Jargon Buster

The following terminology is used in the course and is listed here for easy look-up:

Ad Swap Fellow crowdfunders who promote each other’s projects. This is useful as it is free advertising in exchange for you placing some poster or banner up and helping out a fellow Crowdfunder.
All-Or-Nothing Model Where entrepreneurs get to keep the funds raised only if the campaign reached its goal.
Angel Investor An angel investor or angel (also known as a business angel or informal investor) is an individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
Audience Interaction the audiences who are active in the progression of your project, be it by responding to polls, leave feedback or throw in their opinion of the plot of the story or the marketing techniques. This is ideal for Creators who like to interact with other creative people and it breaks down the barrier between them and the consumers.
Backer An individual who supports a project financially, also knows an a Doner, Patron or Sponser
Balance Sheet A statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.
Barker Someone who uses social networking sites and other mediums promote a project and help show it to the masses. This is great as friends of the Creators can do this, and get ten times the amount of people to notice a project.
Best Practices Commercial or professional procedures that are accepted or prescribed as being correct or most effective.
Bonds A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.
Break-even Point  The point at which gains equal losses. Knowing this helps a business see how much sales are needed to cover costs and expenses in order to start making a profit.
Bridge Financing A method of financing used by companies before their IPO, to obtain necessary cash for the maintenance of operations.
Broker-Dealer Registered professionals, firms, or agencies that buy and sell securities on behalf of clients, including large stock brokerages. Broker-Dealers execute securities sales and purchases on behalf of clients, provide investment advice to customers, supply liquidity through market-making activities,  publish investment research, raising capital for companies, and operate market platforms. Broker-Dealers must be registered with the SEC and are closely regulated. Several types of investment crowdfunding and general solicitation activities require that the issuer work with a registered broker-dealer.
Burn Rate The rate at which a new company spends its initial capital.
Business Traction The progress of a start-up company and the momentum it gains as the business grows.
Call For Prompts  Asking the audience to offer up their ideas, inputs and feedbacks. Prompters may get an advanced sneak peak at the results. This activity can be done live (see Fishbowl).
Campaign The funding period for a specific project in a crowdfunding platform.
Capital Gains A profit from the sale of property or an investment.
Cash Flow Statement A document that represents the cash inflows and outflows from the business operations.
Class A Shares A specific share class that can be accompanies by more or less voting rights than class B shares. Typically Class A shares have more voting rights.
Class B Shares A specific share class that can be accompanies by more or less voting rights than class B shares. Typically Class A shares have less voting rights.
Community Shares The term community shares refers to withdrawable share capital; a form of share capital unique to co-operative and community benefit society legislation. This type of share capital can only be issued by co-operative societies, community benefit societies and charitable community benefit societies.
Convertible Debt (Convertible Notes) A financing vehicle that allows startups to raise money while delaying valuation discussions until the company is more mature. Though technically this is debt the company promises to pay back to its lender(s), convertible notes are meant to convert to equity at a later date. Investors who agree to use convertible notes generally receive a discounted price when they purchase equity since they put in their money in at the earliest, riskiest stages of the business.
Copyright The exclusive and assignable legal right, given to the originator for a fixed number of years, to print, publish, perform, film, or record literary, artistic, or musical material.
Creator The person who runs a Crowdfunded project; can be an artist, author, musician or inventor etc.
Credit Score A statistically derived numeric expression of a person’s creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person’s past credit history. It is a number between 300 and 850 – the higher the number, the more creditworthy the person is deemed to be.
Crowd Equity  This is used to describe the type of crowdfunding which offers equity in a business in exchange for the funds.
Crowd Financing Same as Equity Crowdfunding.
Crowd Lending This is used to describe the type of crowdfunding used for loans
Crowdfunding Platform An online portal or intermediary that allows projects to be represented on the web portal to attract backers, investors and donors
Crowdfunding Portal Similar to a crowdfunding platform, a portal does not handle investmentsor finances, but merely acts as an intermediary connecting investors with projects and businesses online.
Crowdfunding The practice of soliciting financial contributions from a large number of people especially from the online community. Crowdfunding activities are generally intermediated by crowdfunding platforms.
Crowdsourcing Obtain (information or input into a particular task or project) by enlisting the services of a number of people, either paid or unpaid, typically via the Internet.
Cyberfunded Creativity Cyberfunded creativity is a subtype of Crowdfunding, which concentrates on creative material in online sites.
Debentures A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital.
