Frequent terms used in Deals, Startups & Financials

  • An Advanced Subscription Agreement (ASA) is an equity instrument where investors 'pre-pay' for shares in a company – they hand over money but receive their shares when these are issued at a future funding round. In America, these are often known as a SAFE.

  • LTV stands for “lifetime value” per customer and CAC stands for “customer acquisition cost.” The LTV/CAC ratio compares the value of a customer over their lifetime to the cost of acquiring them. This eCommerce metric compares the value of a new customer over its lifetime relative to the cost of acquiring that customer

  • The payback period in capital budgeting is the amount of time it takes for your company to recover the cost of acquiring one customer.

  • A pre-money valuation is the value of a company before a new outside investment. Pre-money valuations generally form the basis of what a VC's share in the company is determined to be worth, based on how much they invest.

  • A post-money valuation is a company's estimated value after receiving outside investment or financing. So if a company was worth £10M, and then it raised another £5M, its post-money valuation would now be £15M.

  • Share dilution (also called equity dilution) is the decrease in ownership percentage for existing shareholders when new shares are issued or reserved. It occurs after material events, such as a fundraise or when an employee option pool is created.

  • S/EIS is designed to encourage investment in UK Start-Ups who buy new shares in your company. See here for more details.

  • A shareholders' agreement, also called a stockholders' agreement, is an arrangement among shareholders that describes how a company should be operated and outlines shareholders' rights and obligations.

  • The profit and loss (P&L) statement is a financial statement that summarises the revenues, costs, and expenses incurred during a specified period.

  • A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company.