The down to earth investment glossary

The financial and investing world is filled with industry-specific jargon that can get anyone’s head spinning in zero-g and prevent first-time investors from taking that important step. Here we’ve taken some of the more commonly used financial terms in crowdfunding platforms and brought them back to Earth for everyday people.

Accredited investor: a high net worth individual who, by law, is able to invest a larger amount each year than a non-accredited investor (aka “retail” investor, see below). This is because they are thought to have the necessary financial ‘cushion’ and knowledge to bear and understand the risks involved with investing larger amounts of money.

Generally speaking, any natural person whose individual net worth, or joint net worth with that person’s spouse or spousal equivalent, exceeds $1,000,000; or, any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

Potential investors should refer to Regulation D, Rule 501 for a complete definition.

Upon sign-up in Spaced Ventures, all users will have the opportunity to indicate whether or not they qualify to invest as an accredited investor. All users 18 years or older, regardless of their investor status, have access to all investment deals on our platform.

Cap table (capitalization table): a spreadsheet or table of the issuing company’s securities and who owns them. Basically, a company’s “who owns what” list. Conducting a raise through Spaced Ventures may simplify a company’s cap table, as you have options for organizing your hundreds or thousands of investors into a single entry on your list.

Equity: Equity securities (e.g., common stock) represent an ownership interest of a company by shareholders. Unlike holders of debt securities (e.g., bonds) who generally receive only interest and the repayment of the principal, holders of equity securities are able to profit from capital gains. Capital gains is an increase in the value of a capital asset, such as a stock, that gives it a higher worth than the purchase price.

The risks associated with equity securities include, Risk of Loss, Market and Liquidity Risk, Performance Risk and Dilution Risks.

Convertible Note: A convertible security is an investment that can be changed into another form under its terms. The most common convertible securities are convertible bonds or convertible preferred stock, which can be changed into equity or common stock.

The risks associated with convertible securities include the associated risks of debt securities before the security is converted and equity securities after the security is converted.

Discount: A discount refers to a bond / note that is issued for less than its par—or face—value. Sometimes, a company will issue a Convertible Note at a discount to its face value.

Escrow: a legal arrangement where a third party temporarily holds money on behalf of two other parties who are completing a transaction. These funds cannot be released to the appropriate party until all predetermined conditions are met.

When you invest in a company on Spaced Ventures, your money is transferred to an escrow account handled by Prime Trust/FundAmerica (our escrow agent and payments provider). If the offering succeeds and reaches its funding goal, your money will be released to the startup you chose to invest in. Otherwise, it will be refunded to you.

Form C: also known as an Offering Statement, is a document that needs to be completed by any company conducting a raise through Regulation Crowdfunding and must be filed with the SEC (Securities and Exchange Commission). The purpose of a Form C is for companies to provide all the information reasonably necessary for investors to make an educated decision before investing in the company. Companies wishing to conduct a raise through us can fill out their own Form C or they can work with our partners at Spaced Ventures to help fill and verify it.

Interest rate: Bondholders receive interest for loaning a company money. Of course, bonds are subject to default risk, interest rate risk and more. The risk that arises for bond owners from fluctuating interest rates. How much interest rate risk of a bond depends on how sensitive its price is to interest rate changes in the market. The bond’s sensitivity depends on two things, the bond's time to maturity, and the coupon rate of the bond. . Issuer: a legal entity that develops, registers, and sells securities for the purpose of financing its operations. Spaced Ventures use the terms “company, issuer and issuing company,” interchangeably.

Know Your Customer(KYC): a set of standards and requirements set by the U.S. government and used in the investment and financial services industry to verify the identity of their customers, their risk profiles, and financial profiles. Basically, it is the process of verifying a person is who they say they are in order to help prevent money laundering, fraud, and other financial crimes. Spaced Ventures takes these requirements seriously. Therefore, before confirming your investment, you may receive an email from us asking you to provide more documents to better verify your identity or to provide the correct ACH payment information. Maturity date: The maturity date refers to the moment in time when the principal of a fixed income instrument must be repaid to an investor. In the context of a convertible bond, the maturity date is the scheduled date when a convertible debt will automatically convert into equity, unless it happens sooner such as with a financing round.

Retail investor: is an investor who is non-accredited and is not a professional investor who purchases securities for their own personal account.

Rolling close: a company may choose to do a rolling close to receive early access to some of the money raised so they can start using it to grow their business. The name comes from the fact that such investments are closed on a rolling basis, as opposed to at the end of a campaign. We anticipate that most Spaced Ventures companies may use rolling closes to speed up access to much-needed capital.

Valuation Cap: the maximum valuation at which a Convertible Note will convert into equity. It helps to ensure that a minimum number of shares per investor and allows companies to raise funds without committing to a valuation before the company is ready. Sometimes, a convertible note will include both a valuation cap and a discount.