Debt based Securities Lenders receive a non-collateralized debt obligation typically paid back over an extended period of time. Similar in structure to purchasing a bond, but with different rights and obligations.
Debt crowdfunding A form of crowdfunding in which the contributors provide support in the form of a loan with expectation of financial return. They can receive interests at the end of the time loan (traditional model), or an agreed share of the profits of the firm (revenue sharing model). The target crowd are investors and entrepreneurs. Debt crowdfunding is further divided into peer-to-peer (P2P) lending and business loans.
Dilution A reduction in the value of a shareholding due to the issue of additional shares in a company without an increase in assets.
Discount Rate  Required rate of return of the interest rate.
Dividends A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).
Donation Based Crowdfunding Individuals donate small amounts to meet the larger funding aim of a specific charitable projects while receiving no financial or material while receiving no financial or material return in exchange.
Donation Button The small graphic on the screen which may be clicked to take the shopper to a money handling site where they may send funds to the creator.  If done through the PayPal “Donate” button, it allows the shopper to designate the amount (useful if the project has many items of different prices).
Donation Crowdfunding A crowdfunding model where individuals donate money to projects usually characterised as charitable or have social benefits.
Due Diligence Due diligence is a reasonable investigation of a proposed investment deal and of the principals offering it before the transaction is finalized to check out an investment’s worthiness; generally performed by the investor’s attorney and accountant.
Earnings Yield The earnings yield is the inverse of P/E ratio. The earnings yield ratio shows the percentage of each dollar invested in the stock that was earned by the company.
Elevator Pitch An elevator pitch, elevator speech, or elevator statement is a short summary used to quickly and simply define a profession, product, service, organization, or event and its value proposition
Emerging Growth Company A company with revenues below one billion dollars per year, as defined by the JOBS act. Companies meeting these requirements may be eligible for certain privileges, like being allowed to use test-the-waters communications with qualified institutional buyers.
Equity Based Crowdfunding  Sale of a stake in a business to a number of investors in return for investment, predominantly used by early stage firms.
Equity Ownership of a piece of a company as an investment.
Escrow Account An escrow account is a temporary pass through account held by a third party during the process of a transaction between two parties. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow.
Exit Strategy The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. Usually it comes in the form of IPO, acquisition by a larger company or selling assets.
Fan A fan is someone who is dedicated to a Crowdfunded project, but who maybe doesn’t contribute money to it. Instead they promote the project, comment on the page and create a buzz and enthusiasm for the project.
Financial forecast An estimate of future financial outcomes for a company.
First Reader This is a volunteer editor.  This can be a friend, family member, or a fan, who looks over a rough draft and suggests improvements so that you can make before the final version gets published.  Some crowdfunding projects provide perks for supporters who do this.  Also known as a Beta Reader.
Fishbowl An exercise in which an audience makes suggestions or analytical comments whilst observing the Creator (or someone in his/her team) as they make suggestions about their project. In Cyberfunded Creativity this can be done online, usually on a live blog. The fishbowl technique can also be used for brainstorming business projects or other ideas.
Fully diluted Shares The total number of shares that would be outstanding if all possible sources of conversion, such as convertible bonds and stock options, were exercised.
Funder This is the people who provide funding for a person or project
Funding Period A specific time, which is set in advance (typically 90 days), allowed for the company to raise funds. The JOBS Act requires an all-or-nothing system in which the company has until the end of the Funding Window to reach its Target Raise or else it receives nothing and the funds raised are returned to the investors.
Funding Portal crowdfunding intermediary that does not: (i) offer investment advice or recommendations; (ii) solicit purchases, sales, or offers to buy securities offered or displayed on its website or portal; (iii) compensate employees, agents, or others persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal; (iv) hold, manage, possess, or otherwise handle investor funds or securities
Funding Window Same as Funding Period.
General Assumptions  include interest rates your business will use for loans (both short-term and long-term loans, which often have different interest rates), and also the tax percentage which will be applied toward your Company’s profits.
General Solicitation The practice advertising to potential investors outside of one’s current network with the intent of fundraising, as is now allowed by the SEC for private issuers under particular registration exemptions enabled in the JOBS act (Title II 506c, Title IV Reg A, and upcoming Title III Reg CF).
Gross Margin The difference between Revenue and cost of sales/service.
Growth stage  A stage in the life cycle of a company characterised by revenue and profit increase.
Honor Roll a list of names accrediting a project’s patrons and/or other supporters.
