Investment Crowdfunding Glossary

ARR

ARR stands for "Annual Recurring Revenue", and is commonly used by startups when talking about subscription sales of their products or services

ARV

ARV stands for "After-Repair Value", and is a term used frequently in real estate investing. The higher the ARV, the higher the risk for the lender.

Becoming an accredited investor has nothing to do with certification or accreditation in the way most people think of those things. It mostly just means “people that the SEC considers sophisticated enough to invest in unregulated private investments, like startups or commercial real estate”.

Angel Investing

Angel Investing is a form of “seed” capital, which is money used in the early stages of a business, often before there is any meaningful revenue from paying customers. Usually angel investments are based on more than just an idea – usually a prototype of some kind exists, and there is enough of an organization in place to give the investor confidence that the business can succeed in the difficult challenge of finding “product-market fit”.

Broker-dealer

A Broker-Dealer is registered with the SEC, and subject to a range of regulations and restrictions, including the obligation to “recommend only those specific investments or overall investment strategies that are suitable for their customers.”

Cap Rate

Cap Rate, short for “Capitalization Rate” is a term used in real estate investing as one measure of investment return. It is calculated by dividing the Net Operating Income (NOI) the property generates by the current market value of the property.

Cap Table

A company’s cap table is a document (typically a spreadsheet, especially among young companies) that expresses exactly who owns what equity in the company (including percentage and equity type, like Preferred Stock vs. Common Stock), as well as tracking any convertible debt, warrants, or other claims on the company.

Capital Stack

Capital Stack is a term encountered mostly in commercial real estate projects, and it refers to the relative priorities of different lenders and equity holders in a property.

Carried Interest

Carried interest, also called "carry", refers to the portion of an investment's profits that are paid to the investment manager.

Convertible Note

A convertible note is a type of investment security that startups use to raise money from angel investors and venture capitalists.

Down Round

A down round is an investment round in which a company raises capital at a valuation that is lower than its previous valuation

Due Diligence

Due Diligence for investments just means doing "reasonable" homework to fully investigate what you're investing in before proceeding

JOBS Act

The 2012 JOBS Act (short for “Jumpstart Our Business Startups Act”) was a sweeping law intended primarily to overhaul financing options for small businesses, as well as make it easier for private companies to go public (if they wanted to), and to create new intermediate options between staying private and going public for those that sought to stay private longer (aka, “mini-IPOs”).

LTV

LTV is short for "Loan-to-Value", and it comes up a lot in Real Estate investing. The higher the LTV, the higher the risk is for the lender

Litigation Financing

Litigation financing is providing money to a plaintiff in order to fund a lawsuit in exchange for a portion of the award (if any) recovered during a trial. While the money is often used directly to pay for legal expenses, it can also be used to pay for a plaintiff’s ongoing personal or business expenses during the lawsuit.

Opportunity Zone

An opportunity zone is an economically-distressed community where new investments may be eligible for preferential tax treatment.

Reg A+

SEC Reg A+ opened up new kinds of real estate and startup investments to everyone. Browse our investment platform reviews and explore investor resources

Reg CF

Reg CF crowdfunding investment offerings are true “crowdfunding”, in the sense that anyone can invest in them, and all of the advertising and notifications about them must happen on the internet.

Reg D

Reg D is part of the SEC's rules and regulations, and was updated in 2013 as part of Title II in the 2012 JOBS Act.

Rule 506(b)

Crowdfunding Investments offered under Rule 506(b) are typically only open to accredited investors (with some important exceptions), and companies cannot use "general solicitation" to advertise the offerings.

SAFE (Simple Agreement for Futur Equity)

A SAFE is a type of investment contract often used for startup investments

SPE

SPE is short for "Special Purpose Entity", and SPEs are very common across the investment crowdfunding ecosystem. They are typically LLCs (limited liability companies) or LLPs (limited liability partnerships) created to own a specific asset like a property or piece of fine art.

Schedule K-1

Many real estate and equity crowdfunding investments are indirect using LLCs or other SPVs, which will send you one of these each year at tax time.

Syndicate

An investment syndicate is used to pool investor funds into a single investment, usually taking the form of a Limited Partnership (LP) or an LLC.

Want to learn more but aren’t sure where to start? You can explore 168 crowdfunding investment platforms in our database and learn more about the nuts and bolts of crowdfunding and alternative investing on our blog. Did you know you can use a self-directed retirement account to invest in many alternative investments? Rocket Dollar makes it easy, and when you sign up using that link you'll be helping to support YieldTalk.

EquityMultiple

Outstanding

EquityMultiple stands out among real estate crowdfunding investment platforms because their main investors and senior leadership come from institutional real estate finance, rather than being VC-funded. Seed funding for the company was provided by Mission Capital (later acquired by Marcus & Millichap) and their co-founders and board of advisors come from the New York real estate finance and law community. They offer fewer investments than some other platforms, but that’s a deliberate choice to take a more curatorial approach to dealflow. Overall, EquityMultiple is a solid choice for accredited investors looking for a hands-off way to invest in commercial real estate.

"Gain exclusive access to high-yield commercial real estate deals"

First National Realty Partners

Excellent

First National Realty Partners (FNRP) is a commercial real estate private equity firm that focuses on grocery-anchored commercial shopping centers, offering both investments in individual properties and an Opportunity Fund across all of their offerings.

"First National Realty Partners (FNRP) is a rapidly growing commercial real estate private equity firm that owns and operates real estate throughout the United States. FNRP focuses on expanding its portfolio by acquiring market-dominant, well-located commercial assets well below replacement cost. "

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