By Michelle Williams, Marketing Manager at AngelNews

More key investment terms and phrases for you to get your head around. Empower yourself with the knowledge you need to survive in the industry. Don’t be baffled by the complex jargon; continue to read our glossary and stay in the know! Or even better, why not download our app of investment terminology; and have these definitions at your fingertips and never get lost in a conversation with investors again:


When a company raises capital there is always a possibility that all the money many not be forthcoming. This risk is often underwritten by an institution or individual which, for a fee, will agree to make up any shortfall.

Venture Capital Trust/VCT

A quoted closed-end investment company traded on the Main Market of the London Stock Exchange under a scheme established by the UK Government in 1995 to encourage investment in smaller companies. Individual shareholders in a VCT receive very generous tax reliefs each year on new investments in new VCTs. All dividends from the VCT are tax free and all gains on the sales of the shares in a VCT are tax free, provided they have been held for a fixed period. The VCT can invest up to a maximum of £1m per investee company and can only invest in unquoted companies or companies listed on AIM or Ofex. They must invest their capital in a fixed period.

Venture Capital

Originally capital supplied to early stage, innovative companies where the risks were high but so were the potential returns. The term in Europe has now come to encompass almost all types of investment in unquoted companies and including Management buy-outs. Often used interchangeable with the term Private Equity, although in professional circles Venture Capital now includes the inference that the investment is at the earlier stage of the business cycle.

Venture Capitalists

Capitalists who invest in unquoted companies taking an equity percentage of around 25%. In some cases they offer managerial advice/support in return for a management fee.

Venture Catalyst

Venture Catalysts help to speed up the process of a company raising investment by screening business plans.

Vintage Year

The year a fund starts to make investments.

Vulture Capital
A derogatory term used of venture capitalists, by people who believe that venture capitalists take too much and offer too little when they invest.

Warrant/Stock Purchase Warrants/Subscription Warrants

A type of security that entitles the holder to buy a proportionate amount of shares at a specified price at any time or at certain points for a period of years. Warrants are usually issued alongside another instrument eg ordinary or preferred shares or a bond to enhance the marketability of the accompanying securities.


Assurances, which are given by the selling shareholder or the directors of a company, verifying that statements they have made about the company and the state of the finances are true. See also indemnities (qv).

Weighted Average Cost of Capital/WACC

A calculation of a firm's cost of capital that weights each category of capital proportionately. Included in the WACC calculation are all capital sources including all types of shares and debt. WACC is calculated by multiplying the cost of each capital component by its proportional weighting and then summing: WACC= E/V x Re + D/V x Rd x (1-Tc)
Re = cost of equity
Rd = cost of debt
E = the market value of the firm's equity
D = the market value of the firm's debt
V = E + D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = the corporate tax rate
WACC is the average of the cost of each of these sources of financing weighted by their respective usage in the given situation. A weighted average, shows how much interest the company has to pay for every £/euro/dollar it borrows from third parties whether shareholders or debt providers. A firm's WACC is the overall required return on the firm as a whole. It is the appropriate discount rate (qv) to use for cash flows similar in risk to the overall firm. Source: investopedia.com

White Knight
An investor who rescues a company in distress. Also a bidder considered to be friendly to the interests of the management who is invited to bid for a company when the takeover target is facing a hostile bid.

Working capital
Capital which is used to finance the ordinary trading activities of a company eg raw materials, labour costs and to finance debtors or receivables. An accounting definition would be current assets less current liabilities. Note: For start-up businesses the working capital requirements can be larger than the requirements to acquire fixed assets. For some trading businesses a rise in sales can lead to a disproportionate increase in working capital requirements.

A negotiated agreement between the debtors and its creditors outside the bankruptcy process.

This is when an asset's value is written down to nil on the balance sheet and the write-off amount is taken as an expense through the profit and loss account. It is a non-cash item.

An subjective upward or downward adjustment of the value of an asset on a balance sheet. In the case of a very large asset a company may seek an independent valuation from an expert to justify their write-up/write-down to investors and third parties.