGE
A reduction in the recognised value of an asset.
WRITE-OFF
In a start-up setting, vesting is the process where an
employee or founder earns shares over time.
VESTING
Capital invested in a project in which there is a
substantial element of risk, typically a new or
expanding business.
VENTURE CAPITAL
A Venture Capital Trust (VCT) is a tax efficient UK
closed-end collective investment scheme designed
to provide venture capital for small expanding
companies.
VCT

26
Karma Samdup
Co-Managing Partner | Law
MJ Hudson
David Harris
Associate | Law
MJ Hudson
The MJ Hudson Venture Capital practice uniquely advises clients across the venture spectrum on
both funds and deals. This means, for instance, advising clients on fund investments as well as fund
formation (both onshore and offshore structures); advising clients in respect of equity and/or loan
financing rounds as well as commercial partnerships/collaborations, secondaries and, on exits,
representing domestic and foreign based institutional and family office LPs, managers, HNW
individuals and angel investor networks, as well as founders and entrepreneurs.
In our experience, a key ingredient for ensuring a smooth completion process in respect of any
given transaction, is undoubtedly having parties to the transaction who have a clear understanding
of market norms (e.g. terms and trends). There will invariably be some back and forth between
parties around what is market; however, understanding this glossary of common venture deal
terms will be invaluable for any serious participant in the venture capital industry as it is aimed
at demystifying the key concepts in a venture capital transaction and ensuring that founders and
investors alike speak the same language when negotiating their deal terms.
Introduction
LEGALTERMS

27
LEGALTERMS
An agreement enabling investors to subscribe in
advance for Common/Ordinary Shares, converting
automatically on a “Qualifying Financing” and/
or at the option of the holder on a “Non-Qualifying
Financing”, as well as automatically converting on the
maturity date, an exit or an insolvency.
As a reward for early funding, investors are usually
given the benefit of a “Valuation Cap” and/or a
“Discount Rate”. Where there is both, the investor will
benefit from the most favourable outcome providing
the greater number of conversion shares for them.
This is used in the UK as a quick and easy mechanism
for seed fundraising without setting a fixed valuation,
and is structured in such a way that UK tax-paying
angel investors would be able to benefit from
attractive SEIS/EIS tax reliefs.
In order to comply with the SEIS/EIS rules, the ASA
will not be repayable (i.e. must always convert) and
generally will have a maturity date for conversion of
no more than 6 months and will not bear interest.
ADVANCE SUBSCRIPTION AGREEMENT
(“ASA”)
LEGAL TERMS
Usually represents the share class with the least
preferential rights. Often being the shares that
the company is incorporated with and held by the
founders and management, as well as investors
looking to benefit from favourable tax (SEIS/EIS)
treatment on their investment. Employee options will
also invariably be over this class of shares.
COMMON/ORDINARY SHARES
This protects the investor from dilution caused
by the company issuing securities at less than the
subscription price paid per investor share (a “down
round”), effected either via the issue of bonus shares or
an adjustment to the conversion price.
This can be calculated on the basis of the following:
• a “broad-based weighted average”: the weighted
average price taking into account the Fully-Diluted
Share Capital. This is seen as the balanced approach
and is the most common;
• a “narrow-based weighted average”: the weighted
average price based only on the Issued Share
Capital. This is more investor friendly; or
• a “full ratchet”: this effectively assumes that the
investors subscribed at the lower issue price of the
relevant “down round” without taking into account/
averaging out the issue price of the other shares in
issue. This is the most favourable investor position
but is rarely agreed.
ANTI-DILUTION

28
Convertible Debt (which sometimes takes the form of
loan notes) is convertible into shares (often the lender
will require this be the most senior class). The loan
may convert automatically (on a “Qualifying Financing”
typically) or at the option of the lender (e.g. on a “Non-
Qualifying Financing”) and will have a maturity date.
This is usually interest-bearing, with interest often
converting alongside the principal.
As a reward for early funding, investors are usually
given the benefit of a “Valuation Cap” and/or a
“Discount Rate”. Where there is both, the lender will
benefit from the most favourable outcome providing
the greater number of conversion shares for them.
The funds may be converted and/or repaid (often at
the option of the lender) on the maturity date or an
exit, and are immediately repayable on certain events
of default (e.g. insolvency of the company).
CONVERTIBLE DEBT/
CONVERTIBLE LOAN NOTES
LEGALTERMS
The right of investors to participate in any sale of
shares made by certain persons (e.g. the founders or
key management) after the application of Pre-emption
Rights on Transfers, and often on a substitution basis.
The agreed percentage discount applied to the
subscription price at the relevant subsequent financing
round to determine the exact conversion price in
relation to a Convertible Debt/Convertible Loan Notes
or an ASA. Therefore, the higher the discount rate, the
more attractive it is for the lender/loan note holder.
Prevents minority shareholders from blocking a sale by
refusing to sell their holding. Drag-Along Rights allow
a defined majority of shareholders (e.g. 75%, but almost
always more than 50%) to sell the shareholding in its
entirety, forcing other shareholders to sell.
A class of non-voting shares with no economic value,
often used in connection with vesting provisions to
take value away from unvested shares, or in the case of
a “Bad Leaver”. Administratively simpler and likely to
be more tax efficient than a share buyback mechanism.
CO-SALE RIGHT
DISCOUNT RATE
DRAG-ALONG RIGHTS
DEFERRED SHARES
SALE

