Private Placement Investment Glossary

Angel Investors

As the term suggests, these are well-off individuals or syndicate of investors, willing to raise capital for qualified entrepreneurs & start-up businesses in return for an ownership stake (convertible debt or preferred stock). Individual angel investors consolidate together to form larger angel groups or angel networks for sharing expertise and pool investments.

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Banks & Broker-Dealers

The bank is a financial intermediary that will generates credit ratings simply by financing cash to some debtor, and thus setting up an equivalent put in for the bank’s equilibrium sheet. Credit pursuits can be carried out often right or perhaps not directly by way of investment capital markets.

Broker Dealers

In finance industry, broker-dealer could be an individual person, individual company or group of companies involved in trading business securities. Core responsibilities of any broker-dealer includes, but not limited to, selling and institutionalizing securities for the businesses on regulatory issues and transactions.

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Corporations with Venture Arms

Business capital is usually a sort of money infusion for a brand new or perhaps expanding company. It usually emanates from investment capital organizations that will concentrate on building high-risk personal portfolios. Along with investment capital, the actual investment corporation has its own venture arm.

Equity Crowdfunding

Equity Crowdfunding is a rapidly trending approach used by entrepreneurs to raise capital today. Equity crowdfunding is the process by which a company or individual person seeks a ‘crowd’ of people or investors to investment money or provide debt capital for a given project. Crowd fund, like crowd sourcing (see below) is a popular way to raise capital quickly and from many people. While equity crowdfunding has become mainstream in Europe and parts of Asia, it was only until the US Congress passed the JOBS Act in 2014 as a means to spur investment in small businesses. The rules and regulations for Reg A+ offerings (typically the regulations that address equity crowdfunding strategies) went into full affect in May 2016. For more information about equity crowdfund platforms and a directory of the various portals that facilitate equity crowdfunding, please click here

Crowd Sourcing

Crowd sourcing is simply a means to raise capital by targeting groups of investors, usually online. One finds a ‘crowd’ to help with funding or for work, by ‘sourcing’ a group of people.

Economic Development Agencies

Economic development agencies assist third world and first/second world locations with development of infrastructure and technology. Normally this is accomplished through funding various initiatives on the ground that help create jobs and increase quality of life.

Emerging Seed Funding

Seed Incubation aka Seed Funding, is an early stage funding that a venture/small firm receive. It allows businesses to afford initial expenses and start-up business operational costs. Seed incubation is simply a process of harvesting the initial ideas.Emerging seed

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Endowment Funds

An endowment fund is a genuine donation of tangible or intangible assets to an institution, specifying that a donation is to be invested and the income earned from that donation must be spent for a specific purpose. Endowment funds are commonly managed by academic institutions, cultural institutions, religious entities, and other non-profit organizations.

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Family Offices

Family offices are the private firms that manage and supervise the financial aspects of particular rich families. Family offices provide different approach of wealth management as compared to traditional wealth management and advisory firms, because they focus on complete outsourced solutions for managing the investment and return on investment of affluent family or individual. Services offered by most of the family offices are as follows:

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Foreign Investors

FDI is the key contributor in the today’s globalized world. FDI or Foreign Direct Investment is the direct investment injected by an individual, company or group of companies in a foreign country, either by acquiring existing company or by off-shoring business activities in a particular country where investment, raw-materials and labor cost is relatively low.

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Fund of Funds

A fund of funds or FOF is a type of investment strategy in which a person or company invests in other mutual funds. It is more commonly known as multi-management, because in FOF, investor invests mutual funds in other mutual funds and allocates variety of fund categories into a one single investment fund.

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Hedge Fund

Hedge fund is one kind of limited partnership structure that is generally different from mutual funds, including with regard to the mutual fund use of leverage is relatively low. On other hand, hedge funds provide great extent of flexibility in terms of strategy and risk-reward schemes and policies. The numbers of investors exposed to hedge funds comparatively low vs. investors that use mutual funds. Those investing in hedge funds are required to meet minimum net worth criteria and initial minimum investment.

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High Net Worth Investors

High Net Worth (HNW) wealth management firms provide investment-advisory services incorporating financial planning, investment portfolio management, and other financial services to HNWI or High Net Worth Individual, who is person or family with high net worth financial assets excluding primary residence.

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Industry Specific Investors

High Tech: is considered as the technological inventions or advancement in the technology. There are numerous technology sectors, in which firms operate for the enhancement and enrichment of the particular sector, such as, automotive, biotechnology, computer sciences, information technology, telecommunication, etc.

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Initial Public Offering

The term “Initial Public Offering” or “IPO” is referred to a type of public offering where company’s stock shares are sold to general public in exchange of certain securities. By this process, any private company can transform into public company. IPOs are usually the first sale of stock offered by the company to public investors (vs private investors via private placement offering).

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Institutional Consultancy

An institutional consultancy advisor gives speculation guidance to open and privately owned businesses, establishments and development searching organization for help with dealing with their financial investments, or the money in their representatives’ retirement reserves.

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Long/Short Investment

There are two main types of investments, long-term investment and short-term investment. Long/short investment is type of investment strategy for the most part connected with hedge-fund stocks investments. It includes purchasing long equities that are relied upon to increase value in worth and selling under-valued equities that are anticipated to be decrease.

