Qcept – ATDC graduate company specializing in non-visual defect detection. Their inspection systems allow fabs to improve yield by detecting non-visual defects such as sub-monolayer metallic and organic contamination.
Qualified Stock Options – Also known as Incentive Stock Options, provide tax advantages to an employer that non-qualified stock options do not and are subject to more strict requirements.
Quality Control Manager – directs the quality control program designed to ensure continuous production/service consistent with established standards.
Restricted Stock – A method of executive compensation that has come into prominence since stock options fell out of favor. The restricted stock must meet certain conditions such as a length of time or other business performance metrics before the stock can be transferred.
Return On Investment (ROI) - A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of several investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment, the result is expressed as a percentage or ratio.
Revenue – The amount of money brought into a company by its business activities. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income.
Reverse Merger – the acquisition of a public company by a private company, allowing the private company to bypass the usual lengthly and complicated process of going public. According to DealFlow Media's Reverse Merger Report, only 12 reverse mergers were completed in November and December 2008, capping the worst year for reverse mergers since 2004.
Charlie Paparelli – President and founder of Paparelli Ventures, a pre-formation investment company focused on entrepreneurs in the Atlanta technology community.
Participating Preferred - A type of preferred stock that gives the holder the right to receive preferred dividends as well as an additional dividend based on some predetermined condition. The additional dividend paid to preferred shareholders is commonly structured to be paid only if the amount of dividends that common shareholders receive exceeds a specified per-share amount.
Pay-to-Play Provision – An investor must keep "paying" (participating pro-ratably in future financing) in order to keep "playing" (not have his preferred stock converted to common stock) in the company.
PHP (Hypertext Preprocessor) – A widely-used general-purpose scripting language that is especially suited for Web development and can be embedded into HTML.
Preferred Stock – A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.
Pre-Money Valuation – A term used in private equity or venture capital that refers to the valuation of a company or asset prior to an investment or financing. External investors, such as venture capitalists and angel investors will use a pre-money valuation to determine how much equity to demand in return for their cash injection to an entrepreneur and his or her startup company. Pre- and post-money valuation concepts apply to each round of financing.
Pro-rata – A method of assigning an amount to a fraction, according to its share of the whole. For example, a pro-rata dividend means that every shareholder gets an equal proportion for each share he or she owns. Pro-rating also refers to the practice of applying interest rates to different time frames. If the interest rate was 12% per annum, you could pro-rate this number to be 1% a month.
Protective Provisions -Veto rights that investors have on certain actions by the company. The protective provisions are often hotly negotiated. Entrepreneurs would like to see few or no protective provisions in their documents. VC's, in contrast, would like to have some veto-level control over a subset of actions the company could take, especially when it impacts the VC's economic positions.
Polaris Ventures – Polaris invests in seed, early stage, and middle market companies in high growth industries. As the lead or co-lead investor, they take an active and long term role in helping management teams build highly successful business. Polaris has over $3 billion under management and current investments in more than 90 companies.
Post-Money Valuation – The value of the company after the investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity. The implied post-money valuation is calculated as the dollar amount of investment divided by the equity stake gained in an investment.
Purewire – ATDC member company that secures business and social interactions on the Web. Founded by veteran security industry entrepreneurs, the company offers Web security-as-a-service to increase ROI and lower the total cost of security for businesses.
Open Architecture – a type of computer architecture or software architecture that allows adding, upgrading and swapping components. For example, the IBM PC has an open architecture, whereas the Amiga 500 home computer had a closed architecture, where the hardware manufacturer chooses the components and they are not generally upgradable. Workshare unveiled a new open architecture platform in September.
Open Source Software (OSS) – Open Source is a development method for software that harnesses the power of distributed peer review and transparency of process. The promise of open source is better quality, higher reliability, more flexibility, lower cost, and an end to predatory vendor lock-in. The law firm, Morris Manning and Martin, has a blog about Open Source law.
The Open Source Initiative (OSI) is a non-profit corporation formed to educate about and advocate for the benefits of open source and to build bridges among different constituencies in the open source community.
Opportunity – a broad term to imply the overall investment opportunity in your venture if you are pitching to an investor
Opportunity Costs – The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.
Options – A privilege, sold by one party to another, that gives the buyer the right, but not the obligation to buy or sell a stock at an agreed-upon price within a certain period or on a specific date. Critical Outcome Technologies issued stock options on Monday as part of a CEO compensation package.
Shachar Oren – The CEO of the ATDC graduate company, Neurotic Media. As the co-founder of Neurotic Media, Shachar has steered the company's strategic direction from inception to becoming the premier digital service provider in the B2B space. Shachar is also the system architect behind the company's patent-pending, ground-breaking technology platform.
