Glossary of Terms

“A” Round Financing: The first major round of business financing by private equity investors or venture capitalists. In private equity investing, an “A” round, or Series A financing, is usually in the form of convertible preferred stock. An “A” round by external investors generally takes place after the founders have used their seed money to provide a “proof of concept” demonstrating that their business concept is a viable – and eventually profitable – one.

A: A Nasdaq stock symbol specifying that the stocks are Class “A” shares of the company.

A Priori Probability: Probability calculated by logically examining existing information. A priori probability can most easily be described as making a conclusion based upon deductive reasoning rather than researchor calculation. The largest drawback to this method of defining probabilities is that it can only be applied to a finite set of events.

Accredited (Investor):  Per federal law, a natural person with either $1,000,000 or more in net worth (excluding primary residence) or $200,000 annual income (or $300,000 with spouse) for past two years and reasonable expectation of same for current year.  Other definitions also exist for entities other than natural persons.

Angel (Investor):  Once, an unrelated individual investing monies in a business venture, often later than founders, friends and family (the “3F’s”), but before larger corporate investors such as venture capitalists (“VC’s”).  The term “angel” arose in the entertainment industry, where investors would bankroll a production for a share of the profits.  Now, with wealthier individuals able to invest significant funds throughout the development of a company (so-called “super-angels”), and venture capitalists sometimes investing alongside and on the same terms as angels, a more modern definition is that “angels” write checks with their own money, while “VC’s” write checks with other people’s money (venture capitalists typically raise funds from investors called “limited partners” who do not actively participate in the fund’s investment decisions and operations, whereas the VC’s act as the “general partners” making the investment decisions and overseeing the invested companies.)

Angel Capital Association (ACA):  America’s national Angel industry trade organization, currently with about 180 regional member groups of angel investors and 20 affiliate organizations.  See for more information.

Broker-Dealer:  In reference to “Crowdfunding”, one of the two types of “Intermediary” (“Portals” being the other) authorized by the “JOBS Act” to handle the sale of crowdfunded securities (i.e. equity or debt instruments) by an “issuing company”.  More generally, a governmentally regulated component of the U.S. financial system, either a natural person or an organization trading securities on its own account or on behalf of customers.  Broker-dealers are regulated by the federal Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA)(a “Self-Regulatory Organization”, or “SRO”), and sometimes the various states.

Crowdfunding:  “Crowdfunding” is the process of raising financial support for a venture via smaller amounts from many investors (“the crowd”), rather than the alternative pattern of larger amounts from a smaller number of supporters.  Charities and philanthropies have traditionally employed both fundraising strategies (soliciting both the general populace, or crowd, as well as fewer wealthier donors), while businesses have usually taken the route involving fewer and larger supporters.  Today’s internet has vastly increased the ability of fundraisers to communicate information, solicit and receive financial support from anyone on-line.

Crowdfunding without the expectation of financial return, or with the promise of a specific good or service, are termed “donation-based” or “reward-based” crowdfunding, are in the nature of charitable solicitation or business marketing, and have never been illegal in the U.S.  In contrast, soliciting funds in return for a ownership interest or expectation of repayment, are termed “equity-based” or “debt-based” crowdfunding (together grouped as “securities-based” crowdfunding), and have been until now governed (and effectively prevented) by federal and state securities law.  One of the most significant parts (Title III) of the federal “Jumpstart Our Business Startups”, or JOBS Act of 2012 specifically enabled and legalized “security-based crowdfunding”, subject to a variety of regulations and restrictions.

Crowdfunding Intermediary Regulatory Advocates (CfIRA):  An open organization of diverse participants and parties interested in the crowdfunding industry (“portals”, “broker-dealers”, professional and business service providers, investors, etc.) dedicated to interacting with each other and advocating with the regulators charged with shaping and governing the nascent industry of securities-based crowdfunding authorized by the JOBS Act.  CfIRA has participated in numerous hearings, written official letters as well as popular articles, etc., both in public as well as government forums (Congress, SEC, FINRA, etc.)  See for more information.

Crowdfunding Professional Association (CfPA):  The American industry trade organization dedicated to facilitating a vibrant, credible and growing crowdfunding community, from investors through service providers to entrepreneurs.  See for more information.

European Business Angels Network (EBAN):  The European equivalent of America’s Angel Capital Association.  See for more information.

Intermediary:  Either a “Broker-Dealer” or a “Portal”, both allowed by the JOBS Act to consummate a securities-based crowdfunding transaction.

Issuer:  A company raising funds through a “Portal” or “Broker-Dealer” via securities-based crowdfunding, and issuing a security (equity or debt) to each investor in return for his or her funds.

JOBS Act:  The “Jumpstart Our Business Startups” (“JOBS”) Act, passed by overwhelming bipartisan congressional majorities in both chambers and signed into law by President Obama in April, 2012.  The JOBS Act contains seven sections, or “titles” aimed at facilitating different aspects of the development and success of the all-important business startups and growth companies that create the vast majority of new employment in our country.  Title III legalizes and regulates securities-based crowdfunding.  Actual implementation of the securities-based crowdfunding authorized in the JOBS Act awaits rule-making by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), called for within 270 days of passage of the JOBS Act but realistically hoped for sometime in 2013.

Management Fee: A charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise. It can also include other items such as investor relations expenses and the administration costs of the fund.

National Angel Capital Organization (NACO):  Canada’s analogue of the American Angel Capital Association (ACA), and a close affiliate and partner of the ACA.  See for more information.

Portal:  The second type of “Intermediary” authorized by the JOBS Act to facilitate securities-based crowdfunding, providing legally-mandated information to potential investors, and then managing transfer of the offered funds to the issuing companies in return for an equity ownership stake in or debt instrument from the issuing company.

Private Equity:  A company ownership position that is not listed and cannot be traded on a public securities exchange.  Issuance, ownership and exchange of private securities are regulated differently from those of public securities under federal and state law.

Society for Corporate Compliance and Ethics (SCCE):  A non-profit professional organization dedicated to fostering law-compliant and ethical corporate behavior.  See for more information.

World Business Angel Association (WBAA):  WBAA is a non-government organization whose direct members are national federations, which in turn represent business angel groups and networks in their respective countries.  Neither business angel groups themselves, nor individual business angel investors, are members of WBAA, although they may be involved with the organization in other ways and participate actively in its programs.  Countries whose national business angel federations are represented in the organization include Australia, Chile, China, France, Germany, India, Italy, New Zealand, Panama, Portugal, Scotland, Spain, United Arab Emirates, United Kingdom, and the United States, as well as the European Union.