Startup legal jargon.
Demystified.
Helping you with the knowledge to navigate the legal landscape confidently.
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Assets Under Management
Assets under management (or "AUM") is equal to the market value of investments that either an institution or individual manages on behalf of its clients.
Asset Deal
During mergers and acquisitions (M&As), buyers may choose to purchase a company's underlying assets instead of its stock (shares). These transactions are called asset deals.
Articles of Association
A document that sets out the rules and regulations governing the management of a company, including its internal affairs and shareholder rights.
Arm's Length Transaction
An arm's length transaction is a business deal where the buyers and sellers act independently. Neither party influences the other. Normally, the parties will have no pre-existing relationship, and both parties will have equal access to information relating to the deal.
Anti-dilution
A protective provision for investors that adjusts their equity ownership percentage in the event of a future funding round at a lower valuation, ensuring their stake is not reduced unfairly. Anti-dilution provisions can come in various forms, such as full ratchet or weighted average adjustments.
Angel Investor
An angel investor is a type of individual investor who provides funding to up-and-coming startups in return for equity in the company.
Advance Subscription Agreement (ASA)
An agreement for future equity, allowing investors to invest in a company now and receive shares in a future funding round.
Accredited Investor
An accredited investor is a legal entity or natural person allowed to trade unregistered and unregulated securities. Generally, only investors registered with a governing financial organisation can sell or publicly exchange securities such as stocks and bonds.
Accelerator
An accelerator is an organisation that provides capital (usually a seed investment), mentorship, and networking connections to startups. Y Combinator, the first seed accelerator, is a well-known example.
Articles of Association
A document that sets out the rules and regulations governing the management of a company, including its internal affairs and shareholder rights.
Anti-dilution
A protective provision for investors that adjusts their equity ownership percentage in the event of a future funding round at a lower valuation, ensuring their stake is not reduced unfairly. Anti-dilution provisions can come in various forms, such as full ratchet or weighted average adjustments.
Advance Subscription Agreement (ASA)
An agreement for future equity, allowing investors to invest in a company now and receive shares in a future funding round.
Acceleration Clause
A provision that allows for the acceleration of vesting (of shares) or other benefits in the event of specific circumstances, such as a change of control or termination.
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Business Model Canvas
A business model canvas is a planning tool typically consisting of a single page that outlines the essential building blocks necessary to bring a business (or a product or service) to market.
Burn Rate
Burn rate is the rate at which a business spends money. It's typically used by new businesses to track how much they spend in venture capital funding before creating their own positive cash flows. It is a measurement of negative monthly cash flow.
Bridge Loan
Bridge loans, also known as swing loans or bridge financing, are short-term financing options for companies that need funds temporarily until long-term financing becomes available. Essentially, they "bridge" the gap between a company's immediate need for funds and access to funds from long-term financing. A type of bridge financing is an ASA or CLN.
Boot-strapped
Bootstrapped is a term used to describe a company that has been built from the ground up with little to no outside capital.
Board of Directors
A group of individuals appointed to oversee the management, day-to-day running and direction of a company.
Blind Pool
A blind pool describes when a limited partnership raises funds from investors without telling them where the money will be invested.
Bear Hug
A bear hug is an acquisition strategy where one company offers to purchase another at a much higher price than that company's valuation. It's sometimes viewed as a hostile takeover, but it's more beneficial for shareholders than most hostile takeovers would be.
Board of Directors
A group of individuals appointed to oversee the management, day-to-day running and direction of a company.
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