Here are dozens of useful terms which you might find helpful when reading crowdfunding campaigns

There are three sections:

Let us know if you have a word that you do not understand and we will explain it to you or may even add it below!

Glossary of terms to do with investing

Articles of Association

The articles of Association are the legally binding terms by which shareholders in a company are organized and brought together. They will define the type of the organization e.g. a limited company, the kind of business to be pursued and not, as well as rules about the types of equity issued, rules the company’s ability to borrow and matters such as the process for buying/selling and registering/deregistering shareholdings, the rules around directors’ appointments, payment of dividends, how the shareholders will be communicated with and various other practical matters relating to how the company is run.

Base Rate

The rate at which the Bank of England lends to other banks; currently 0.5%.


A debt issue by a company to investors. It is repaid using a fixed number of installments over a fixed period. The interest rate is usually fixed for the life of the bond.


Usually used in the context of bonds, an issue that is callable can be repaid in line with the terms of the agreement. For example, a bond might be callable on an annual, quarterly, monthly, weekly or even daily basis. If a bond is called the issuer repays the capital to the investors in line with the terms of the agreement and ceases to pay interest when the capital has been repaid.

Capitalisation table (cap table)

A spreadsheet listing all shareholders and holders of options and any other securities, along with the number of shares, options and convertible securities held.

Cold approach

When you ask for investment from someone you do not already know and they have not asked you to approach them.


Dilution is what happens to investors when a company issues a new round of shares, if they do not subscribe in that new round for their pro rata amount. You can have dilution in terms of the percentage stake you hold and also in the value of the stake you hold.

Disclosure letter

A letter given by the founders, and maybe other key members of the management team, and the company to the investors setting out exceptions to the representations and warranties.


This is the payment made to equity shareholders out of the profits of the company. Dividends can be paid at any time, although it is usual in a private company for them to be paid annually or sometimes six monthly or quarterly. Dividends received by the shareholder are usually liable for tax and have to be declared on an investor’s annual tax return.

Drag along/bring along

A mechanism ensuring that if a specified percentage of shareholders agree to sell their shares, they can compel the others to sell ensuring that a prospective purchaser can acquire 100% of a company.

Due diligence

This is the process of researching a business and its management prior to deciding whether to proceed with an investment in a company.


The Enterprise Investment Scheme (EIS) grants 30% of what the investor pays for the shares as a credit to reduce the investor’s individual income tax owed for the year the shares are purchased. The maximum amount of relief a taxpayer can claim annually is £300,000 or total tax liability, whichever is less. In addition, there is no capital gains tax when the shares are sold.

Elevator pitch

A one to five minute verbal pitch made by an entrepreneur explaining what his or her business does and why it would make a good investment opportunity.


The shares issued by a company assigning ownership of a stake in the business to the shareholder, usually in return for a cash investment. There are many different types of equity based on different rights granted to different shareholders.


An exit is achieved when the shares of a company are sold to a third party. Sometimes the shares are sold for cash and sometimes for other consideration such as shares in another company. Some investment agreements have specific requirements that the management team must start and/or achieve the exit process by a certain date.


A company offers to sell shares on a stock exchange for the first time.


The gate-keeper is the individual who assesses business plans on behalf of investors. They may or may not be an investor. Usually it is a term used to describe the managers of a business angel network.

Heads of Agreement/Heads of Terms

The document which lists all the terms of the deal as agreed by the entrepreneur and the potential investors. The lawyers use this to prepare the Shareholders’ Agreement and all other documentation in preparation for the investment being made.

Intellectual property (IP)

Legal term used to describe the patents, licences, copyrights, trademarks and designs owned by a company.

Initial Public Offer (IPO)/Flotation

This is when a company lists on a stock exchange, after which the shares can be sold and bought by investors freely. Some IPOs are accompanied by a fundraising through the issue of new shares.

Lead investor

This is an investor (who may be an angel or a VC) who leads the investment negotiations and due diligence on behalf of other investors and (probably) who co-ordinates the investment process. Post the investment, the lead investor will represent the other shareholders’ interests and may act as a non-executive director at the company.

Lifestyle business

This is a business run to maximize the benefits to the owners who probably also manage the business. It is often used as a term of insult about businesses that ask for investment but which are believed by potential investors to have no hope of ever giving them their money back.

Liquidity event

This is when shareholders in a business are able to release their investment for cash. This is not the same as an exit, because an exit may arise because the shares are swapped for shares in another company.

Loan principal

This is the capital sum lent by someone to a company. The lender may be a bank or a new investor. Loan principal has to be paid in addition to the interest charged by the lender on the loan.

Non-disclosure agreements or NDA

This is a legally binding document signed by potential investors in which they agree not to use any of the information they receive or find out whilst researching the investment opportunity, against the company they are researching. A key element of a NDA is the agreement by the potential investor that all information will be kept confidential.