29
Options granted over a certain class of shares (usually
Common/Ordinary Shares) to incentivise present and
future employees and directors. There are various
types of options schemes and some potentially more
tax efficient than others (e.g. EMI options in the UK
which are for the benefit of full-time employees). The
ESOP is usually capped at a certain percentage of the
share capital (often calculated with reference to the
Fully-Diluted Share Capital) and this cap may be set
by reference to either the pre New Money or post
New Money. It is important to identify whether any
existing ESOP is taken into account for the purposes of
determining the Pre-Money Valuation - investors will
typically require this.
EMPLOYEE SHARE OPTION POOL
(“ESOP”)/EMPLOYEE SHARE INCENTIVE
SCHEME
LEGALTERMS
Growth Shares are issued to key management of the
company to incentivise them to grow the business.
The shares give them the right to participate in exit
proceeds to the extent that the value of the business
on the exit is above an agreed “hurdle rate”.
GROWTH SHARES
The shares of the company, assuming the exercise of
all options and warrants, and the conversion of all
convertible notes and other similar rights.
FULLY-DILUTED SHARE CAPITAL
Weighted voting rights on voting at the board and/
or (albeit less common perhaps) at the shareholder
level which may be used by the founder to retain a
requisite level of control in relation to board and/
or shareholder resolutions. Institutional investors
may also ask for enhanced voting rights which may
be triggered in certain limited circumstances – for
example, in the case of a default under the investee
company’s documents – which would enable
the investor to secure a majority of voting rights
irrespective of their shareholding.
Typically includes a share sale, an asset sale, or an
IPO. The relevant equity documents may or may not
provide for a detailed time frame view on when an Exit
will be sought/delivered.
Founders may be prohibited from transferring their
shares (perhaps subject to Permitted Transfers)
without investor consent for a set period of time.
ENHANCED VOTING RIGHTS
EXIT
FOUNDER LOCK-IN
EXIT The rights to dividends and other income returns.
This is often on a pro-rata basis but there may be a
preference in favour of investors, which is unusual in
the UK but more common in the US. This may include
a cumulative or a non-cumulative preference return,
often seen as a compensation for the money invested
and referable to interest earned in a bank savings
account. Note that, depending on the exact nature of
the preference right, the shares benefiting from any
income preference rights, may need to be accounted
for as debt (as opposed to equity) in the company’s
books.
INCOME RIGHTS/DIVIDEND RIGHTS

30
Positive undertakings from the founder/managers
to act in the best interests of the company and to
undertake certain actions (e.g. maintaining D&O and
keyman insurance policies).
The money being raised by a company as part of a
new funding round. Investors may sometimes require
a condition that a certain amount of new money be
raised as part of a funding round.
MANAGEMENT UNDERTAKINGS
NEW MONEY
The rights to a return of surplus assets on a liquidation
or other return of capital after deducting liabilities.
The basic position is that on a distribution of assets on
a liquidation or on an Exit, proceeds are distributed
to the shareholders pro-rata to their respective
shareholdings.
Investors in early stage companies (subject to whether
they are individuals looking for SEIS/EIS tax reliefs)
will generally look for a 1x liquidation preference.
Typically, this is a Non-Participating Preference but
it may be a Participating Preference. Arguably, this
provision is the most important economic provision in
any equity documentation.
LIQUIDATION PREFERENCE/
LIQUIDATION WATERFALL
LEGALTERMS
Investors holding shares with a non-participating
preference get their money out first (typically an
amount equal to the money invested plus accrued
dividends, if any, but this may instead be a greater
multiple of the investment). Once the preference
shareholders have been paid, other shareholders
would share in the remaining proceeds, on a pro rata
basis.
NON-PARTICIPATING PREFERENCE
A financing whereby the company raises below the
qualifying threshold of funds through an issue of
equity securities, which would trigger a conversion of
Convertible Debt/Convertible Loan Notes or an ASA.
NON-QUALIFYING FINANCING
The shares of the company in existence at any given
point, excluding options, warrants, convertible notes
or similar rights.
ISSUED SHARE CAPITAL
The lead investor, or an investor majority, will typically
have the right (perhaps subject to certain share
ownership thresholds) to appoint a director and/or an
observer.
INVESTOR DIRECTOR/OBSERVER
Information rights including, for example, the delivery
of annual (un)audited accounts, monthly/quarterly
management accounts, and annual budget, as well as
inspection rights and any other rights to cater to an
investor’s reporting requirements (e.g. ESG metrics).
INFORMATION RIGHTS

31
LEGALTERMS
Investors holding shares with a participating
preference get their money out first (typically an
amount equal to the money invested plus accrued
dividends, if any, but this may instead be a greater
multiple of the investment). Once the preference has
been paid, participating preference shareholders
would share in the remaining proceeds with other
shareholders, on a pro rata basis, although there may
be a cap.
This generally requires investors to invest on a pro
rata basis in subsequent financings or lose some
or all of their preferential rights (e.g. anti-dilution
rights). In the worst case, they may have their shares
automatically converted into common stock–but this
is very rare in European transactions.
PARTICIPATING PREFERENCE
PAY-TO-PLAY
Transfers which can be made without price or other
restriction (e.g. without complying with any Pre-
emption Rights on Transfers or Right of First Refusal
on transfers). This is normally reserved for close family
members or family trusts (in the case of individuals)
and as members of the same group or fund group
(in the case of corporates or funds). It is worth
considering if this definition is broad enough from
an investor perspective (e.g. increasingly, secondary
transactions are becoming more common as a means
of delivering liquidity).
PERMITTED TRANSFERS
A right to require that transfers by existing
shareholders be offered to the other shareholders
before third parties (subject to Permitted Transfers).
This may either be done on a pro rata basis or the offer
may be made to investors first. It is often possible to
waive the application of such rights through the board
and a specified investor majority consenting to deem
such transfer as a Permitted Transfer.
PRE-EMPTION RIGHTS ON TRANSFERS
A right to participate in new share allotments, subject
to customary carve-outs (e.g. the exercise of EMI
options). This may either be done on a pro rata basis
or new shares may be offered to investors first. It is
often possible to waive the application of such rights
through a requisite shareholder resolution being
passed (e.g. via a special resolution requiring 75%
consent of shareholders).
PRE-EMPTION RIGHTS ON ALLOTMENTS
The value of the company once all of the investor
monies have been invested, again usually with
reference to the Fully-Diluted Share Capital. The post-
money figure is used to gauge the investors’ ownership
once the round is concluded.
POST-MONEY VALUATION
Shares (typically held by investors) with rights
attaching to them in preference to other share
classes, which may include (for example) a liquidation
preference, anti-dilution rights or preferred dividend
rights. As a company undertakes further funding
rounds, subsequent classes of preference shares may
be created.
PREFERENCE SHARES

