Resources

Private Equity and Entrepreneurship Glossary

Early stage

The state of a company after the seed (formation) stage but before middle stage (generating revenues). Typically, a company in early stage will have a core management team and a proven concept or product, but no positive cash flow.

Earnings before interest and taxes (EBIT)

A measurement of the operating profit of a company. One possible valuation methodology is based on a comparison of private and public companies’ value as a multiple of EBIT.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

A measurement of the cash flow of a company. One possible valuation methodology is based on a comparison of private and public companies’ value as a multiple of EBITDA.

Earn out

An arrangement in which sellers of a business receive additional future payments, usually based on financial performance metrics such as revenue or net income.

Elevator pitch

A concise presentation, lasting only a few minutes (an elevator ride), by an entrepreneur to a potential investor about an investment opportunity.

Employee Stock Ownership Program (ESOP)

A plan established by a company to reserve shares for employees.

Enterprise Value (EV)

The sum of the market values of the common stock and long term debt of a company, minus excess cash.

Entrepreneur

An individual who starts his or her own business.

Entrepreneurship

The application of innovative leadership to limited resources in order to create exceptional value.

Equity

The ownership structure of a company represented by common shares, preferred shares or unit interests. Equity = Assets – Liabilities. Equity value can also be considered to be the proceeds from sale available to stockholders after all debt and other expenses have been deducted from enterprise value.

EVCA

European Private Equity and Venture Capital Association, an EU trade association for all forms of private equity.

Evergreen fund

A fund that reinvests its profits in order to ensure the availability of capital for future investments.

Exit strategy

The plan for generating profits for owners and investors of a company. Typically, the options are to merge, be acquired or make an initial public offering (IPO). An alternative is to recapitalize (re-leverage the company and then pay dividends to shareholders).

Expansion stage

The stage of a company characterized by a complete management team and a substantial increase in revenues.