Options/ Share options

Share options can be issued to managers or sometimes institutions. They confer the right to acquire shares at a specified price at or after a future date, and they can be performance related. The release of share options will normally dilute the value of other shares in issue.

Personal guarantee

The promise made by an entrepreneur which obligates him/her to personally repay debts his/her company defaults on. This is often required by a bank providing an overdraft to a company.

Post-money valuation

This is the value of a privately held company immediately after the most recent round of financing. This value is calculated by multiplying the company's total number of shares in issue by the share price of the latest financing. If the number of shares under option is also included, the valuation is said to be on a “Fully Diluted” basis.

Pre-emption rights

An investor has pre-emption rights automatically in UK law, unless the company waives these rights. When pre-emption rights are in place, the company must offer existing investors the opportunity to invest in any new round of funding in a size pro-rata to their existing shareholding, before offering those shares to other existing or new investors.

Pre-money valuation

The value of a privately held company prior to the most recent issue of shares.


A structure whereby the eventual equity allocations between the groups of shareholders depend on either the future performance of the company. This allows management shareholders to increase their stake (at the expense of the investors) if the company performs particularly well, which is known as a “positive ratchet.” You can also have a “negative ratchet” which allows the investors to increase their stakes (at the expense of the management shareholders) if the company performs badly.


A regular (usually monthly) fee paid by a company to an adviser to assist them with the business’s development and/or fundraising.


The Seed Enterprise Investment Scheme is designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies. It complements the existing Enterprise Investment Scheme (EIS) which offers tax reliefs to investors in higher-risk small companies.SEISis intended to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate.

Relief is available at 50% of the cost of the shares, on a maximum annual investment of £100,000.

Shareholder register

The document held by the company that records all the shareholders in the business and the number of shares they own. A copy of this register is also held at Companies House in the UK.

Shareholders’ Agreement

Also known as an Investment Agreement. It is often issued in conjunction with the Subscription Agreement (see below). The Shareholders Agreement sets out the “rules of behavior” between shareholders who are party to the agreement, which may include such things as agreements not to compete with the company, how board meetings are called and held, the rights to have a board seat, and confidentiality etc.

Subscription Agreement

This is the agreement specifying detailed terms of the investment being made. Typically it will describe the amounts and types of shares to be issued and the specific rights of the investors such as veto rights, rights to directorships and information rights. It is often used in conjunction with the Articles of Association and the Shareholder’s Agreement.


An arrangement whereby a group of investors come together to invest in an investment proposition which they would not be prepared to consider individually whether because of risk or amount of funding required. The syndicate is usually headed by a lead investor.

Term sheet

This is a document summarizing the details of a potential investment offered by the investor which serves as basis for the more detailed Subscription Agreement.

Trade sale

This is when a company is sold all or in part to another business.

Venture Capital

Venture Capital is money invested in privately owned businesses, i.e. those that are not quoted on the London Stock Exchange or another stock exchange. This money is usually invested from a fund managed by a team of fund managers, know as Venture Capitalists. The money for the fund comes from private individuals and institution investors such as pension funds. The Venture Capitalists are expected to invest the money so that they make large profits for the investors in the fund. The Venture Capitalists usually charge fees both from the fund investors for managing the fund and from the companies in which the fund invests.

Voting rights

The right of a shareholder to vote on matters of corporate policy and who will make up the board of directors. Voting often involves decisions on issuing securities, initiating corporate actions and making substantial changes in the corporation's operations.


Also known as representations. These are the terms in a Shareholders’ Agreement whereby usually the founders and key managers and (subject to local company law) the company give undertakings in respect of the past and present operating condition of a company. Examples include operating in a legal fashion, no bad debts, ownership of assets. Breach of warranty gives the investors the right to claim damages and, if it is sufficiently fundamental, may enable the investors to terminate the contract.

Glossary of financial terms


These words are interchangeable and refer to the money a company receives from its customers for the goods and services provided. Usually, revenue is reported net of sales taxes such as VAT.

Gross profit

Gross profit is the profit the company is making, after it has paid the direct costs which relate to the goods or services sold. It is the profit made before overheads (including salaries) are charged.

Gross margin

Gross margin = gross profit/sales expressed as a percentage. Gross margin varies considerably from industry to industry.

PBIT/EBIT/Operating profit

PBIT (profit before interest and tax) is the profit made after all overheads have been charged but before interest and tax have been charged.

PBIT margin

PBIT margin = PBIT/sales expressed as a percentage. PBIT margin varies considerably from industry to industry.

Pro Rata

Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the whole.


EBIT is the profit made after overheads have been charged but before depreciation and amorisation charges have been applied and before interest and tax have been charged.


The ratio of debt to equity capital. If a balance sheet shows 5 million of total assets and debt of 4 million, the gearing is 80%. A very highly geared business is living dangerously. Gearing is also known as “leverage.”

Profit before tax

This is the profit after all costs have been charged, but before taxes have been applied.