32
LEGALTERMS
The value of the company prior to the relevant funding
round, usually with reference to the Fully-Diluted
Share Capital, which will determine how many shares
the investors’ money will buy.
A financing whereby the company raises at least a
certain threshold of funds through an issue of equity
securities, which would trigger a conversion of
Convertible Debt/Convertible Loan Notes or an ASA.
After a certain period or on certain default events,
it is sometimes possible that investors may have the
option to redeem their shares at the issue price plus
accrued but unpaid dividends; however, this right isn’t
common in UK transactions.
PRE-MONEY VALUATION
QUALIFYING FINANCING
REDEMPTION RIGHTS
Certain key matters which may have an effect on
investment value (e.g. an Exit, the creation of a new
share class, commencement of litigation, capex
spending over a certain amount etc.) will be subject
to certain consent thresholds (e.g. the holders of 50%
or more of the investor shares and/or an investor
director).
There is a balance to be struck between protecting
investor value and ensuring that the founders/
directors can effectively operate the business on a day-
to-day basis.
RESERVED MATTERS/VETO RIGHTS
Restrictions on the founders and potentially other key
employees (e.g. non-competes and non-solicitations of
employees, clients or suppliers) while they remain with
the company and usually for a set period of time (often
12–24 months) thereafter is usual.
RESTRICTIVE COVENANTS/
NON-COMPETE/NON-SOLICITATION
An investor may wish to have new service
agreements in place, particularly for the founders/
key management, covering key issues such as IP
(so the company owns the relevant IP created by
any founder/key management, if any), termination
(including summary dismissal) and gardening leave;
the termination provisions may also tie in with the
Vesting Provisions/Leaver Provisions.
In terms of IP specifically, it is also important to
consider if IP was created by any founder/key
management (or indeed any person) prior to a funding
round. If so, then if the company has not had an
effective assignment of such IP, then a separate IP
assignment deed should be required.
The right of the company and/or investors to have a
first right of refusal before the other shareholders or
third parties on a transfer of shares, typically by the
founders or key management.
SERVICE AGREEMENTS
RIGHT OF FIRST REFUSAL (“ROFR”)

33
LEGALTERMS
A simple agreement for a right to subscribe for more
(senior) shares in the company at the next funding
round with a fixed Pre-Money Valuation. US based
accelerator Y-Combinator introduced the SAFE as a
means of incentivising company and seed investors to
simplify funding discussions during the early stages of
a company.
It will also typically grant investors the benefit of a
“Valuation Cap” and/or a “Discount Rate”, as a reward
for investing at an earlier stage. Where there is both,
the investor will benefit from the most favourable
outcome providing the greater number of shares.
The right generally has no maturity or expiration
date, and the shares may be converted and/or repaid
at the option of the holder on an exit, and will be
immediately repayable on certain events of default
(e.g. insolvency of the company).
SIMPLE AGREEMENT FOR FUTURE
EQUITY (“SAFE”)
A minority protection right to “tag-along” to a sale of
shares which would result in a change of control of
the company. Intended to allow small shareholders the
opportunity to receive liquidity.
This provides a ceiling on the valuation at which the
relevant Convertible Debt/Convertible Loan Note or an
ASA may convert, effectively capping the conversion
price. Therefore, the lower the valuation cap, the more
attractive it is for the lender/loan note holder.
TAG-ALONG RIGHTS
VALUATION CAP
Loans to early stage businesses, often with a 9%+
interest rate, to reflect the added risk and often
supported by an Equity Warrant Instrument (see above)
to give the lender some economic upside, as well as
security over the company assets, to protect against
default.
The use of venture debt is becoming more prominent
but is still not the norm. Founders may prefer to take
venture debt to avoid potential equity dilution, if their
business is revenue generating and has the ability to
service the debt.
VENTURE DEBT

