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Glossary

A (2) | B (4) | C (9) | D (4) | E (14) | F (8) | G (4) | H (1) | I (4) | J (4) | L (4) | M (9) | O (3) | P (7) | Q (1) | R (3) | S (7) | T (3) | U (1) | V (2) | W (2)
Title Term Definition
Acquisition

An Acquisition is a corporate action in which an enterprise or individual buys some, of a target enterprise's ownership stakes in order to assume control of the target enterprise.

Audit Authority (AA)

The audit authority is a national, regional or local public authority or body designated for each Operational Programme and responsible for verifying the effective functioning of the management and control system; it also monitors project compliance with national and European regulations. The Member State will designate an audit authority for each Operational Programme (along with a managing authority and certifying authority). The audit authority's tasks include checking whether the management and control systems are working efficiently (system audits). It is also responsible for carrying out controls focusing specifically on declared expenditure (operational audits). Ensuring adequate separation of functions between the main authorities (managing/certifying authorities, intermediate bodies) is an important part of these controls.

Beneficiary

A public or private body and, for the purposes of the EAFRD Regulation and of the EMFF Regulation only, a natural person, responsible for initiating or both initiating and implementing operations; and in the context of State aid schemes, the body which receives the aid; and in the context of financial instruments under Title IV of Part Two CPR, it means the body that implements the financial instrument or the fund of funds as appropriate.

Blending

Funding arrangements that combine grants with other financing mechanisms such as loans.

Business angel

A knowledgeable private individual, usually with business experience, who directly invests part of his or her personal assets in new and growing unquoted businesses. Besides capital, business angels provide business management experience for the entrepreneur.

Buyout

A transaction in which a firm (or part of it) is acquired from the current shareholders (the vendors).

Capital Receipts

Payments or distributions or other amounts received or to be received by the relevant Financial Instruments representing the repayment or return of all or part of the Principal or capital element of any investment.

Certifying Authority (CE)

A certifying authority is responsible for guaranteeing the accuracy and probity of statements of expenditure and requests for payments before they are sent to the European Commission. Management of the European Regional Development Fund, European Social Fund and Cohesion Fund is shared with member countries, regions and other intermediary bodies. A certifying authority is nominated by one or more of the aforementioned groups for each Operational Programme co-financed by these Funds. Specific responsibilities of certifying authorities include: 1. Certifying compatibility of expenditure with national and EU rules and criteria; 2. Ensuring sufficient information is received from the relevant Managing Authorities to support their claims; 3. Taking account of audit reports; 4. Maintaining computerised records; 5. Keeping account of unused/recovered funds to be returned to the Commission.

Cohesion Fund

The Cohesion Fund is aimed at Member States whose Gross National Income (GNI) per inhabitant is less than 90 % of the EU average. It aims to reduce economic and social disparities and to promote sustainable development. The Cohesion Fund allocates a total of € 63.4 billion to activities under the following categories: 1. trans-European transport networks, notably priority projects of European interest as identified by the EU. The Cohesion Fund will support infrastructure projects under the Connecting Europe Facility; 2. environment: here, the Cohesion Fund can also support projects related to energy or transport, as long as they clearly benefit the environment in terms of energy efficiency, use of renewable energy, developing rail transport, supporting intermodality, strengthening public transport, etc. The financial assistance of the Cohesion Fund can be suspended by a Council decision (taken by qualified majority) if a Member State shows excessive public deficit and if it has not resolved the situation or has not taken the appropriate action to do so.

Cohesion Policy

Cohesion Policy is the European Union's strategy to promote and support the 'overall harmonious development' of its Member States and regions.Enshrined in the Treaty on the Functioning of the European Union (Art. 174), the EU's Cohesion Policy aims to strengthen economic and social cohesion by reducing disparities in the level of development between regions. The policy focuses on key areas which will help the EU face up to the challenges of the 21st century and remain globally competitive. Approximately 35.7% of the EU budget 2007-13 (equivalent to ca. €347.41 billion over seven years at 2008 prices) is allocated to financial instruments which support Cohesion Policy. These are managed and delivered in partnership between the European Commission, the Member States and stakeholders at the local and regional level.

