By Michelle Williams, AngelNews

Please enjoy our snapshot of terms used in the Venture Capital and Business Angel Industry.

Exercise price

The price at which an option or warrant can be exercised.

Exit Route/Exit Strategy

The method for liquidating an investment in a company obtaining the maximum possible return. Exit strategies can include selling or distributing the investee company's shares in and after an initial public offering (IPO), a sale of the investee to another company or a recapitalization. Increasingly venture capitalists are considering selling in the Secondary market (qv) as other exit opportunities are limited.


A company goes to a factor to discounts its invoices, with the factor paying a percentage of the value of the invoice up front and the balance, less a fee, when the invoice is finally paid by the creditor. A similar exercise is called invoice discounting when the company manages its own sales ledger and debt collection rather than the factoring agency doing so.


Investment companies earn their rewards in the form of a dividend or interest payments, but the may also be entitled to fees in connection with putting together the deal and for monitoring the progress of the investment.

Fixed assets

Assets such as land and buildings which are fixed and which cannot be moved or sold easily or quickly (cf Current Assets).

Financial Services and Markets Act 2000

The UK Act that provides the regulation of the financial services industry in the UK.

Financial Structure

The debt, equity and other financial instruments used to provide finance for a company.


When a company begins trading its shares on a stock exchange.

Follow-on Rounds

When a company seeks to and obtains additional rounds of financing from its shareholders. See "A" round (qv).

Founders' Shares

Shares owned by a company's founders when the company is set up.

Free Cash Flow

The cash flow of a company available to service the capital structure of the firm. Typically measured as operating cash flow less capital expenditures and tax obligations.

Friends and Family Shares

Shares to friends and family members issued early on in the life of a company. Usually these shares are issued at a heavily discounted rate to the price achieved at an eventual IPO.


The Financial Services Authority, the immensely powerful UK regulator of the financial services industry. Often referred to as "the Regulator".

Fully Diluted Earnings Per Share

This is the net profit adjusted for any income from capital raised from convertible shares converting or warrants being exercised, divided by the Fully Diluted Outstanding Shares (qv).

Fully Diluted Outstanding Shares

The number of shares representing total company ownership, including ordinary shares and assuming all current convertible shares, preferred shares, options, warrants, and other convertible securities are converted or exercised.

Fund of Funds

Specialist fund set up to invest in a range of private equity fund managers, who in turn invest the capital into investee companies. Used as a method by investors to spread risk across a wider private equity portfolio than would otherwise be achievable.


The ratio of debt to equity in a company. In general the higher the gearing the higher the percentage of annual profits which must be used to pay interest and the greater the vulnerability of the company to events outside its control such as a rise in interest rates or a fall in sales. There is no precise and accepted definition of gearing and therefore the way the figure is calculated should be checked. Grey areas can be long-term loans from shareholders and convertible equity.

General Partner

The General Partner is responsible for all management decisions of a limited partnership. The General Partner has a legal duty to act in the best interests of the Limited Partners (qv) and is fully liable for its actions.

Golden Handcuffs

When an employee terminates his employment contract early thereby relinquishing unvested stock.

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