Hub Site Websites such as Kickstarter or IndieGoGo that show us many different projects.  There are also hub sites that host specific types of content, such as webcomics or fiction.
Illiquid Asset The state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value.
Initial Public Offering (IPO) An Initial Public Offering. The first sale of stock to public investors by a new company or by an existing company in a new product or project.
Intellectual Property The ownership of ideas. Unlike tangible assets to your business such as computers or your office, intellectual property is a collection of ideas, concepts patents, copyrights, etc.
Interest Rate The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Intermediate Term Debt A type of fixed income security with a maturity, or date of principal repayment that is set to occur in the next 3-10 years.
Internal rate of return (IRR) The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero.
Investment Crowdfunding Investing in a company via crowdfunding in exchange for equity ownership, debt payments, a convertible note, or some other financial return.
Investment Limit The JOBS Act limits the amount individuals may invest through Crowdfunding. The Investment Limit for an investor with annual income below $100,000, is the greater of $2,000 or five percent of the investor’s annual income or net worth. For an investor with annual income above $100,000, the maximum is ten percent of the annual income or net worth, up to a maximum of $100,000. This limit pertains to any twelve month period.
Investment Memorandum (IM) Document stating the objectives, risks and terms of investment involved with a private placement. This includes items such as the financial statements, management biographies, detailed description of the business, etc.
Investor Relations A responsibility of the Company relating to how and when the Company communicates with investors in connection with the Company’s performance. Strategic Investor Relations can help a Company maintain a good relationship with its investors and for subsequent investments can advocate for a Company.
Invoice Trading Firms sell their invoices at a discount to a pool of individual or institutional investors in order to receive funds immediately rather than waiting for invoices to be paid.
Issuer A legal entity that develops, registers and sells securities for the purpose of financing its operations.
Keep What You Raise Model Entrepreneurs get to keep the funds raised regardless.
K-Fan This is a fan who spends £100 or more, per year on a one creator’s work.  These fans started the idea of crowd-funded projects.
Landing Page The project/campaign web page which contains the necessary information and details of the project.
Limited Liability Company A corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities.
Linkback The promotion of a project by posting the URL to its landing page.  This helps entice more people to the project.  Also known as linklove or linkluv.
Liquidity Event The merger, purchase or sale of a corporation or an initial public offering. A liquidity event is a typical exit strategy of a company, since the liquidity event typically converts the ownership equity held by a company’s founders and investors into cash.
Liquidity The availability of liquid assets to a market or company.
Loan-Based Crowdfunding A crowdfunding model where individuals agree to loan others in return for interest.
Long Term Debt Loans and financial obligations lasting over one year.
Market Opportunity A forecasted demand in specific market/markets for a particular product or service in which unsatisfied customer need exist.
Mezzanine Financing Debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full.
Micro-donation Micro-donation or micro-philanthropy is a form of charitable donation that is small in the donated amount.
Micro-Loan A very small, short-term loan at low interest, especially to a start-up company or self-employed person.
Minority shareholders’ agreement  An agreement that supplements the constitutional documents of the company. The contents of individual shareholders’ agreements vary, but they are commonly used for regulating the ownership and voting rights of the company’s shares, management of the company, dispute resolution, and protection of the competitive interests of the company.
Networking Effect A phenomenon whereby a good or service becomes more valuable when more people use it.
Non-accredited investors Anyone in the general adult population who wants to invest.
Online crowdfunding Raising fiinance via platforms (websites) that let people give money to creative endeavors in exchange for a small reward, such as a product under development or access to special events.
Options A financial derivative security whereby the security provides the buyer the right but not the obligation to buy/sell a security at a predetermined price during a specified period of time
Ordinary share A share entitling its holder to dividends which vary in amount and may even be missed, depending on the fortunes of the company.
P/E Ratio A measurement tool frequently used in the investment industry and calculated by dividing the price per share by the earnings per share.
P/S Ratio A measurement tool frequently used in the investment industry and calculated by dividing the company’s market cap by the sales revenue.
Patron Someone who contributes money to a Crowdfunded project.  It may apply to a specific item for publication, or to the project as a whole.  Also known as donor, backer or sponsor.
Peer to Peer (P2P) Business Lending Debt based transactions between individuals and existing businesses which are mostly SME’s with many individual lenders contributing to any one loan.
Peer to Peer (P2P) Consumer Lending Individuals using an online platform to borrow from a number of individual lenders each lending small amount; most are unsecured personal loans.