Organizational Culture – describes the attitudes, experiences, beliefs and values of an organization. It has been defined as the specific collection of values and norms that are shared by groups in an organization and control the way they interaction with each other. Read ATDC's best practices for forming a productive organizational culture.
Outstanding Shares – stock currently held by investors, including restricted shares owned by the company's officers and insiders, as well as those held by the public. Shares that have been repurchased by the company are not considered outstanding stock. Avalon Technology recently announced a buy-back plan to reduce outstanding shares.
Oversight Systems – a recent ATDC graduate company that was founded to ensure confidence in the integrity and accuracy of financial reporting and underlying transactions for customers. The solutions and technology provide global industry leaders with the forensic audit capabilities so much in demand in today's environment of heightened regulatory enforcement and corporate compliance initiatives.
Oversubscribed – a situation in which the demand for an initial public offering of securities exceeds the number of shares issued. The goal of a public offering usually is to price the security issue at the exact price at which all the issued shares can be sold to investors. If there is more demand for an IPO than there is supply, it means a higher price could have been charged and the issuer could have raised more capital. Clearwater's IPO in 2007 is said to have been oversubscribed.
NAICS – (North American Industry Classification System), a set of industry categories standardized between the U.S. and Canada. In the U.S., it is taking over from the SIC code system.
Needle & Rosenberg Intellectual Property Practice of Ballard Sphar – focuses on intellectual property and includes a well-established and highly regarded national patent prosecution and patent litigation practice
Nelson Chu – managing partner of Kinetic Ventures, a leading venture capital investor in communications, information and power/clean technology driven businesses
Net Present Value (NPV) – the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.
Networking – the strong association between the entrepreneur as a person and his or
her business demands that entrepreneurs get out into the world and
create and maintain business relationships. This is a key to success in finding people and resources for your company.
New Growth Theory - emphasizes that economic growth results from the increasing returns associated with new knowledge. The theory supports the importance of investing in new knowledge creation to sustain growth. Ample attention and incentive is needed to encourage knowledge creation (research and development, the education system, entrepreneurship and the tolerance for diversity, macroeconomic expectations, openness to trade).
New Media – a generic term for the many different forms of electronic communication that are made possible through the use of computer technology. The term is in relation to "old" media forms, such as print newspapers and magazines, that are static representations of text and graphics. New media includes:
- web sites and web advertising
- streaming audio and video
- chat rooms and online communities
- e-mail
- DVD and CD-ROM media
- virtual reality environments
- integration of digital data with the telephone, such as internet telephony
- digital cameras
- mobile computing
"No Shop" Provision – a binding provision, usually in a Letter of Intent, contract, or term sheet, that promises exclusive rights to negotiate
Non-Compete Clause – a term used in contract law under which one party (usually an employee) agrees to not pursue a similar profession in competition with another party (usually the employer). The use of such clauses shows a concern that, upon their termination or resignation, an employee might begin working for a competitor or start a business and gain competitive advantage by abusing confidential information about their former employer.
Non-Disclosure Agreement (NDA) – a legal contract between at least two parties that outlines confidential materials or knowedge the parties wish to share with one another for certain purposes, but wish to restrict access to. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or a trade secret. NDAs are commonly signed when 2 companies are considering doing business together and need to understand the processes used in each other’s business for the purpose of evaluating the potential business relationship.
Market – The opportunity to buy or sell; the extent of demand for merchandise. The market niche you should participate in should reach at least several hundred million within 3-5 years and, ideally, your company can become a leading player in a large market.
Market Segmentation – A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners will respond to very different advertisements.
Mentor - 1. a wise and trusted counselor or teacher; 2. an influential senior sponsor or supporter
MMM – Morris, Manning, and Martin – a leading technology law firm in Atlanta
MOU – Memorandum Of Understanding – A legal document outlining the terms and details of an agreement between parties, including each party’s requirements and responsibilities. The MOU is often the first stage in the formation of a formal contract. An MOU is far more formal than a handshake and is given weight in a court of law should one party fail to meet the obligations of the memorandum.
ATDC CONFERENCE ROOMS:
- Magic - The ATDC conference room, Magic, is named to describe a company’s "secret sauce" or its proprietary technology that will, along with other company strategies, create a unique offering in the marketplace.
- Management - The ATDC conference room, Management, is named in honor of the successful companies that are run by management with experience in the industry and/or the technology critical to the business. ATDC entrepreneurs include first-timers and serial entrepreneurs.
- Mettle - The ATDC conference room, Mettle, is named to inspire courage and fortitude. ATDC seeks a diverse set of member companies who will take advantage of our services and connections. Members who want to share experiences and expertise with the community are a good fit.
- Money – The ATDC conference room, Money, reminds entrepreneurs of the importance of having capital to grow and to sustain their business. Because one of the top causes of business failure is a lack of capital, it is important that companies have a business that can generate good cash flow to sustain growth. Also, investors typically look for entrepreneurs to put their own money or sweat equity into a business before they will consider investing.
