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Terms & Definitions
Management Fee:
Compensation for the management of a venture capital fund's activities, paid from the fund to the general partner or investment advisor. This compensation generally includes an annual management fee.
NDA (Non-disclosure agreement):
An agreement issued by entrepreneurs to potential investors to protect the confidentiality of their ideas when disclosing those ideas to third parties.
Private Equity:
Equity securities of companies that have not "gone public", i.e. are not listed on a public exchange. Private equities are generally illiquid and viewed as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer in the absence of a marketplace. In South Africa, venture capital falls under the wider industry term, private equity.
Seed Money:
The first round of capital for a start-up business. Seed money usually takes the structure of a loan or an investment in preferred shares or convertible bonds, although sometimes it is ordinary shares. Seed money provides startup companies with the capital required for their initial development and growth. Angel investors and early-stage venture capital funds often provide seed money.
Syndication:
A number of investors offering funds together as a group on a particular deal. A lead investor often coordinates such deals and represents the group's members. Within the last few years, syndication among angel investors (an angel alliance) has become more common, enabling them to fund larger deals closer to those typifying a small venture capital fund.
Venture Capital Financing:
An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to external capital.
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