Pension Led Funding Mainly allows SME owners/directors to use their accumulated pension funds in order to invest in their own businesses. Intellectual properties are often used as collateral.
Perk a benefit for doing something in a crowdfunded project, such as making a donation or linking back to a post.  Perks may be individual (if you pay X amount, you get a signed copy of the script) or collective (if total donations reach Y amount, an extra behind the scenes episode is produced for everyone who has donated to enjoy). There are many types of perks and ways to earn them.
PIPR  (Private Issuer Publicly Raising)  A company raising money from investors taking advantage of Regulation D Rule 506(c) which allows general solicitation (advertising) to the public.
Pitch Deck A presentation of a summarised business plan.
Pitch This is the promotion of the crowdfund used to garner interest from potential funders.
Platform This is the term used to describe the various web sites which facilitates crowdfunding (eg: Kickstarter is a crowdfunding platform).
Pledge This is a term used to describe the promise to pay the person/people crowdfunding the defined amount
Pooled Investment Vehicle Funds from many individual investors that are aggregated for the purposes of investment, as in the case of a mutual or pension fund.
Portal Fee The fee due to the Funding Portal for its work in facilitating and managing the Crowdfunding process. The Portal Fee is due from the company only if the Target Raise is met. The company, not the investors, pays the Portal Fee. All fees are subject to the forthcoming S.E.C. regulations.
Portfolio diversification A technique of risk management which involves owning multiple investments in order to diversify the risk through a wide variety of assets, both in terms of quality and quantity. The rationale of diversification is to reduce non-systematic risk in a portfolio in order to cover the poor performance of some investments with the good performance of others.
Post Money Valuation Company’s value after outside financing and/or capital injections are added to its balance sheet. Post-money valuation refers to a company’s valuation after funds, such as investments from venture capitalists or angel investors have been added to the balance sheet.
Pre Money Valuation A pre-money valuation is a term widely used in private equity or venture capital industries, referring to the valuation of a company or asset prior to an investment or financing. If an investment adds cash to a company, the company will have different valuations before and after the investment.
Pre-Buzz  “Pre-Buzz” is your campaign’s preseason. This is the week or weeks leading up to your Go-Live date where you are refining your message and how you deliver it. You are warming up your circles of influence to help you push your campaign to the next level. Pre-Buzz is a necessary aspect of every campaign and should never be overlooked. People can’t invest in an opportunity they don’t know about so the more people who know the more likely you are to reach your funding goal. Pre-Buzz is everything from going to pitch meetings to developing a social media presence for your company and its importance can’t be overlooked.
Pre-emption The purchase of shares by one person or party before the opportunity is offered to others.
Preference Shares A share which entitles the holder to a fixed dividend, whose payment takes priority over that of ordinary share dividends.
Pre-Sales Crowdfunding Backer supports a product that has yet to be manufactured. Entrepreneurs receives the necessary funds to produce their products
Primary Market The first sale of new securities to investors in order to raise investment money for the issuing company. (As opposed to a Secondary Market in which investors buy and sell securities among each other without the issuing company receiving the funds.)
Private Offering The sale of investment securities by businesses who do not wish to raise funds through public offerings can seek private placement with a small group of investors. Private offerings must adhere to the rules of any one of several SEC registration exemptions.
Private Placement The sale of securities to a relatively small number of select investors as a way of raising capital.
Profit and Loss Statement A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time.
Progress Meter An interactive graphic that provides a visual representation of how the venture is moving towards its target.  More often than not, something happens when the goal is reached, such as the audience getting a perk.  Note that projects often have multiple goals, while most meters can only track one (the highest).  A popular source is TickerFactory. Sometimes if the Target is not met, all donations are returned to their donors.
Project This is the crowdfund campaign for the product or cause.
Projected Cash Flow presents projected changes in the Company’s cash balances.
Prompter Someone who provides creativeness and proposals to a creator, usually during a call for prompts.  Regular prompters in an ongoing project can build up considerable sway.
Real Estate Crowdfunding Reserved largely for wealthy investors, real estate crowdfunding involves using mainly equity and peer-to-peer lending to finance real estate purchases using multiple investors.
Return on Investment A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.
Revenue Model Key component of the business model. It primarily identifies what product or service will be created in order to generate revenues and the ways in which the product or service will be sold.
Revenue sharing  Revenue sharing has multiple, related meanings depending on context: In business, revenue sharing refers to the distribution of profits and losses between stakeholders, who could be general partners (and limited partners in a limited partnership), a company’s employees, or between companies in a business alliance.
