Breaking Down the Terminology of the Investing World: A Guide for Beginners to Help You Get Started continued – originally posted on LinkedIn
Are you interested in learning about the investing world, but don’t know where to start? Following on from my last post, I continue to break down some of the most common terminology used in the investing world. By understanding these terms, you will be one step closer to getting started with seeking investment or starting your own investment portfolio.
When it comes to seeking investment, there are a few key things you need to have in order – your business structure, your revenue model and most importantly – your pitch deck.
Your pitch deck is essentially your business’ story – it should include information on your team, your market opportunity and most importantly, how you’re going to make money.
One of the first things you need to understand when starting to invest are the different types of investments available to you. The three main categories are equity, debt and hybrid.
Equity: This is when you own shares in a company, meaning that you become a partial owner. If the company does well, your investment will increase in value. However, if the company doesn’t do so well, you could lose some or all of your investment.
Debt: This is when you lend money to a company and they agree to pay you back over a certain period of time, with interest. This is a less risky investment than equity, as you will get your money back even if the company doesn’t do well.
Hybrid: This is a combination of equity and debt, where you lend money to a company but also receive shares in the company. This type of investment has both risks and rewards, but can potentially provide higher returns than either equity or debt investments alone.
Navigating the Waters Episode 3
In the latest episode of Navigating the Water we continue to demystify the jargon of investors by breaking down what each term means and why it’s important.
I chat again with Kim-Adele Randall and we are joined by the lovely Gertrude Matshe Global Curator of HerStory as we discuss:
– Understanding where you and your business are in the journey
– The Power of the PitchDeck – How to create a compelling story.
– Building your team – The two people you need by your side are your lawyer and your accountant – why these are crucial hires and what they bring.
The terms we discuss in this episode are:
Angel Investor : An angel investor is an individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
Convertible Debt: Convertible debt is a type of financing that allows the borrower to convert the loan into equity shares at some point in the future, usually when certain predetermined conditions are met.
Ownership Equity: Ownership equity is the portion of a company’s stock that is owned by its shareholders. It can also be referred to as shareholder equity or stockholders’ equity.
Pre-seed: Pre-seed funding is the earliest stage of venture capital financing. It typically comes from personal savings, friends and family members, and angel investors.
Seed: Seed funding is the first round of venture capital financing for a startup. It typically comes from angel investors, incubators, and seed accelerators.
Series A: Series A financing is the first round of institutional investment in a startup. The name comes from the fact that it is typically the first time that preferred stock is offered for sale to outside investors.
Pre-seed team: The pre-seed team is the group of individuals who are responsible for taking a company from concept to launch. This team typically includes the founder or co-founders, early employees, and advisors.
Seed stage: The seed stage is the earliest stage of a startup’s lifecycle. This stage typically lasts from the time the company is founded until it has secured its first round of institutional investment (Series A).
Accredited Investor: An accredited investor is an individual who meets certain criteria set forth by the Securities and Exchange Commission (SEC). These criteria include having a net worth of $200,000 or more (or $300,000 or more if married), or having an annual income of $200,000 or more (or $300,000 or more if married).
Pitch Deck: A pitch deck is a presentation that entrepreneurs use to raise money from investors. The deck typically includes slides on the company’s business model, market opportunity, team, financials, and go-to-market strategy.
Target Audience: The target audience is the group of people who are most likely to buy a product or service. When creating a marketing strategy, businesses typically identify their target audience by demographic characteristics such as age, gender, income level, and geographic location.
Revenue Model: The revenue model is the way a company makes money. There are many different revenue models, but some of the most common include advertising, subscription, pay-per-use, and freemium.
Key Performance Indicator (KPI): A key performance indicator (KPI) is a metric that is used to gauge the success of a business or individual in achieving their goals. KPIs can vary depending on the industry and what type of goal is being measured, but some common examples include revenue growth, customer acquisition costs, and churn rate.
If you’re interested in learning more about investing, be sure to check out my blog posts where I’ll be breaking down even more terminology! As always, if you have any questions or comments, feel free to reach out to me on social media or via email. I’m always happy to help!
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