BZT Dictionary®

Fee

A collective term for the remuneration of, among others, advisors. It can also relate to remuneration which investors receive from the companies in which they invest (so-called management fees or monitoring fees) to cover their direct costs for administration of an investment.

Financial buyer

A buyer which is not an industrial business, an entrepreneur or a business angel. The purchase may involve an entire company or a significant part of it. Among examples of financial buyers are investment companies and venture capitalists.

Financial buyers are usually not experts in the company's operational activities but contribute capital and strategic advice and share their networks of influential, experienced people.

Flip

A very short-term investment, in which the investor's exit (the time for sale) has already been decided upon before the completion of the investment.

First round financing

The financing of a young company is usually divided into a number of rounds. The first round is the one which is associated with the greatest risk since the company has perhaps not yet managed to launch its products and start its sales. See also "Second round financing".

Image: Shutterstock

Focusing

Relates to a concentration on those businesses where the company has special advantages as compared with its competitors. Focusing entails at the same time saying no to more remote or new transactions and avoiding the allocation of competence and resources over many businesses. An appropriate choice of words is "less is more".

Image: Shutterstock

Fund

A fund is a gathering of capital which is owned by several investors together (fund unit owners) and, depending on its orientation, makes investments in various types of securities. The fund provides the individual fund unit owner both with an opportunity for larger transactions and greater spreading of risk. An example is a diversified share fund which spreads its capital over a range of industrial and geographic areas and may have tens of thousands of fund unit owners. The fund will have a Fund Manager with responsibility for investments and management of the fund's capital.

The capital of Venture Capitalists and Private Equity comes from funds, in which a number of institutional investors are given the opportunity via the fund to invest indirectly in unlisted companies. See more under "Raise a fund".

Image: Shutterstock

Fund raising

The process by which an investment fund is raised (created) and investors are invited to invest in a mutual fund. Read further under "Raise a fund".

Image: Shutterstock

Future, futures

A "future" is a binding agreement to buy or sell an asset at an agreed price and with delivery on a specified day. An example is a so-called "currency future" which is an agreement to buy or sell a specific currency. Currency futures are used, for example, by a company which wants to guard (to secure itself) against currency risks. For example, if a French company has a large purchase in USD, a bank can offer the company a futures contract in USD with a right to purchase Euros on a specific day in the future at the rate of exchange established today.

Currency futures are a way of hedging.

Image: Shutterstock