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A short lexicon of fundraising

Raising funds is the nerve of the war for a young innovative company (Start-up). Here is a short lexicon to understand some elements of language of your project. XVAL teams are at your service for the study of the business plan and the valuation of your start-up.

Why establish a valuation of your start-up?

The valuation of your start-up and the detailed valuation document will be a real tool for your fundraising project to discuss and negotiate with potential investors within your start-up to :

  • objectify the discussions around the value of your start-up
  • Reassure investors that you are serious about raising funds
  • Allow you to establish an initial reference and a valuation scheme for the different stages of your growth.

Fundraising Glossary:

Capital increase: issue of shares at a fixed price subscribed by existing and new shareholders. The amount raised increases the company's equity. The holders of shares have one voting right and one dividend right for each share held.

Seed: the crucial stage corresponding to the launch and development of a start-up's product or service. Seed capital is a first raising of money from seed funds, private investors such as business angels and family offices.

Tax benefits: measures put in place to support innovation in start-ups such as the research tax credit (CIR), the innovation tax credit (CII), the status of young innovative company (JEI) with tax breaks.

Business angel: an individual who invests in an innovative company with strong growth potential. A current or former entrepreneur, he or she finances the project in which he or she believes and contributes his or her managerial experience. He is a minority shareholder in the company.

Start-up business plan: a document detailing the company's development prospects over a three to five year period. The start-up business plan includes a presentation of the product or service, a market study, the development strategy, the quantified objectives for revenue growth, the income statement, investments and financing, and the short-term cash flow plan.

Private equity: type of investment that consists of a professional investor taking a minority stake in the capital of an unlisted, innovative and fast-growing company. Private equity includes venture capital (financing during the creation of the start-up and seed capital) and development capital (financing a company that has reached a certain level of maturity).

Crowdfunding (participatory financing): collection of funds from a multitude of individuals on a dedicated internet platform to finance a project. Participative financing can take the form of crowdgiving (donation paid by the Internet user with or without a symbolic reward), crowdlending (loan with or without interest) or crowdinvesting (investment with shares in the capital or royalties in return).

Family office: asset management structure serving one family (single family office) or several wealthy families (multifamily office). The presence of a family office in the capital of a start-up is a source of significant long-term financial contributions with a view to increasing the value of the start-up.

Free cash flow: free cash flow generated by operations, after financing customer and supplier deferrals and capital expenditure. It can be used to finance external growth, repay debt or pay dividends to shareholders. Discounted future free cash flows are used for start-up valuations.

Love money: raising funds from family, friends and close relations of the creator of the young company. The use of this method of financing provides financial resources before having access to a bank loan or private equity.

Start-up valuation: estimation of financial value based on growth prospects. The methods used are Discounted Cash Flow (DCF), Net Asset Value (NAV) and peer multiples.

Getting your start-up evaluated:

XVAL.fr experts are at your disposal to help you in the valuation of your strat-up, whether it is to sell the company, raise funds or negotiate financing.

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