A class of shares which have specific rights attached to them, as set out in a company’s articles of association. Typically A shares have enhanced voting rights or other benefits compared to other classes of shares, such as B shares.
Investors who provide investment and other support to early-stage businesses. Traditionally angels are wealthy individuals who have a significant amount of entrepreneurial, industry or investment experience.
Angel network (or Angel syndicate)
A group of angel investors that pool together money and other resources to invest in, and provide support to, early-stage businesses.
Articles of association
One of the constitutional documents of a company that sets out its management and administrative structure. The articles dictate the internal affairs of the company such as director and shareholder rights, the issue and transfer of shares, and the organisation of meetings.
A class of economic property that has similar characteristics. Listed shares, government bonds and real estate are all asset classes.
A class of shares which have specific rights attached to them, as set out in the company’s articles of association. Typically B shares do not have voting rights or other benefits as compared to A shares.
Beneficial shareholder / owner
An investor who owns the economic value and other shareholder benefits attached to shares, such as dividends and tax reliefs, but the registered title to their shares is held with another person or entity, often for administrative convenience.
Starting and running a business with no external equity or debt financing.
The rate at which a company spends its cash.
Capitalisation table (a.k.a cap table)
A table or chart that records all of the shareholders of a company and their percentage of equity, calculated on a fully-diluted basis.
An equity investment where money is invested in a company in exchange for shares to be issued at a later date. The share issue is generally triggered by the company raising finance from other investors. In return for investing early, the convertible equity investors receive a discount on the price of the shares issued to the other investors.
A debt investment where money is invested in a company with the expectation that the debt will “convert” into shares issued at a later date. The share issue is generally triggered by the company raising finance from other investors. Before the conversion, the investor is paid interest.
This is when shares are issued to investors (i.e. the investment “converts”).
The funding of projects or ventures by raising money from a large number of people, usually online. The three main types of crowdfunding are equity, debt and rewards/donations.
Money owed by one person/company to another. The borrower has to repay the money a later date, and generally also has to pay interest.
A reduction in the ownership percentage of a share in a company caused by the issue of new shares.
The percentage reduction that investors participating in the convertible round would receive on the share price of the future round that triggers conversion. The discount is a reward for bearing earlier risk. It should be put forward in conjunction with the longstop date, as a later longstop date will typically mean a higher discount.
An investment strategy that involves mixing the amount, values and kinds of investments within a portfolio to spread risk and minimise losses.
The distribution of a portion of a company’s profits to investors.
A contractual obligation that allows majority shareholders to force minority shareholders to join in the sale of a company on the same terms, valuation and conditions of the majority shareholders.
Enterprise Investment Scheme (EIS)
A UK tax scheme offering income tax and capital gains tax reliefs to qualifying private investors who invest in eligible businesses.
Shares or other securities that represent an ownership interest in a company.
A type of crowdfunding that enables multiple investors to a buy shares, or other equity interests, in a company, usually through an online process.
An event when investors may be able to cash in and sell their shares, such as an initial public offering (IPO) or trade sale.
A person who has not invested (and will not invest) more than 10% of their net assets per year in shares, bonds, fund or other securities that are not listed on a stock exchange. The Financial Conduct Authority refers to 'Everyday Investors' as 'Restricted Investors'.
Financial Conduct Authority (FCA)
The financial services regulatory body in the UK, formerly called the Financial Services Authority (FSA).
All the shares of a company in issue, plus all shares which are the subject of options or other contractual rights to be issued in the future (regardless of whether the right has vested).
An investment opportunity that seeks to raise money to be invested across multiple businesses. Funds campaigns are commonly used to invest in businesses participating in accelerator programmes and competition winners.
If a trigger event does not happen by the Longstop Date, the convertible will convert to equity at the floor price. It acts like a default valuation in the event that there hasn’t been an external priced round or transaction. It is commonly set at the valuation of a company’s most recent investment round prior to the convertible. The floor price is pre-agreed and outlined in the terms that are specified in the convertible instrument, and disclosed to investors in the convertible campaign.
