here for glossary of terms and definitions - EVCA

GLOSSARY OF TERMS USED RELATING TO THE ANNUAL PERFORMANCE
SURVEY:
Seed Stage (as Fund Stage)
Funds that make a majority of their investments in newly formed companies thereby helping to
help a company's founders to research, develop and design a product or service. This stage
involves a relatively small amount of capital and is a typically a pre-marketing stage.
Early Stage (as Fund Stage)
Funds that make a majority of their investments in companies that have a product development,
initial marketing, manufacturing and sales activities already in testing or production. The
investments are used by the company to begin production and sales. In some cases, the
product may have just been made commercially available. These companies may not yet be
generating profits. The companies may be in the process of organizing or they may already be
in business for three years or less. Usually such firms will have made market studies,
assembled the key management, developed a business plan, and are ready or have already
started conducting business.
Later Stage (as Fund Stage)
Funds that make a majority of their investments into portfolio companies that have an already
established product or service, and have already generated revenue, but may not be making a
profit. These companies may need capital to grow or expand. The investments are used to
increase marketing, production capacity, further product development, etc. Later stage funds
make the last round of investments in portfolio companies before an exit in the form of an IPO or
acquisition by a strategic partner.
Balanced (as Fund Stage)
Funds whose investment focus is a Multi-Stage (Balanced) focus in Venture Capital. These
funds' investment activities include Seed Stage, Early Stage and/or Later Stage investing with
no particular concentration on either.
Buyouts (as Fund Stage)
Funds that make leveraged buyout, management buyout or acquisition investments. In most
cases these funds use debt in addition to equity to leverage the size of their investments and
increase the potential return on investment. This stage would also include funds making
infrastructure investments.
Generalist (as Fund Stage)
Funds whose investment focus is both Venture Capital and buyout investing. Buyouts. These
funds can invest in all stages of Venture Capital and Buyouts.
Mezzanine Stage (as Fund Stage)
Funds that invest using a type of debt financing that has intermediate priority in the capital
structure of a company. For example, mezzanine debt has lower priority than senior debt but
usually has a higher interest rate and often includes warrants. In venture capital, a mezzanine
round is generally the round of financing that is designed to help a company have enough
resources to reach an IPO.
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Other Private Equity/Special Situation (as Fund Stage)
Funds that invest in companies which cannot be classified in the other fund stage categories.
Special Situation funds would be included in this fund stage classification. Other private equity
funds may include publicly traded funds, hybrid funds, or hedge funds.
Turnaround/Distressed Debt (as Fund Stage)
Funds that invest in underperforming companies. Turnaround funds may use both debt and
equity to invest in companies and employ a variety of tactics to improve profitability and
increase revenue. Distressed Debt Funds make investments in companies that are in
bankruptcy proceedings or already bankrupt. These funds purchase outstanding debt from a
company at a discount. Most distressed debt funds that are managed by private equity firms
make controlled debt investments, meaning they take an active seat on the company board or a
management position within the company. Restructuring Funds are funds that invest in
companies that have a large amount of debt, are in default of creditors, have insufficient liquidity
or lack capital assets. The funds look to restructure or eliminate these liabilities for the company.
Recap Funds are funds that make investments that include a reorganization of a company's
capital structure. Often Recap Funds will sell off non-essential assets, or pay down debt that a
company owes.
Industry Focus
The industry sector/s specially mentioned by the fund managers in the fund’s stated investment
policy. The selection checked should also reflect the current investments of the fund.
IRR (Internal Rate of Return)
The IRR is the interim net return earned by investors (Limited Partners), from the fund from
inception to a stated date. The IRR is calculated as an annualized effective compounded rate
of return using monthly cash flows to and from the investors, together with the Residual Value
as a terminal cash flow to investors. The IRR is therefore net, ie after deduction of all fees and
carried interest. In cases of captives or semi-captive investment vehicles without fees or carried
interest, the IRR is adjusted to create a synthetic net return using assumed fees and carried
interest.
NAV (Net Asset Value) / Residual Value
Total assets less total liabilities of the fund at a specific date at fair value (so NAV is net
of management fees and any carry owed on the Residual Value of the portfolio).
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