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Mezzanine Financing and Bridge Loans

Mezzanine financing, like bridge loans, is a form of debt. A company takes on mezzanine debt and in return the investors will get paid an interest payment, and if the loan is not paid back in its due time the debt converts to equity. Bride loans, however, are usually short, like 2 to 4 weeks in length is usually given so the company can just get by long enough to cover its debt.

Miscellaneous

Corporations with Venture Arms: Corporate Venture Capital (CVC), is different from corporate venturing. It is the financing of corporate funds specifically in outer new businesses. Corporate Venturing alludes to when an organization helps advancement and new activities internally. It is characterized by the Business Dictionary as the “practice where a vast firm takes a value stake in a little yet imaginative or expert firm, to which it might likewise give administration and showcasing ability; the target is to addition a particular preference.

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Mutual Funds

Mutual funds are a popular entity structures, both for onshore and offshore companies. A mutual fund invests capital typically in a diversified manner and maintains a longer term portfolio than hedge funds.

Onshore Funds

Onshore funds is a fancy way of saying the fund is not offshore, i.e. if you are in the United States and have an onshore fund it means your fund is domiciled in the United States.

Offshore Funds

Offshore funds are popular and normally means anything outside of one’s jurisdiction. Technically if you are a US citizen in New York and you invest in a Canadian fund this is considered ‘offshore’, although it is not popularity considered such. Many consider Cayman funds or BVI funds the traditional offshore structure.

Peer-to-Peer Lending

Peer to peer lending is a popular way for one to raise capital. Instead of tapping normal channels like venture capital, peer to peer allows for a company to lend another copany funds, i.e. ‘peers’ lend out the funds. Normally one does not have a relationship with the other peer.

Pension Fund

A pension fund is secured by an organization, legislative foundation or guild to pay for the (future) annuity profits of resigned workers. Pension supports gather retirement funds from laborers and their bosses, and put this cash in an extensive variety of advantages. Since benefits trusts deal with the cash of up to a huge number of people, they are significant players in the money related markets.

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Private Equity

In finance sector, private equity is a benefit class comprising of equity securities and obligation in working organizations that are not traded on an open market on a stock trade.

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Real Estate

Real estate investment is the process of purchasing, managing, and then selling/renting the property for profit. Real estate business has a market gap of efficiency in most of the countries because finding right properties in which to invest requires substantial efforts and is much time consuming as compared to other investments.

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Small Business Innovation Research (SBIR)

The Small Business Innovation Research (SBIR) program strives for US companies to delve into the Federal governments research and development areas that have commercial use. This is a popular way to raise capital, help the US government/one’s country, and give back to society, all with the potential of making a profit.

Sovereign Wealth Funds

Sovereign Wealth Fund (SWF) is a pool of funds drawn from a country’s reserves owned by respective central government or central bank. Sovereign wealth funds can be invested locally or internationally.

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Special Purpose Vehicles

SPV or special purpose vehicles are usually legal entities, sometimes offshore, often times European, that are created to compete a specific task or investment. Often Cayman funds or other funds, like limited partnerships, are SPVs.

Sweat Equity

Sweat equity is simply the amount of time an energy one puts into a company and in return they receive an equity ownership stake. often, startups cannot afford to pay salaries and many work on sweat equity instead.

University Seed Funds

Universities often give out capital to start ups, both from their own school and to outside companies. Such seed funding is popular.

Venture Capitalists

Venture capitalists are the investors usually provide investment for start-up companies or assist small emerging companies who have high potential for growth but do not have access to the public funding.

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Private Placement Brokers

Private placement brokers are registered investment experts of securities and its non-public offerings. They focus on assisting investors to find perfect non-public investment opportunities matching their investment objectives and long-term goals. Occasionally, private placement brokers also work for the company organizing their non-public offerings, including drafting of all paperwork, identifying Private Placement Memorandum (PPM – a document having information about the proposed securities), and presenting final sales report to the prospective investors.

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Finders vs Broker-Dealers

Though Finders and Broker-Dealers carry out many of the similar operations and have almost same responsibilities, they are poles apart from each other. Many companies appoint finders to assist them in finding rightly-qualified investors for the ventures. Unlike broker-dealers, finders only correspond to the deal rather than any party. On the other hand, broker-dealers are the legal agents representing either of the party in the deal.

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144a offering

Rule 144A, under the Securities Act of 1933, as amended (the “Securities Act”) provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private resales of minimum $500,000 units of restricted securities to QIBs (qualified institutional buyers), which generally are large institutional investors that own at least $100 million in investable assets. When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the condition that it may not make offers to persons other than those it reasonably believes to be QIBs.

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Regulation S

Reg S Offerings 

Reg S offerings are typically referred to as “Offshore Offering” because they mainly have to either do with a foreign company creating an offering, or an US company that is offerings its debt or equity overseas, i.e. outside the United States. A Reg S offerings is typical of many European offerings and the larger clearing firms in Europe, often grant access to their systems via a Regulation S offering. Memorandum can assist in drafting the necessary Reg S paperwork and ensure that your offering is properly structured.

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