A risk is something that can be measured and included in financial analysis. If it can’t be measured, it’s likely just fear.
Seed Capital
This is the first stage of venture capital, often to finance the early development of a new idea, product or service. May be used for product development, market research, building a management team or developing a business plan
Startup Capital
This stage of financing is similar to the seed stage but tends to take place after a product or service is launched and a business plan is developed. May be used to fine-tune the product or service or build out the team
Early Stage Capital
This stage of financing is made to companies that have customers and money coming in but which may not yet be profitable or have breakeven cash flow. An early stage investment may support a company’s customer acquisition, marketing, business development or production
Expansion Capital
This stage of financing is made to companies that are cash flow positive. It enables companies to expand product or service offerings and enter new markets
Exit Stage Capital
This stage of financing is made to companies that are ready to go public after products or services have gained substantial market share. Financing may be used for steps toward the IPO, including mergers and acquisitions driving out competitors. Sometimes referred to as mezzanine or bridge stage funding
Post-Revenue Company
Refers to a startup company that already has money coming in from customers or business activities. A post-revenue company may or may not be profitable. Investments may help a post-revenue company achieve scale or faster growth
Pre-Revenue
Refers to a startup company that does not yet have money coming in from customers or business activity. In a pre-revenue state, a company may be seeking investments for product development or hiring staff
Publicly Traded
These are companies that have held an initial public offering and whose shares are traded on a stock exchange or over-the-counter market where individuals or institutions can purchase shares. Public companies are subject to periodic filing and other obligations under federal securities laws
Privately Held
Privately held companies are owned by a small number of shareholders and are not publicly traded on a stock exchange. Privately held companies can exist as sole proprietorships, partnerships or corporations. They have fewer reporting requirements than publicly traded companies
Simply put, an asset is anything that can be converted into cash. And because of this, assets can be bought, sold, traded, borrowed, licensed, and so on.
Trade Secrets
A piece of knowledge which is not generally known or seen by others, and by which a business can obtain an economic advantage over competitors or customersformulas, practices, processes, designs, instruments, patterns, commercial methods, or compilations of information
INTANGIBLE ASSETS
Cash and Cash Equivalents
Items on a balance sheet that can easily be converted to cash within a short timeframe (usually 3 months)bank account balance, coins, currency, and short term government bonds
TANGIBLE ASSETS
Accounts Receivable
Money customers owe to the company for goods or services provided or promisedInvoices, credit due
INTANGIBLE ASSETS
Inventory
Goods and materials a business holds for the purpose of selling, reselling, or repair
warehouse stock
TANGIBLE ASSETS
Access to Credit
Often based on credit rating, this is the ability of individuals or enterprises to obtain loans or other financial services
credit, deposit, and payment
INTANGIBLE ASSETS
Land and Buildings
Real estate that you own an interest in and may profit from, should it produce revenue
rental property, farmland
TANGIBLE ASSETS
Equipment
Equipment and furniture used to operate the business which usually decreases in value as it is used
manufacturing equipment, computers, desks
TANGIBLE ASSETS
Brand Equity
Value of symbolic representation of company or service to create reputation and positive feelings
brand name, product or service name
INTANGIBLE ASSETS
Copyrights and Patents
Legal protection granted to authors and creators for their innovations that give exclusive rights for a period of time
inventions, literary, musical, and artistic works
INTANGIBLE ASSETS
Agreements for Future Revenue
The legal rights and duties of a contract for future revenue from ownership, service, employment, insurance, licensing, and permits
royalty agreements, franchise agreements
INTANGIBLE ASSETS
Rights to Use
A legal claim to some future benefit or cash for rights to use a resource
air or drilling rights, easements on property drilling for oil, gas, or minerals, access to water, air, timber cutting, and route authorities
INTANGIBLE ASSETS
Trademarks
Recognizable symbol, name or phrase that denotes a business or one of its products or service
a brand name, phrase, mark, or symbol
INTANGIBLE ASSETS
How do investors understand the relationship between risk and return in the context of one huge variable: TIME?
Capital Structures
Who are the other investors? Are incentives aligned (for founders, employees, key partners, other investors)? Do key stakeholders have ownership? What is the debt to equity ratio? Is the company raising the necessary capital to fund future growth?
Competitve Landscapes
Who are the key competitors? Is the market for the company’s product or service well formed? Who is moving into this space and how well do they know the market? What is the company’s competitive edge?
Organizational Structures
Does the structure facilitate investment in the relevant geography? Does the organizational structure support the goals of the enterprise? What does the organizational chart look like? What is the structure and strength of the board of directors?
Exit Scenarios
What are most likely exit scenarios for investors? Are the founders aligned with the investors around exit opportunity and timing? Who is leading thinking about exits?
Intellectual Property
Is there protectable IP in products, systems, service models? Are there patents or patent applications? Are trademarks of value? What is to stop competitors from taking the company’s core ideas?
Financials and Projections
Is the balance sheet, profit and loss, cash flow statement complete and up to date? What is the best use for the cash on the company’s balance sheet? What is the current cash flow and its seasonality? What are the models for revenue and costs?
Legal
How strong are the contracts with key suppliers, partners, staff, and other stakeholders? What legal or regulatory risks should investors know about? Is the company facing any pending litigation or disputes that could lead to litigation?
Operational Fundamentals
Does the company understand costs, revenues, billing, logistics, operational activities that run the business? Is technology handled appropriately, securely, efficiently? Are supplier relationships solid? Does the company have the right resources to run the operations?
Quality of Team
Looking from founders, management, staff and board to key contractors and service firms, does the company have what it needs right now? How is the company culture supporting success? Can the company attract and retain talent?
Regulatory Environments
Do you see where regulation is coming and are you ahead of your competition? Are the regulations in this industry changing soon? Do you have all the required regulatory and other government licenses, permits, and consents?
Sales and Marketing
What are plans for customer acquisition and retention? What are the marketing and sales ratios in this industry and sector and for this business model? Do you have the resources needed to understand, to reach, and to sell into your market?
Validity of Ideas
What does the product or service do that is of value? Have you proven that you can make, sell, deliver, charge for your product or services in the current market? Where is the market for this type of product or service headed?
Social or Environmental Impact
What will drive the impact the company is seeking? How does the company measure its impact? What are the key indicators the company tracks? Are there potential unintended consequences of the business?