Term

Main definition

Incentive Stock Options

Stock options that are entitled to favorable tax treatment for the holder under the Internal Revenue Code (e.g., the holder may avoid the obligation to pay taxes at the time of exercising the option and thereby deferring tax until the disposition of the stock, and along with this achieving long-term capital gains treatment instead of ordinary income treatment on the intrinsic value of the option).

Incorporation

The process which results in a business or venture becoming a corporation, via filing a charter with the state of incorporation's secretary or department of state. Many businesses choose Delaware as the state in which to incorporate and be domiciled.

Incubator

An organization or facility designed to host, nurture, and assist start-up companies (including business concepts and new technologies) to the point that they become attractive to professional management, angel investors, and even venture capital funds. [more ...]

Indemnity

Provisions in a definitive acquisition and sale agreement (and sometimes in an agreement in a different context) provide a party with indemnification rights and incidental remedial rights after the closing (i.e., to recover cash compensation for specified damages, losses, costs, or expenses for a specified period of time) against the other party, and those provisions are typically applicable only with respect to breaches by the other party of its representations and warranties or covenants (that survive the dosing), and under these provisions as well as other damages an indemnified party may have an express right to recover legal fees and legal costs and expenses incident to pursuing those remedial rights.

Independent Directors

A member of a board of directors who has no material financial ties or affiliations with either the company, company insiders (i.e., founders or management) or outside investors that effectively control the company.

Initial Public Offering

A corporation's first offer and sale of stock to the public effected pursuant to a registration statement (and prospectus) filed with and declared effective by the SEC under the Securities Act.

Inside Round

A round of funding in which the investors have all previously invested (usually in the immediately preceding round) in the company. Inside rounds can give rise to valuation and conflict issues (and attendant potential liabilities).

Institutional Investor

Large, asset-rich, professionally managed organizations that (as a core business model) invest capital-on behalf of others--in a variety of investments and asset classes and on a continuous basis.

Intellectual Property ("IP")

Intangible (non-physical), but often very valuable, assets of the business, such as inventions, knowledge, know-how, "brand", techniques, and unique writings and images, often protected by the law of patents, copyrights, and trademarks.

Internal Controls

The processes and procedures that control the conduct of persons engaged in financial transactions on behalf of the company.

Internal Rate of Return

The interest rate (expressed as a return on capital invested) at which a specific amount of capital invested today would have to grow in order to reach a specific value at a specific time in the future.

Investor Rights Agreement

One of the principal definitive agreements (between the company and the investors/purchasers) in a venture capital investment transaction, typically providing for registration rights, covenants regarding rights to financial and other information, board observer rights (if any), other affirmative and negative covenants, and rights of first refusal an new issuances of securities by the company.

IPOs

Acronym for the Initial Public Offerings, which often involve a company's common stock being registered with the SEC under the 1933 Act.

ISOs

Acronym for Incentive Stock Options.

Issuer

The name stems from the fact that a company that raises capital "issues" either debt instruments or securities, or a hybrid of the two.