Commission Communication

A Communication is a policy document with no mandatory authority. The Commission takes the initiative of publishing a Communication when it wishes to set out its own thinking on a topical issue. A Communication has no legal effect.

Commission Recommendation

In EU law Choose translations of the previous link, a Recommendation is a legal instrument that encourages those to whom it is addressed to act in a particular way without being binding on them. A recommendation enables the Commission (or the Council) to establish non-binding rules for the EU countries or, in certain cases, Union citizens.

Common Agricultural Policy (CAP)

The Common Agricultural Policy is one of the most important EU policies. The main aims of the policy include ensuring reasonable prices for Europe's consumers, fair incomes for farmers, production of high quality products and the use of environmentally friendly production methods, through the Common Market Organisation. CAP can intervene by providing financial support when farmers are hit by natural disasters or outbreaks of animal diseases such as foot-and-mouth.

Common Provision Regulation (CPR)

Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006.

Credit Risk Assessment

Credit Risk Assessment is a step in a risk management procedure related to the determination of the quantitative or qualitative value of the credit risk ("valuation") associated to an investment.

Debt instrument

Loans and other funding instruments that provide the investor with mostly fixed minimum returns and are at least partly secured.

Decision

In EU law Choose translations of the previous link, a decision is a legislative instrument that is binding in its entirety on all those to whom it is addressed.

Delegated Acts

Delegated acts are non-legislative acts of general application which supplement or amend certain non-essential elements of a basic legal act (see Article 290 of the Treaty on the Functioning of the European Union). Delegated acts can only be adopted if the legislator has delegated to the Commission the power to do so in the basic legal act. Furthermore, the basic legal act provides that the legislator may revoke the delegation to the Commission, and that a delegated act may only enter into force if no objection has been expressed by the legislator within a period set by the legislative act.

Directive

In EU law Choose translations of the previous link a directive is a legislative instrument that is binding on the EU countries to whom it is addressed as regards the result to be attained but leaves them free to determine the form and methods.

EGESIF

Expert Group on ESIF implementation issues

Employment and Social Innovation (EaSI)

The Employment and Social Innovation (EaSI) programme is a financing instrument at EU level to promote a high level of quality and sustainable employment, guaranteeing adequate and decent social protection, combating social exclusion and poverty and improving working conditions.

Equity

Provision of capital to a firm, invested directly or indirectly in return for total or partial ownership of that firm and where the equity investor may assume some management control of the firm and may share the firm’s profits.

Equity gap

Exists when there is a persistent capital market imbalance preventing supply from meeting demand at any price (or at a price acceptable to both sides). 

European Court of Auditors

EU Institution established to carry out the audit of EU finances. As the external body having auditing rights over the Commission, it contributes to improving EU financial management and acts as the independent guardian of the financial interests of the citizens of the Union.

European Progress Microfinance Facility

The European Progress Microfinance Facility, increases the availability of microcredit – loans below € 25 000 – for setting up or developing a small business.

European Regional Development Fund (ERDF)

Fund financed by European Union budgetary resources, set up in 1975 to stimulate economic development in the least prosperous regions of the EU. As one of the EU's Structural Funds, ERDF seeks to correct imbalances between regions across the EU and enhance economic and social cohesion.

European Social Fund (ESF)

Fund financed by European Union budgetary resources, set up in 1958 to improve employment and job opportunities in the European Union and so help raise standards of living. It aims to help people fulfil their potential by giving them better skills and better job prospects. 

Evergreen

A financial instrument or fund without a fixed maturity or term.

Ex-ante assessment

An assessment which precedes the European Structural and Investment Funds (ESIF) programme contribution to a financial instrument and which establishes evidence of market failures or sub-optimal investment situations and the estimated level and the scope of public investment needs, including types of financial instruments.