The stage that a business is at when it has passed its seed or initial stage, has established proof of concept and is looking to grow.
High Net Worth Investor
An individual who had an annual income to the value of at least £100,000 and/or held net assets to the value of at least £250,000 in the preceding financial year, as defined in regulations made pursuant to the UK Financial Services and Markets Act 2000.
Initial public offering (IPO)
The first time that a company's shares are available for public purchase by means of a listing on a stock exchange. This process is also known as going public or floating.
Know Your Client (KYC)
The regulatory process that financial services firms and certain other of businesses must perform to verify the identity of their customers to help prevent against money laundering and other financial crimes.
This is the deadline for the convertible trigger event to occur. If the conversion does not occur on or before this date, the conversion will happen at the pre-agreed floor price.
A person or firm that holds assets such as shares on behalf of another, enabling the nominee to handle complicated administrative matters.
Shares which represent normal equity ownership in a company. Ordinary shares generally entitle the owner to vote at shareholder meetings, receive dividends, and receive distributions on the winding up of a company, but do not carry preferential treatment.
A right granted which gives the receiver the option, but not the obligation, to buy (or sell) shares in a company, or other securities, at an agreed price within a certain time frame.
(Also called anti-dilution) A contractual provision which requires the company to offer its shareholders the chance to purchase additional shares to maintain their percentage of equity in advance of further shares being issued.
The period of time after an investment has been made in a company.
A group of financial assets such as shares, property or bonds, held by one person or entity.
A class of shares which have specific preferential rights attached to them, as set out in the company’s articles of association. Typically the preference will be a dividend paid in priority to other shareholders, or priority to distributions on the winding up of the company.
The potential for losing something of value. With equity investment the main risk to the investor is losing all the money invested.
An agreement between a company’s shareholders detailing certain rights and obligations of the shareholders.
A share lot represents the total shares being sold by an investor in any given company during a trading cycle in the Seedrs Secondary Market.
An ownership interest in a company which entitles the shareholder to certain rights, for example a share of profits or dividend payments from the company. Shares are also referred to as “stock”.
A market where investors purchase shares from other investors rather than from the company that has issued the shares directly.
The initial stage of a business, where it is looking to create a minimum viable product establish proof of concept.
Seed Enterprise Investment Scheme (SEIS)
A UK tax scheme offering income tax and capital gains tax reliefs to qualifying private investors who invest in eligible early-stage startups.
An individual who has been a member of a business angels network for at least the last six months, or for at least the last two years has made at least one investment in an unlisted company, has worked in private equity or corporate finance and/or has been a director of a company with an annual turnover of at least £1 million, as defined in regulations made pursuant to the UK Financial Services and Markets Act 2000.
An agreement between a company and investors purchasing shares in the company. It sets out the terms of the share purchase and details certain rights and obligations of the company and the investors as shareholders.
A contractual obligation which gives minority shareholders the right, but not the obligation, to join a transaction where shares are sold by majority shareholders, on the same terms, valuation and conditions of the majority shareholders.
A non-binding agreement addressing the basic terms and conditions under which an investment will be made in a business. A term sheet often serves as a template to develop more detailed legal investment documentation.
These define what cause the convertible to convert to equity. This is usually a significant funding round, IPO or change of control. What constitutes a ‘significant funding round’ will generally be set out in the terms and will require a certain amount of money to be invested. To put this in context, one example of a potential trigger event could be an equity funding round of at least £1 million (but this threshold might be lower for an earlier stage company).
The monetary worth of a business as determined by considering both qualitative and quantitative factors.
Applied to counter a scenario of run-away growth in the period after investment but prior to conversion. It limits the maximum price set for conversion of the convertible. Investors are then able to benefit in the upside of their investment as they would have in a straight equity investment. If the trigger event is at a valuation that exceeds the cap, the convertible investors will receive equity at the cap. This means the effective discount they receive on the share price increases. If, for example, the initial discount offered was 15% with a valuation cap of £4 million but the convertible is triggered by a round at a valuation of £5 million, convertible investors would convert at a valuation of £4m; this means they have received a 20% discount to the £5m valuation set by the trigger event.