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Convertible<br />
Note/Debt<br />
Commonly used in a startup’s first investment round, a convertible<br />
note is a loan made to a startup by an investor which is to convert to equity<br />
at a predetermined trigger event (and is generally not paid back).<br />
Crowdfunding<br />
The raising of smaller amounts of capital from a larger number of<br />
investors, usually via the internet and usually in return for future<br />
access to products or services.<br />
Debt Financing<br />
Raising capital for your startup by borrowing money in return for the<br />
payment of interest (rather than receiving money in return for shares).<br />
Default<br />
Inability or failure to repay a loan or make a required repayment.<br />
Dilution<br />
Dilution occurs when the percentage that a shareholder owns of a<br />
company is reduced as a result of the company issuing new shares.<br />
Director<br />
A person validly appointed to govern a company on behalf of<br />
its shareholders.<br />
A discretionary trust is a trust under which the trustee can exercise<br />
its discretion when distributing trust income amongst the trust’s<br />
beneficiaries.<br />
Dividend<br />
A payment made by a company to its shareholders. Startups usually<br />
make the payment of dividends discretionary and it is rare for them<br />
to be paid at all in the early stages.<br />
Due Diligence<br />
A process whereby potential investors investigate a company they are<br />
looking to invest in. Investors are looking to confirm that everything<br />
promised in the pitch is accurate.<br />
Employee<br />
A person employed by your startup for a wage or salary either on<br />
a casual, part-time or full-time basis. Distinct from a contractor,<br />
the business is obliged to provide an employee with entitlements<br />
such as sick leave and superannuation contributions.<br />
Employee Share<br />
Option Plan/Employee<br />
Share Scheme<br />
A scheme in which employees are granted shares or options to buy<br />
shares in the company in order to incentivise and reward them.<br />
Equity<br />
Share ownership in a company.<br />
Equity Financing<br />
Distinct from debt financing, equity financing involves the issuance<br />
of shares to investors in return for capital.<br />
Escrow<br />
Funds held by a third party until certain obligations/conditions are<br />
fulfilled by the contracting parties.<br />
Exercise<br />
When an option holder purchases shares under their option<br />
entitlement.<br />
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