Ex-ante evaluation

Ex-ante evaluation required for Programmes in line with Article 55 of the CPR. The ex-ante evaluation of the programme should consider the form of interventions to be used at programme level (i.e. be a high-level gap analysis/feasibility study carried out in parallel with the programming exercise), leading to determine whether financial instruments should or should not be inincluded in the OP/RDP.

Exit policy/strategy

A policy/strategy for the liquidation of holdings by a Venture Capital or private Equity fund according to a plan to achieve maximum return, including trade sale, write-offs, repayment of preference shares/Loans, sale to another Venture Capitalist, sale to a financial institution and sale by public offering (including initial public offerings).

Expansion capital

Financing provided for the growth of a firm, which may or may not break even or be profitable. Capital may be used to finance increased production capacity, market or product development, or to provide working capital.

Expiry date of repayment term

A loan of a specific amount has a specified repayment schedule and specified maximum term (maturity). The expiry date refers to a date in the future upon which the borrower has to fulfill its last and final repayment obligation.

Final Recipient (FR)

A legal or natural person receiving financial support from a financial instrument.

Financial Instruments (FIs)

Union measures of financial support provided on a complementary basis from the budget to address one or more specific policy objectives of the Union. Such instruments may take the form of equity or quasi-equity investments, loans or guarantees, or other risk-sharing instruments, and may, where appropriate, be combined with grants.

Financial Intermediary (F.Int)

Entity acting as an intermediary between sources of capital supply and demand (e.g. bank, holding fund, fund).

Financial Regulation

Regulation (EU, EURATOM) No 966/2012 of the European Parliament and of the Council of 25 October 2012 , on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002.

Fund manager

The individual(s) or entity(ies) responsible for implementing the investment strategy and managing the portfolio of investments related to the Financial Instruments (being Equity funds, Loan funds, Guarantee funds), in accordance with the stated goals and provisions as set out in the Funding Agreement.

Fund of Funds (FoF)

A fund set up with the objective of contributing support from a programme or programmes to several financial instruments. Where financial instruments are implemented through a fund of funds, the body implementing the fund of funds shall be considered to be the only beneficiary.

Fund raising

The process in which venture capital firms raise money to create an investment fund . These funds are raised from private, corporate or institutional investors, who make commitments to the fund which will be invested by the general partner.

Funding Agreement

Contract governing the terms and conditions for contribution from ESIF programme to financial instrument. This will be established between a Managing Authority and the body that implements the fund of funds or between a Managing Authority or the body that implements the fund of funds and the body that implements the financial instrument.

GAFMA

Guidelines for SME Access to Finance Market Assessments: a methodology developed by the EIF to be used to prepare market assessments to identify market failures, suboptimal investment situations and investment needs related to the access to finance of micro-enterprises and SMEs.

General Block Exemption Regulation (GBER)

As part of the rationalisation and simplification of State Aid rules, the Commission adopted a General Block Exemption Regulation (GBER). The GBER declares certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty. The main purpose of the block exemption approach is to obviate the need for prior notification and approval of aid schemes in areas wherethe Commission has defined the circumstances in which it will find aid to be compatible with the common market.

Grant

Direct financial contributions, by way of donation, from the budget in order to finance either an action intended to help achieve an objective part of a EU policy or the functioning of a body which pursues an aim of general European interest or has an objective forming part of a EU policy.

Guarantee

A written commitment to assume responsibility for all or part of a third party's debt or obligation or for the successful performance by that third party of its obligations if an event occurs which triggers such guarantee, such as a loan default.

Horizontal Assistance (HA)

Advisory services and guidance that is in principle applicable to all Member States and types of Financial Instruments.

Income Receipts

Payments to, distributions to or other receipts by the relevant Financial Instruments representing the payment of income, or the earning of revenue by, the relevant Financial Instruments in respect of its investments other than capital receipts, which could include: 1. interest (including any capitalised interest); 2. dividends; 3. capital gains.