34
A right given to the investor to acquire a certain
number or a fixed percentage of shares of the company
at a set price at a future date or on the satisfaction of
certain conditions.
Used to flush out information on the company by
creating a cause of action if there is a hidden liability.
The persons giving warranties will “disclose” against
them to the extent they are not true.
In the UK, they are usually given by the company and
the founders, and it is usual for liability to be capped
at the amount of the investment (in the case of the
company) and as a salary multiple in the case of the
founders.
WARRANT INSTRUMENT/
EQUITY WARRANT
WARRANTIES
LEGALTERMS
The requirement for shares held by founders and/or
key management to be subject to vesting over a set
period of time, or (in some circumstances) according
to certain performance metrics, to ensure that they
remain incentivised to continue to provide value to
the business. Therefore, founders/key management
will “vest” their shares over an agreed vesting period –
typically between 2 to 4 years.
The exact outcome for a departing founder or key
management will depend on: (a) the point in time at
which they depart; and (b) the circumstances of their
departure.
Leaving founders/key management will typically
be designated as either a “Good Leaver” or a “Bad
Leaver”. A founder/key manager who is determined to
be a “Bad Leaver” during the relevant agreed vesting
period will typically lose the value of all their shares.
A founder/key manager who is determined to be a
“Good Leaver” during the relevant agreed vesting
period will have a portion of their shares as “vested”
shares and a further portion as “unvested” shares.
Their “unvested” shares will typically lose their value,
and their “vested” shares may either be kept by the
founder/key manager (perhaps converted into non-
voting shares of the same class) so they continue
to retain their economic upside in the company or
such shares may be required to be sold back to the
company at the then fair market value. This is often a
sensitive point of discussion and the permutations can
vary from deal to deal.
VESTING PROVISIONS/
LEAVER PROVISIONS

35
SECTION 3
Environmental, Social & Governance
(ESG) Terms

36
Matthijs Baan
Managing Director
ESG and Responsible Investing
MJ Hudson
Marieke Boudeling
Associate
ESG and Responsible Investing
MJ Hudson
Investors, regulators, media and the public are increasingly putting pressure on fund managers to
demonstrate the evidence of their Responsible Investment or ESG credentials. There is a plethora of
industry standards, reporting initiatives and regulations aimed to bring transparency to the inves-
tor space. The aim of this glossary is to provide some context and a brief explanation for the most
commonly used terms related to Responsible Investment and ESG as encountered in the day-to-day
business of MJ Hudson Spring. We hope this provides a little more clarity on the topic and that it can
facilitate greater transparency within our industry.
MJ Hudson Spring is an advisory firm with over 10 years of experience in Sustainability & Responsi-
ble Investing and is part of MJ Hudson group since mid-2019. MJ Hudson Spring serves institutional
investors, asset managers, family offices, Private Equity, Private Debt and Venture Capital funds, and
corporates, on the development and integration of best-in-class Environmental, Social and Govern-
ance practices.
Introduction
ESGTERMS

37
ESGTERMS
ENVIRONMENTAL
SOCIAL
GOVERNANCE
TERMS
“ESG” is an abbreviation of ‘Environmental’, ‘Social’,
‘Governance’, the three main categories used when
considering the sustainability and ethical aspects of an
investment. ESG is the dominant acronym (and almost
exclusively used) in the financial investment or asset
management industry.
ESG
The “S’’ of the term ‘’ESG’’ deals with the social
challenges and opportunities such as employee
engagement and development, labour conditions
and fair employment practices, human rights,
product safety and consumer (privacy) protection and
responsibility for the community.
SOCIAL
GOVERNANCE
The “G’’ of the term ‘’ESG’’ deals with the governance
challenges and opportunities concerning management
structure, board accountability and independence,
executive compensation, transparency, audits and
internal controls, shareholder rights, tax avoidance,
anti-bribery and corruption and cybersecurity.
The “E” of the term “ESG” deals with the challenges and
opportunities concerning the environment, including
aspects such as climate impact, energy consumption,
biodiversity, ecosystem, waste management, natural
resource use and circularity.
ENVIRONMENTAL

38
ESGTERMS
The 2018 Energy Efficiency Directive, amended
from the 2012 directive, represents a set of binding
measures that help the EU reach a 32.5% energy
efficiency target by 2030. Under the directive, all EU
countries are required to use energy more efficiently
throughout all stages of the energy chain.
ENERGY EFFICIENCY DIRECTIVE (EED)
The workstream in the Due Diligence process with the
objective to identify ESG-related unmanageable (and
manageable) risks, ensuring the investment committee
has all relevant information to make a decision about
the proposed investment.
ESG DUE DILIGENCE
Disclosure topics are a set of specific ESG factors that
are to be reported by companies to investors and key
stakeholders.
Complete lists of ESG reporting disclosure topics are
found in common reporting standards such as GRI and
SASB.
An abbreviation of Corporate Social Responsibility,
which means taking responsibility for the impact
of a company on all aspects of society (including
environment). ‘Being good’ at CSR means that a
company is operating in ways that benefit society (and
the environment). What CSR means for a company
specifically depends on aspects such as the industry,
supply chain position and geography.
CORPORATE SOCIAL RESPONSIBILITY
(CSR)
DISCLOSURE TOPICS
CDP is an international non-profit organization,
founded in 2002. The CDP aims to support companies,
cities and municipalities to measure and manage
their risks and opportunities regarding a variety of
environmental factors including climate change,
water security and deforestation. The annual process
of disclosing information allows the CDP to track
progress towards environmental stewardship.
CARBON DISCLOSURE PROJECT (CDP)
A concept modelled on biology, where products are
constantly recycled without non-renewable or non-
degradable inputs. Circularity builds on 3 values:
• Eliminate the concept of waste. Design products
and materials with life cycles that are safe for
human health and the environment and that can be
reused perpetually. Create and participate in
systems to collect and recover the value of these
materials following their use.
• Power with renewable energy. Maximise the use of
renewable energy and operate as energy-efficiently
as possible.
• Respect human & natural systems. Manage water
use to maximize quality, promote healthy
ecosystems and respect local impacts. Guide
operations and stakeholder relationships using
social responsibility.
CIRCULARITY
The potential to produce and consume within the
regenerative capacity of the earth. Sustainability is a
system’s state, and companies are challenged to adapt
to that new system. In practical terms we often ask
the question ‘’can a company operate sustainably?’’
thereby only using resources that the eco-system can
regenerate in a reasonable amount of time.
(ENVIRONMENTAL) SUSTAINABILITY

