By Michelle Williams, AngelNews

The world of investment and entrepreneurship can be a complex one to get your head around. You will notice that new phrases and words are banded around all the time. We have compiled a short list of definitions for the most commonly used terms in the market. Happy reading!


Sometimes when a company is sold, part of the payment will be deferred. The seller will thus receive some cash now and some cash in each of the next few years. The amount of these deferred payments will often be linked to the profitability of the company in those years. This is known as earn out and is intended to reassure the buyer of the company's state at the time of exchange.


The European arm of NASDAQ, the independent US stockmarket which attracted many smaller technology companies. The stockmarket was wound down at the end of 2003.


The European Business Angel Network (EBAN) is the European trade association for business angels, seed funds, and other early stage market players. EBAN is an independent and non-profit association representing the interests of business angels networks, early stage venture capital funds and other entities involved in bridging the equity gap in Europe. Website: www.eban.org

Elevator Pitch

A very short (5 minutes) presentation of an entrepreneur's idea, business model and case and details of competitive position delivered to potential investors.

Enterprise Investment Scheme/EIS

The EIS was launched as a successor to the BES (qv) in January 1994. It aims to encourage wealthy individuals to invest in smaller unquoted companies and to play an active part in their management, thereby becoming Business Angels (qv). An EIS investor receives capital gains tax and income tax relief at varying levels provided the shares which are held under EIS are owned for three years. If the investment fails further tax relief is available. Under the EIS a business angel investor may be paid a reasonable salary by the investee company and may become a director, but must not have been previously involved with the company before investing. There are restrictions on which types of company are eligible under EIS. If a company obtains a quotation on the Main Market of the London Stock Exchange within the qualifying period for EIS tax relief, the investor loses those reliefs, but the company can list on the AIM, OFEX and Sharemark markets without losing the relief.

Enterprise Value/EV

This is a more "true" measure of a company's value as it includes the debt and quasi debt that an acquirer would have to take on when buying a company as well as market capitalisation. It also adjusts for cash and cash equivalents which an acquirer would have access to if it controlled the company.


Normally an owner of an independent business. Term used to describe an enterprising person, hence often related to the setting up of a new or growing company. Business owners who have no ambitions to grow their business beyond that which gives them a secure income would not be described as entrepreneurs. Entrepreneurs are also typically those who are seeking venture capital.


Equity or share capital is the risk capital provided to finance a business. If the business fails the equity capital will usually be lost. If the business succeeds, the profits belong to the shareholders.

Equity Kicker

This is usually used in mezzanine financings where a small number of shares or warrants are added to what is primarily a debt financing.


The European Venture Capital Association, for more information visit www.evca.com

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