venture capital
venture capital
Money that is invested in new or emerging companies that are perceived as having great profit potential
multiples
Multiples are the most commonly used type of valuation (and metric) in PE. A multiple is simply the ratio of the value of a company relative to some quantitative measure of its performance.
PP&E
Property, plant, and equipment, a part of fixed assets on the balance sheet
debt holders
are investors who provide the company with cash financing in exchange for a contractual promise to be repaid over a set period of time with a set amount of interest (yield) -more senior than equity
free cash flow
net cash provided by operating activities after adjusting for capital expenditures and cash dividends paid -determines how much debt a company can service which then determines how much leverage an LBO can use
series A and B funding
when company ownership is given to investors for the first time, early funding given when a company generates revenue but not profits -preferred stock is issued to investors when further capital is needed (series B)
my 5 year plan
-working in private equity or venture capital (interest in learning how to value companies and gain good investment judgement put together with analysis) -thinking about the CFA or an MBA -finding something I enjoy and sticking with it
what series A investors look for
1. is the company profitable 2. is it satisfying a market need 3. is it aware of its market
cash flow statement
A financial statement that shows the flow of money in and out of the business accounts for -operating activities (adjusts net income on income statement) -investment activities (sums up cash a company spent/received related to changes in the balance sheet) -financing activities (tracks cash spent/received on equity/debt)
preferred stock
A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do and dividends
EBITDA
Earnings before interest, taxes, depreciation (fixed assets like company equipment or furniture), and amortization (non cash expenses ex. patent) -tells a companies cash generating capability
seed funding
Investment made very early in a venture's life to fund the development of a prototype and feasibility analysis -funding to make a company look attractive to investors
series A funding allows a company to
grow by 1. hiring people 2. marketing 3. R&D
equity holders
investors who have provided a company with cash financing in exchange for direct ownership stake in the company -own shares -have a lot of control of the company -benefit from financial up springs of the company
LBO
the acquisition of a company where the buyer contributes some of its own money (equity) along with a lot of borrowed money ("debt" or "leverage") to fund the purchase -assets are used as collateral for the loans -junk bonds issued with higher risk and yields
series A investors
they are looking for companies with great ideas as well as a strong strategy for turning that idea into a successful, money-making business - valued at up to $15 million
purpose of the income statement
to match sales up with their associated expenses as closely as possible in order to show how profitable the company is during a particular period.