39
ESGTERMS
The integration of ESG processes into investment
processes, which can differ per type of investor but
typically entails:
1. Policy—A statement on the commitment and
strategy towards ESG, and a framework to identify
opportunities and monitor progress.
2. Due diligence & monitoring—(Annual) ESG
assessments of asset managers, investment funds
and/or portfolio companies, focused on risk
exposures, value creation and impact.
3. Reporting—Reports for communication to investors
and for internal discussions, providing transparency
to all stakeholders.
4. Knowledge & training—Team engagement through
trainings and workshops; build knowledge and
viewpoints through research and events.
ESG INTEGRATION
A policy that investors and fund managers and their
portfolio businesses can implement into their
investment processes, decision making and ongoing
operations. A good policy will outline and define the
processes and objectives related to ESG factors and will
provide a statement on the adherence to these
processes and objectives.
ESG POLICY
The EU taxonomy is a tool to help investors understand
whether an economic activity is environmentally
sustainable, and to navigate the transition to a
low-carbon economy. Setting a common language
between investors, issuers, project promoters and
policy makers, it helps investors to assess whether
investments are meeting robust environmental
standards and are consistent with high-level policy
commitments such as the Paris Agreement on Climate
Change.
The taxonomy provides an overview of 67 activities
in seven industry categories, representing 93.2% of
GHG emissions. Metrics and thresholds are identified
as criteria for inclusion in the EU Taxonomy. If the
criteria are not met, the company’s activity is not
sustainable.
EU TAXONOMY
The Greenhouse Gas (GHG) Protocol originated
from a partnership between World Resources
Institute (WRI) and the World Business Council for
Sustainable Development (WBCSD). It provides a global
standardised framework to measure and manage GHG
emissions from private and public sector operations,
value chains and mitigation actions. The GHG Protocol
basically categorises emissions in three “scopes” (see
separate definition).
GHG PROTOCOL
An investment strategy that aims to generate a
measurable and positive social and/or environmental
impact, while generating a financial return. Impact
investments are made with the purpose and intent
to achieve an objective that otherwise would not be
accomplished.
IMPACT INVESTING
Integrated reporting is the communication of both
financial and sustainability targets and results in one
report. It is critical how they are linked: allowing
sustainability data to relate to a company’s strategy
and financial results and integrating sustainability
targets into Key Performance Indicators (KPIs).
INTEGRATED REPORTING
GRI is an independent international organization that
has pioneered sustainability reporting since 1997.
GRI helps businesses and governments worldwide
understand and communicate their impact on critical
sustainability issues such as climate change, human
rights, governance and social well-being. The GRI
Sustainability Reporting Standards are developed with
true multi-stakeholder contributions and rooted in the
public interest.
GLOBAL REPORTING INITIATIVE (GRI)

40
ESGTERMS
International Labour Standards (ILS) are legal
instruments that set out basic principles and rights
at work, established by the International Labour
Organization (ILO), a United Nations agency founded
in 1919. They are either Conventions, which are legally
binding international treaties that may be ratified by
the ILO’s Member States, or Recommendations, which
serve as non-binding guidelines.
Areas covered by ILS include basic human rights,
occupational safety and health, wages, working
time, employment policy and promotion, vocational
guidance and training, skills development, specific
categories of workers, labour administration and
inspection, maternity protection and social security,
the protection of indigenous and tribal people, and
migrant workers.
INTERNATIONAL LABOUR STANDARDS
Invest Europe is an association representing Europe’s
private equity, venture capital and infrastructure
sectors, and some of Europe’s largest pension funds
and insurers. Formed in 1983 as the European Private
Equity and Venture Capital Association (EVCA), it
rebranded as Invest Europe in 2015. It requires its
members to implement professional standards which
mould the principles of ethical behaviour between
equity managers, their investors and portfolio
companies.
INVEST EUROPE
There are nine planetary boundaries as defined by the
Stockholm Resilience Centre: Climate change, Novel
entities, Stratospheric ozone depletion, Atmospheric
aerosol loading, Ocean acidification, Biochemical
flows, Freshwater use, Land-system change, Biosphere
integrity. Crossing these boundaries increases the
risk of generating large-scale abrupt or irreversible
environmental changes. So far, humanity has crossed
four.
PLANETARY BOUNDARIES
An accord within the United Nations Framework
Convention on Climate Change addressing
greenhouse-gas-emissions reduction, adaptation, and
finance, beginning in the year 2020. At the December
2015 Paris conference, 195 countries adopted the
first-ever universal, legally binding global climate deal.
The agreement sets out a global action plan to put the
world on track to avoid dangerous climate change by
limiting global warming to below 2°C.
PARIS AGREEMENT
The relevance of an ESG topic, indicated by the friction
between the current and desired future sustainable
state of the factor, for a company. Material ESG
topics can have a significant impact – both positive
and negative – on a company’s business model and/
or value drivers, such as revenue growth, margins,
required capital and risk. Material ESG topics are
generally identified using comprehensive frameworks
and standards, such as GRI and SASB.
MATERIALITY