Reward Based Crowdfunding Individuals donate towards a specific project with the expectation of receiving a tangible (but non-financial) reward or product at a later date in exchange for their contribution.
Rewards This is what the funders get in exchange for pledging on a pre-sale/rewards based crowdfunding platform
ROI (Return on Investment) The payback earned from investing in something. Examples include financial return through stocks or emotional return through feeling good about giving.
Royalty Based Crowdfunding Royalty crowdfunding offers backers a percentage of revenue from the project or venture the backer supports, once it is generating.
S.E.C.Securities and Exchange Commission The part of the United States government that regulates investment and finance, including startups and the various forms of crowdfunding.
SAFE (Simple Agreement for Future Equity)  A contract between an investor and entrepreneurs whereby the investor provides capital to the business in exchange of a warrant to issue stock in the future.
Secondary Market A market on which securities and assets such as stocks are bought and sold between investors. Secondary Markets provide liquidity by allowing investors to exchange their investment for cash. Also called the aftermarket. (As opposed to a Primary Market in which securities and assets are purchased directly from the issuer.)
Secured Loan A loan that is supported by some type of collateral.
Securities A financial instrument that represents: an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option.
Seed Capital The initial capital used to start a business.
Series A Financing The first round of funding after the initial seed capital.
Series Anchor an audience member with a prevailing influence over a series.
Shareholders’ agreement A contract/ agreement among shareholders of a company that describes rights and obligations.
Short Term Debt Loans and financial obligations due in one year.
Social Proof Also known as informational social influence, is a psychological phenomenon where people assume the actions of others in an attempt to reflect correct behaviour for a given situation.
Sponsor A person who pays for a specific item to be released.  A sponsor covers the whole price; some projects allow for several cosponsors to split the price.  (This is distinct from general patrons who may donate toward the project as a whole, rather than individual items)
Start-up Business  A business which generally is less than a year old and has no revenue or only nominal revenue.
Start-up Capital The money that is required to start a new business, whether for office space, permits, licenses, inventory, product development and manufacturing, marketing or any other expense.
Stretch Goals A stretch goal is an additional funding goal that will finance another specific piece of your project once the initial goal has been met. A stretch goal should be concrete and reasonable, and should give contributors a little extra motivation to get involved. A really great stretch goal can even motivate contributors to give a second time.
Swag The items that are used as perks or promotions as rewards for a project.
Tag A word or short phrase that identifies a project or topic. Tags function in online venues to help people find projects or material that interests them
Target Raise The amount of money that the company wants to raise in a crowdfunding campaign. The Crowdfunding Act limits companies to raising $1 million for any twelve month period. If the Target Raise is not met during the Funding Period, the company gets none of the pledged funds, which are returned to the investors. The company may not raise more than the Target Raise. Only if the entrepreneur meets his funding target is the project funded. This is a form of investor protection that requires a minimum buy-in from all the backers before a project is funded. It raises the bar on meeting one’s funding target and forces an entrepreneur to strategically consider how much he needs.
Tender Offer  An offer to purchase some or all of shareholders’ shares in a corporation. The price offered is usually at a premium to the market price.
Term Sheet A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents.
Testing the Waters Communicating with potential investors to gauge interest before raising money or formally registering with the SEC.
Tip Jar This is a method by which audiences can donate random amounts of money to a project that doesn’t have set prices, or in addition to set prices for people who wish to support the project as a whole.
Trademark A symbol, word, or words legally registered or established by use as representing a company or product.
Unsecured Loan A loan that is not supported by any type of collateral.
Valuation Cap The valuation cap is associated with convertible notes in the second round of funding. To reward early investors for taking a risk in the first stage of funding, convertible notes can be converted to shares at a discounted price on a predetermined discount rate. Given that the company will have a high valuation.
Valuation The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
Venture Capital (VC) Equity funding in a startup provided by an investment company.
Venture Exchange secondary market in which early investors in startups and small businesses could sell their shares, and new investors could buy and trade private stocks. Meant to improve the liquidity for the securities of small companies. There is currently a draft bill in the house of representatives intended to expand the use of Venture Exchanges in the US.
Warrants A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.

CRUCIAL is co-funded by the EU through ERASMUS+. Project: CRUCIAL (Crowdfunding Capital) 2015-1-IE01-KA202-00862The European Commission support for the production of this publication does not constitute an endorsement of the contents which reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein