Commonly Used Investing Terms
Accredited Investor
The SEC defines an accredited investor as an individual who with his or her spouse has a net worth excluding the equity in their primary residence of more than $1 million and/or had taxable income of more than $200,000 ($300,000 if married) in the last taxable year with a reasonable expectation of this level in the current and next taxable year.
Capital Call
A demand for a contribution of additional cash issued to the investors. The ability of the syndicate to call additional capital is controlled by the operating agreement.
Capitalization "Cap" Table
A table listing all of the investors, the security in which each has invested, the number of shares and the percentage interest held by each.
Carry or Carried Interest
The positive difference between the money returned to investors and the amount invested by them. Example: If the investors invested $100,000 in a syndicate, and received $250,000 when the syndicate is liquidated, then carry is $250,000-$100,000 = $150,000. Syndicate and fund managers may be paid a portion of the carry as compensation for their efforts.
Fund
A pool of investment capital that will be invested in more than one company or deal.
K-1
A tax form issued by the syndicate showing the taxable impact of syndicate operations on a member.
More information on K-1s here: https://www.investopedia.com/terms/s/schedule-k-1.asp
Manager-Managed
An LLC where a manager makes the investment decisions.
The SEC defines an accredited investor as an individual who with his or her spouse has a net worth excluding the equity in their primary residence of more than $1 million and/or had taxable income of more than $200,000 ($300,000 if married) in the last taxable year with a reasonable expectation of this level in the current and next taxable year.
Capital Call
A demand for a contribution of additional cash issued to the investors. The ability of the syndicate to call additional capital is controlled by the operating agreement.
Capitalization "Cap" Table
A table listing all of the investors, the security in which each has invested, the number of shares and the percentage interest held by each.
Carry or Carried Interest
The positive difference between the money returned to investors and the amount invested by them. Example: If the investors invested $100,000 in a syndicate, and received $250,000 when the syndicate is liquidated, then carry is $250,000-$100,000 = $150,000. Syndicate and fund managers may be paid a portion of the carry as compensation for their efforts.
Fund
A pool of investment capital that will be invested in more than one company or deal.
K-1
A tax form issued by the syndicate showing the taxable impact of syndicate operations on a member.
More information on K-1s here: https://www.investopedia.com/terms/s/schedule-k-1.asp
Manager-Managed
An LLC where a manager makes the investment decisions.
Accredited Investor
The SEC defines an accredited investor as an individual who with his or her spouse has a net worth excluding the equity in their primary residence of more than $1 million and/or had taxable income of more than $200,000 ($300,000 if married) in the last taxable year with a reasonable expectation of this level in the current and next taxable year.
Capital Call
A demand for a contribution of additional cash issued to the investors. The ability of the syndicate to call additional capital is controlled by the operating agreement.
Capitalization "Cap" Table
A table listing all of the investors, the security in which each has invested, the number of shares and the percentage interest held by each.
Carry or Carried Interest
The positive difference between the money returned to investors and the amount invested by them. Example: If the investors invested $100,000 in a syndicate, and received $250,000 when the syndicate is liquidated, then carry is $250,000-$100,000 = $150,000. Syndicate and fund managers may be paid a portion of the carry as compensation for their efforts.
Fund
A pool of investment capital that will be invested in more than one company or deal.
K-1
A tax form issued by the syndicate showing the taxable impact of syndicate operations on a member.
More information on K-1s here: https://www.investopedia.com/terms/s/schedule-k-1.asp
Manager-Managed
A manager makes the investment decisions.
Member-Managed
The syndicate members make the investment decisions through a vote of the members.
Minimum Investment
The minimum dollar amount a company is willing to accept from any one investor.
Operating Agreement
The agreement among the members governing the operation of the syndicate.
Preference
An amount paid to a class of stock before ("in preference to") other classes receive their pro rata share.
Syndicate or SPV
An entity that is formed to make an investment in one company or deal. Individual investors who wish to invest less than the company’s minimum join the entity and invest together as a group.
Warrant
A right to acquire stock in the future at a specified price. Warrants are similar to options. Options are generally issued to employees; warrants as part of an investment.
Waterfall
The amount each investor will receive at a specified exit amount. This accounts for the fact that preferential returns may be different for each class of stock.