41
ESGTERMS
The PRI is the world’s leading proponent of responsible
investment, established in 2006 on the New York
Stock Exchange. A result from an initiative by the
then United Nations Secretary-General Kofi Annan,
in early 2005, to invite a group of the world’s largest
institutional investors - supported by experts from the
intergovernmental organisations and civil society - to
join a process to develop the Principles for Responsible
Investment.
As an independent organisation, it acts in the long-
term interests of its signatories, of the financial
markets and economies in which they operate and
ultimately of the environment and society (as a
whole). Signatories must abide by the PRI’s six guiding
principles:
1. We will incorporate ESG issues into investment
analysis and decision-making processes.
2. We will be active owners and incorporate ESG issues
into our ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues
by the entities in which we invest.
4. We will promote acceptance and implementation of
the Principles within the investment industry.
5. We will work together to enhance our effectiveness
in implementing the Principles.
6. We will each report on our activities and progress
towards implementing the Principles.
PRINCIPLES FOR RESPONSIBLE
INVESTMENTS (PRI)
Responsible Investing reflects a philosophy and
practice that incorporates ESG factors into investment
analysis, portfolio structuring and the monitoring of
progress while driving long-term performance, which
can be applied across asset classes.
RESPONSIBLE INVESTING
The Sustainability Accounting Standards Board
(SASB) is a non-profit organisation that sets financial
reporting standards. SASB was founded in 2011 to
develop and disseminate sustainability accounting
standards. SASB offers financial and industry-specific
standards to help business and their investors identify,
manage and report on material sustainability topics.
SASB has developed 70+ industry standards that
identify the minimum set of financial material related
sustainability topics and their associated metrics for a
typical company operating in that industry.
SUSTAINABILITY ACCOUNTING
STANDARDS BOARD (SASB)
SCOPE 1, 2, 3 EMISSIONS
The categorisation of Greenhous gas (GHG) emissions
based on the source as defined by the GHG protocol:
Scope 1: direct emissions from owned or controlled
sources (e.g. emissions from a natural gas
boiler)
Scope 2: indirect emissions from the generation of
purchased energy (e.g. emissions from
purchased (fossil fuel derived) electricity)
Scope 3: all indirect emissions that occur in the value
chain of the reporting company (e.g.
emissions from flights or leased vehicles)

42
ESGTERMS
A regulation in EU law on data protection and
privacy in the EU and EEA, dealing with how personal
and sensitive data is collected, used and stored
by companies, government bodies and any other
organisations.
The GDPR was adopted in April 2016 and came into
force on 25 May 2018. As the GDPR is a regulation, not
a directive, it is directly binding and applicable.
THE GENERAL DATA PROTECTION
REGULATION (GDPR)
The UN Global Compact was officially established by
the United Nations in 2000 in New York. The UN’s
Global Compact aims to encourage businesses to adopt
socially and environmentally responsible policies. The
pact consists of ten principles, covering the support
for human rights, elimination of compulsory labour,
child labour, and discrimination. Environmental
stewardship, and working against bribery and
corruption.
UN GLOBAL COMPACT
The Sustainability Development Goals (SDGs),
developed by the United Nations, are a collection of
17 global goals designed to be a “blueprint to achieve
a better and more sustainable future for all”. They
are a call-to-action for developed and undeveloped
countries to end poverty, improve health and
education, reduce inequality, drive economic growth
while combating climate change and preserving our
oceans and forests
The goals are defined for countries, communities and
societies, specifically for countries with a significant
development gap that we want to close. In practice,
the goals are also used within companies, however
such as translation is not trivial.
SUSTAINABILITY DEVELOPMENT GOALS
The Task Force on Climate-Related Financial
Disclosures (TCFD) was established in December of
2015. The organisation was formed by the Financial
Stability Board (FSB) as a means of coordinating
disclosures among companies impacted by climate
change.
The organisation develops voluntary, consistent
climate-related financial risk disclosures which can
be used by companies to provide information to
investors, lenders, insurers, and other stakeholders.
As of 2020, UNPRI signatories, are obliged to disclose
TCFD related metrics and processes.
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)

44
Mike Booth
Partner | Regulatory Solutions
MJ Hudson
Introduction
Financial services regulation governs to a significant extent how venture capital firms go about their
business, from promoting the opportunity to potential investors all the way through to operating the
fund and acquiring or disposing of underlying investments. Often the regulations are complex and
you can be forgiven for finding it hard to cut through the noise and get to the heart of what it means
and how it will practically impact day-to-day operations. What’s more, the number of new regulations
that impact venture capital businesses is seemingly growing at such a rate it is often difficult to keep
pace.
MJ Hudson Regulatory Solutions provides tailored compliance support in addition to “plug and play”
solutions for all types of investment businesses – buy side, sell side and everything in between. Our
primary goal is to help you do business whilst mitigating compliance risk. We support clients with
a range of needs that includes day-to-day support on all your compliance needs, FCA Authorisation,
launching a new product, new regulation advice and bespoke training.
REGULATORYTERMS