Profit after tax

Profit after tax is the profit after everything other than taxes have been charged.

Distributable reserves

These are the reserves held on the balance sheet and it is out of distributable reserves that dividends are paid.


Multiple is usually used in the context of calculations relating to a funding round or an exit. For example in a £1m sale, a 2x multiple of sales would mean the company had sales of £500,000.

Net assets

Net assets are both

1. The profits of the company plus all the shareholder reserves

2. The net balance of all the assets of the business (e.g. property, plant and equipment, stock), less all the liabilities (e.g. loans and monies owed to third parties)

Intangible assets

These are the assets of the company with a useful life of more than one year, which are recorded on the balance sheet but which are not physical. They can include things such as brands, licences, trademarks and patents.

Tangible assets

These are the physical assets of a company. Tangible assets range from property, plant & machinery to phones and cars. The value of a tangible asset is reduced annual based on a formula across its useful life. In an established company you can have tangible assets that have been valued at £0 in the balance sheet but which are still being used by the company.


Stock is the physical goods owned by the company before they are sold. Some stock will be raw materials but it will also include work in progress and finished goods not yet sold.



Glossary of terms you might find in a business plan



Individuals and businesses have automatic copyright on unique works they publish.

Current trading

This is how the business is performing in terms of sales and profits now as opposed to in the past or in the future. Current trading may be assessed on a daily, weekly or monthly basis depending on what type of business it is.

Design rights

Design rights can be held informally or be registered. They are the rights of ownership an individual of company holds over a design. This can include simple things such as logos and extend to the design rights of e.g. physical objects.

Intellectual property

This is a general term covering non-physical assets that a business might own. It can include copyright, design rights, know how, patents, trademarks and trade secrets.

Know how (and processes)

Many companies have a lot of value held in their ability to do things quicker, better or cheaper than someone else. This information is usually kept confidential within the business in order to protect it. It is not usually “valued” on a balance sheet.


Patents are granted over products, technologies and even processes which prevent someone else from using them for a fixed time period.

Sales pipeline

This is the lists of potential customers who are likely to buy services or products off the business in the future. Usually the sales pipeline is broken down into likely customers who will buy in the next three, six and 12 months. The amount of sales that may be generated by each customer are recorded against their names and then a probability is applied e.g. 50% chance of making that sale. Revenue projections for the financial forecasts should be based on the sales pipeline.

The best pipelines are rolling and are updated all the time.

Statutory Books

Companyregisterswhich must be kept at theregistered officeof a firm, these contain: (1)Register of directors and secretaries, (2) Register ofdirectorsinterests, and (3) Register ofshareholders.


Trademarks can be claimed and also registered. A claimed trademark has the ™ symbol at the end of it. A registered trade mark has the ® symbol at the end of it. You are not permitted to use a registered trade mark unless you own it or have permission from the owner to use it.

Trade secrets

Trade secrets are exactly what they say they are – things in a business which are kept secret. The formula for Coca Cola is a trade secret.



Glossary of terms about people



The Chairman of the board of a company leads the board including setting board meeting agenda’s. He or she is also often a confidante and mentor to the CEO and one of the main public faces of a company, especially in large companies.

Chief Technology Officer (CTO)

The CTO is the person who overseas technology development. It is a term mainly used in software and hardware based companies. A rough equivalent in a “normal” manufacturing company would be Production Director.

Chief Operating Officer (COO)

The COO is the person responsible for the everyday running of the company.

Chief Marketing Officer (CMO)

The CMO is the Marketing Director and will be responsible for marketing the company generally, products and services and also may oversee sales and PR.

Company Director or Director

This is a legal post where a person is a director of a company. The post carries legal obligations and responsibilities for how the company is run. All directors, even if called non-executive directors, have equal responsibility and liability as each other. It is possible to have the title “director” without being a legal director of a company.

Constructive dismissal

The course of events whereby an employee is forced to leave a company because of the behaviours he or she has had to endure whilst working at it. If constructive dismissal is proved, there are serious financial consequences for a company and may result in the company being forced to reinstate the employee.

Human resources (HR)

The department in a company dedicated to looking after the employees of the company. Frequently the major roles of the HR department are hiring and firing employees, but they also offer services like counselling for troubled employees in larger companies.


Individuals, usually students or school leavers, who work for a short period in a company without being given either a freelance or employment contract.


The HMRC document which lists all income from the company from non-salary sources e.g. in relation to company cars etc.


The HMRC certificate you are given when you leave a business, which records your salary earned and other information.


The annual statement sent to every employee recording their salary and the taxes they have paid on their earnings.


The removal of a role from a business, which usually means the individual loses that job. People who are made redundant from one role, may find another role in the company or may have to leave.


Your capital is at risk when you invest in shares and debt securities. You can lose some or all of your money and may not be able to realise your investment. Therefore you should should never invest more than you can afford to lose. If in doubt about the suitability or tax implications of any investment, please seek independent financial advice. 

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