Liquidation preferences – a term in an investment term sheet that details how the investors will receive preferential treatment when a company reaches an exit. During the crazy internet days, investors were asking for “2X” liquidation preferences. This means that when a company is sold, the investor will be first in line to take their money and they will take an amount equal to twice the amount of their initial investment. Then everyone gets to split up whatever money is left. Currently, most term sheets contain “1X” liquidation preferences, so they aren’t as bad.
Liquidity event - A fancy way to say, “I was able to sell part of my business for cash”. An IPO is a liquidity event. Sometimes a sell of the company is a liquidation event. If you sell your company for cash or sell it to a public company, you are liquid. If you sell it to another private company and just get stock in the acquiring company, you aren’t liquid. You have to wait for that company to have a liquidity event before you pad your piggybank.
Liquidation – when a company discontinues operations and sells everything to raise cash to try to pay their debts. Although the names of the terms are similar, this is almost the opposite of a liquidity event.
Limited Partner – Venture Capital funds raise their money from limited partners. These are investors such as pension funds, universities, and high-net-worth individuals, all of whom pay annual management fees to have their money invested in high-risk, high-potential-yield start-up companies. These limited partners don’t get to make the investment decisions. They trust the General Partners to manage the money on their behalf.
Kathy Harris – Partner at Noro-Moseley. Kathy is active in the tech community and is a great person to get to know if you want to pitch to Noro. She handles a lot of the startup investments for them. If get out to a few networking events, you will surely meet her.
Kinetic Ventures – Atlanta firm that has been investing in energy startups before it was cool. Nelson Chu is the guy to meet. He is active in the community and super sharp. He always gives valuable advice to entrepreneurs. They invest in telecom, energy, and IT companies.
Key person insurance – heard of the "hit by a bus test?" What would happen if your key technologist was hit by a bus? Would your company tank? Many startups have one or two key people that are so instrumental to the success of the company that investors require that you purchase "Key Person Insurance" to protect against this.
Imlay Investments – the most active angel fund in Atlanta. Heard of Sig Mosely? If not, you haven’t shopped for money yet. John Imlay was CEO of MSA and is the “grandfather” of the tech industry in Atlanta. MSA groomed over 30 technology CEOs and now John is giving back to Atlanta with his angel fund that has helped numerous entrepreneurs over the years. Sig runs the fund and sees every deal in Atlanta. Make sure he sees yours.
ISO – Incentive Stock Options – Stock options usually come in two flavors, ISO or Non-qualified. ISOs are a type of stock option that has favorable tax implications for employees. They are not taxed when they exercised. Instead they are taxed over a year later as long-term capital gains (a lower tax rate). There is a lot of fine print on these types of stock options so make sure you consult your attorney.
IPO – Initial Public Offering – I probably don’t need to explain this one. This is usually the ultimate grand prize for entrepreneurs although it is rarely achieved. I have seen many more entrepreneurs get rich by selling their companies rather than going public. Also, being a public company is not fun anymore.
HIG Ventures – Atlanta Venture fund with over $550 million in dedicated venture capital under management. The firm invests nationally in early, mid and growth-stage information technology, life science and service businesses. www.higventures.com
H Visa – H visas are visas for foreign college degree or equivalent workers that want to work in the US. The H visa allows someone to work in America for 3 years. If your startup is planning on attracting foreign talent, you should learn about all these rules, regulations, fees, tips, and tricks. For more info, see our previous post on Visas.
Hockey Stick – the image that your financial charts portray. Most startup financial charts look like a hockey stick, moderate revenue growth for a few years and then exponential growth. Most investors expect to see this, but they still laugh at it because theses projections are all absurdly optimistic
Haircut – typically used to describe a down round. When you have to raise money at a lower valuation then your previous round, your previous investors will be "taking a haircut". Basically an unrealized financial loss. We see a lot of early investors and family members get "haircuts" because the entrepreneur sets unrealistic valuations during early financing. These valuations are corrected when professional investors get involved and lots of people end up with buzz cuts.
See our entire list of acronyms here.
GT – Georgia Tech – The Georgia Institute of Technology is one of the nation’s top research universities. Great source for intellectual property to start or expand your business
GRA – Georgia Research Alliance – private, non-profit group with a mission to assist organizations in commercializing research coming out of the universities. They do this with grants, attracting scholars, and being an active voice at the capital. Great partner and friend of ATDC. www.gra.org
GCLA – Georgia CIO Leadership Association – a progressive group of Georgia CIOs. ATDC has a relationship with GCLA and hosts them each year for a cocktail reception and preview of some of our companies. They have some CIOs that are active in startups and encouraging innovation. www.georgiacio.org
See our entire list of acronyms here.