45
REGULATORYTERMS
Alternative Investment Fund Managers Directive
is a piece of European legislation that regulates
the management and/or marketing of Alternative
Investments Funds (“AIF”) in the EEA (definition below).
Types of funds under this legislation include hedge
funds, private equity firms and investment trusts.
Where a firm provides investment services other
than investment advice or discretionary portfolio
management. The client must provide information
about their knowledge and experience relevant to the
product or service to enable the firm to assess whether
the product/service in question is appropriate for
them.
Anti-Money Laundering and Counter-Terrorism
Financing.
The FCA client assets sourcebook which provides rules
and guidelines for UK persons who are holding client
money or custody assets.
The Code of Conduct for staff sourcebook setting out
conduct rules for certain individuals within a firm.
Firms must give clients information on all costs and
associated charges in good time before they provide
the relevant service to the client.
AIFMD
APPROPRIATENESS ASSESSMENT
AML AND CTF
CASS
COCON
COSTS AND CHARGES
REGULATORY TERMS
European Economic Area was established by the EEA
Agreement 1992 which facilitates an extension of the
European Union’s single market to non-EU member
parties.
Broadly, this is electronically (including magnetically)
stored monetary value as represented by a claim on
the electronic money issuer.
Financial Conduct Authority is the financial regulatory
body in the UK.
EEA
E-MONEY
FCA

46
The period to 31 December 2020 where the UK
continues to have similar obligations and enjoy similar
rights as if it was in the EEA, which includes the ability
of UK authorised firms to “passport” their services into
the UK.
A personal recommendation to a client where the
recommendation complies with the rule requirements
laid down in FCA Conduct of Business sourcebook.
IMPLEMENTATION PERIOD (BREXIT)
INDEPENDENT ADVICE
REGULATORYTERMS
Key information documents are standardised notices
on the risks attached to packaged retail investment
products and must be provided to the retail investor
prior to it being made available to purchase.
When the Alternative Investment Fund Manager
(“AIFM”) makes a direct or indirect offering or
placement of units/shares of an AIF managed by it
to an investor domiciled/with a registered office in
an EEA state, or when another person makes such a
placement/offering at the initiative/on behalf of the
AIFM.
London InterBank Offered Rate is a rate set through
the submission of estimated daily borrowing costs
from various banks. It is set to be replaced from 2021.
The Money Laundering, Terrorist Financing and
Transfer of Funds (Information on the Payer)
Regulations is UK legislation that applies to certain
businesses in connection with their obligations to
verifying the identify and source of funds of their
customers.
The process by which criminals disguise the original
ownership and control of the proceeds of criminal
activity by making such proceeds appear to have been
derived from a legitimate source.
KID
MARKETING AN AIF
LIBOR
MLR 2019
MONEY LAUNDERING
Markets in Financial Instruments Directive is a piece
of European legislation that regulates the provision of
investment services such as inter alia: discretionary
investment management, reception and transmission
of client orders, execution of client orders and the
provision of personal recommendations that amount
to investment advice.
MIFID
The Financial Services and Markets Act, the primary
piece of UK legislation that governs financial services
legislation in the UK.
FSMA
Part of the FCA’s handbook in High Level Standards
which covers the Fitness and Proper test for employees
and senior personnel. Fit and proper, broadly
means being honest and trustworthy and have the
appropriate professional qualifications, background
and experience for the role.
FIT

47
A multi-lateral trading facility that allows the exchange
of financial instruments between multiple parties.
Prospectus Regulation provides for a single regime
throughout the EU governing the requirements
for a prospectus, its content, format, approval and
publication.
The Packaged Retail and Insurance-based Investment
Products Regulations which requires a KID (see
definition) to be produced for packaged retail
investment products (e.g. investment funds) where
they are distributed to retail investors in the EEA.
MTF
PROSPECTUS REGULATION
PRIIPS
REGULATORYTERMS
Regulated Market is a market over which government
bodies exert a level of oversight and control e.g. the
London Stock Exchange.
Includes not just packaged products but also
structured investment products, all investment trusts
and unregulated collective investment schemes
and any other investment that offers exposure to
underlying assets, but in a packaged form which
modifies that exposure compared with a direct holding
in the financial asset.
RM
RETAIL INVESTMENT PRODUCT
SMCR stands for Senior Managers & Certification
Regime applies to every FCA regulated firm and applies
personal accountability and obligations on almost all
personnel working in the regulated financial services
sector.
SSR stands for Short Selling Regulation, applies to
people undertaking short selling of shares, sovereign
Credit Default Swaps (CDS) and related instruments
that are admitted to trading or traded on an EEA
trading venue.
Firms providing investment advisory services or
discretionary portfolio management services must
assess the suitability of product/service for all
professional clients in respect of all MiFID business
(captures clients who in relation to the provision
of other services would be classified as eligible
counterparties) as well as for retail clients. The
objective of the assessment is broadly to establish the
risk a client is willing and able to take and whether
they can make a suitable investment decision.
Undertakings for collective investments in transferable
securities are funds primarily designed for retail
investments and are available to be sold across the EEA
using a marketing passport.
SMCR
SSR
SUITABILITY ASSESSMENT
UCITS
A personal recommendation to a client which is not
independent advice or basic advice.
The FCA’s regulatory sandbox allows businesses to
test innovative propositions in the market, with real
consumers.
RESTRICTED ADVICE
REGULATORY SANDBOX

48
INDEX
Accelerator___________________________________________________________
Acquihire ____________________________________________________________
Advance Assurance ___________________________________________________
Advance Subscription Agreement (ASA)_________________________________
Adviser Charge _______________________________________________________
Aggregator___________________________________________________________
Agile_________________________________________________________________
AI____________________________________________________________________
AIFMD _______________________________________________________________
AIM__________________________________________________________________
Alpha ________________________________________________________________
Alternative Investment________________________________________________
AMC _________________________________________________________________
AML and CTF _________________________________________________________
Angel Investor________________________________________________________
Anti-Dilution _________________________________________________________
API___________________________________________________________________
Appropriateness Assessment___________________________________________
ARR__________________________________________________________________
Arrangement Fee_____________________________________________________
Articles of association_________________________________________________
Asset Allocation_______________________________________________________
Asset-Backed _________________________________________________________
AUA__________________________________________________________________
AUM _________________________________________________________________
B2B__________________________________________________________________
B2B2C________________________________________________________________
B2C__________________________________________________________________
Barrier to Entry ______________________________________________________
Bid Discount to Nav___________________________________________________
Bid Price_____________________________________________________________
Biotech ______________________________________________________________
Bleeding Edge________________________________________________________
Blockchain___________________________________________________________
Bootstrapping________________________________________________________
BR OR BPR ___________________________________________________________
Breakeven ___________________________________________________________
Bridging finance______________________________________________________
British Business Bank_________________________________________________
Brownfield___________________________________________________________
Buyback _____________________________________________________________
BVCA_________________________________________________________________
CAC__________________________________________________________________
Cap table_____________________________________________________________
Capital Preservation__________________________________________________
Carbon Disclosure Project (CDP) _______________________________________
Carried Interest (Carry) _______________________________________________
Cash Burn Rate_______________________________________________________
Cash-on-cash return__________________________________________________
CASS_________________________________________________________________
Churn Rate___________________________________________________________
Circularity ___________________________________________________________
Cliff__________________________________________________________________
Closing Date__________________________________________________________
COCON_______________________________________________________________
Co-Investment _______________________________________________________
Common/Ordinary Shares ____________________________________________
Comparables Method_________________________________________________
Concentration risk ___________________________________________________
Convertible Debt/Convertible Loan Notes ______________________________
Corporate Social Responsibility (CSR) ___________________________________
Corporate Venture Capital (CVC) _______________________________________
Co-Sale Right_________________________________________________________
Costs and Charges ____________________________________________________
Crossing the Chasm___________________________________________________
Crowdfunding________________________________________________________
Cryptocurrency ______________________________________________________
Custodian____________________________________________________________
DCF__________________________________________________________________
Deal Flow ____________________________________________________________
Deal-by-deal basis ____________________________________________________
07
07
07
27
07
07
07
07
45
07
08
08
08
45
08
27
08
45
08
08
08
09
09
09
09
09
09
09
09
09
09
10
10
10
10
10
10
10
10
10
11
11
11
11
11
38
11
11
11
45
11
38
11
12
45
12
27
12
12
28
38
12
28
45
12
12
12
12
12
12
13
Deferred Shares ______________________________________________________
Deployment Rate _____________________________________________________
Dilution______________________________________________________________
Directors’ Fees________________________________________________________
Disclosure topics _____________________________________________________
Discount Rate ________________________________________________________
Discretionary Management ___________________________________________
Disruption ___________________________________________________________
Diversification________________________________________________________
Down Round _________________________________________________________
Drag-Along Rights ____________________________________________________
Dry Powder __________________________________________________________
Due Diligence ________________________________________________________
Early Bird ____________________________________________________________
Early Stage ___________________________________________________________
EEA __________________________________________________________________
EIS___________________________________________________________________
E-money _____________________________________________________________
Employee Share Option Pool (“ESOP”) /
Employee Share Incentive Scheme_____________________________________
Energy Efficiency Directive (EED)_______________________________________
(Environmental) Sustainability ________________________________________
Enhanced Voting Rights_______________________________________________
Entrepreneur in residence (EIR) _______________________________________
Environmental _______________________________________________________
ESG __________________________________________________________________
ESG Due Diligence ____________________________________________________
ESG integration_______________________________________________________
ESG policy____________________________________________________________
EU taxonomy_________________________________________________________
Evergreen____________________________________________________________
Execution-Only_______________________________________________________
Exit__________________________________________________________________
Fair Market Value_____________________________________________________
FCA __________________________________________________________________
Fintech ______________________________________________________________
FIT___________________________________________________________________
Follow-on Funding____________________________________________________
Founder______________________________________________________________
Founder Lock-in______________________________________________________
Freemium____________________________________________________________
Friends, Family, and Fools _____________________________________________
FSMA ________________________________________________________________
Fully-Diluted Share Capital ____________________________________________
Gearing______________________________________________________________
GHG protocol_________________________________________________________
Global Reporting Initiative (GRI)_______________________________________
Governance__________________________________________________________
Growth Capital_______________________________________________________
Growth Proposition __________________________________________________
HMRC________________________________________________________________
Hockey Stick _________________________________________________________
Holding Period _______________________________________________________
Hurdle Rate __________________________________________________________
Impact Investing _____________________________________________________
Implementation Period (Brexit)________________________________________
Income Rights/Dividend Rights________________________________________
Incubator ____________________________________________________________
Independent advice __________________________________________________
Information Memorandum ___________________________________________
Information Rights ___________________________________________________
Integrated reporting _________________________________________________
Internal Rate of Return (IRR) __________________________________________
International Labour Standards _______________________________________
Internet of Things (IoT)________________________________________________
Invest Europe ________________________________________________________
Investee Company____________________________________________________
Investment Committee________________________________________________
Investment Horizon___________________________________________________
Investor Director/Observer ___________________________________________
IPO __________________________________________________________________
28
13
13
13
38
28
13
13
13
13
28
14
14
14
14
45
14
45
29
38
38
29
14
37
37
38
39
39
39
14
14
29
14
45
15
46
15
15
29
15
15
46
29
15
39
39
37
15
15
16
16
16
16
39
46
29
16
46
16
30
39
16
40
16
40
17
17
17
30
17

MJ Hudson Venture Capital Jargon Buster 2020

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