Initial public offering (IPO)

The sale or distribution of a company's shares to the public for the first time. An IPO is one of the ways in which a private equity fund can exit an investment.

Intermediate Body

Any public or private body which acts under the responsibility of a managing or certifying authority, or which carries out duties on behalf of such an authority, in relation to beneficiaries implementing operations.

Internal rate of return (IRR)

The net return earned by investors from the fund's activity from inception to a stated date. The IRR is calculated as an annualised effective compounded rate of return, using monthly cash flows and annual valuations.

Joint Action to Support Micro-finance Institutions in Europe (JASMINE)

Joint Action to Support Micro-finance Institutions in Europe, aims at providing both technical assistance and financial support to non-bank micro-credit providers and to help them to improve the quality of their operations, to expand and to become sustainable. JASMINE seeks also to promote good practices in the field of microcredit and to draft a code of good conduct for micro-credit institutions.

Joint Assistance to Support Projects in European Regions (JASPERS)

Joint Assistance to Support Projects in European Regions, is a technical assistance facility for the twelve EU countries which joined the EU in 2004 and 2007. It provides the Member States concerned with the support they need to prepare high quality major projects, which will be co-financed by EU funds.

Joint European Resources for Micro to Medium Enterprises (JEREMIE)

Joint European Resources for Micro to Medium Enterprises, is an initiative of the European Commission developed together with the European Investment Fund. It promotes the use of financial engineering instruments to improve access to finance for SMEs via Structural Funds interventions.

Joint European Support for Sustainable Investment in City Areas (JESSICA)

Joint European Support for Sustainable Investment in City Areas, is an initiative of the European Commission developed in co-operation with the European Investment Bank (EIB) and the Council of Europe Development Bank (CEB). It supports sustainable urban development and regeneration through financial engineering mechanisms.

Legacy funding

The prospective surplus of a fund attributable to the public sector contribution, which can, once available, be used to assist SMEs.

Legal Basis

Legal base or basis, as a general rule, a law based on an article in the Treaty giving competence to the Community for a specific policy area and setting out the conditions for fulfilling that competence including budget implementation. Certain Treaty articles authorise the Commission to undertake certain actions, which imply spending, without there being a further legal act.

Leverage effect

“The Union contribution to a financial instrument shall aim at mobilising a global investment exceeding the size of the Union contribution according to the indicators defined in advance”.
Article 223 – The leverage effect of Union funds shall be equal to the amount of finance to eligible final recipients divided by the amount of the Union contribution.In the ESIF context, the leverage is the sum of the amount of ESIF funding and of the additional public and private resources raised divided by the nominal amount of the ESI Funds contribution.

Loan

An agreement which obliges the lender to make available to the borrower an agreed sum of money for an agreed period of time and under which the borrower is obliged to repay that amount within the agreed time.

Major Project

As defined within Article 100 of the CPR, a Major Project is an ‘Operation (funded by ERDF or the Cohesion Fund) comprising a series of works, activities or services intended in itself to accomplish an indivisible task of a precise economic or technical nature, which has clearly identified goals and whose total cost exceeds EUR 50 million’.

Management costs

Management costs refer to direct or indirect cost items reimbursed against evidence of expenditure. Based on a performance based calculation methodology.

Management fees

Management fees refer to an agreed price for services rendered established via a competitive market process, where applicable. Based on a performance based calculation methodology.

Mezzanine

Mezzanine financing consists of a mix between debt financing and equity. It can be distinguished between equity mezzanine – i.e. forms of mezzanine that have many elements of equity – and debt mezzanine – i.e. forms of mezzanine that have many elements of debt financing. Mezzanine financing is usually unsecured and subordinate (so-called 'junior') to normal debt financing (so called 'senior loans').

Micro Credit

Small loans, usually smaller than €25 000, granted either by specialized institutions or by banks.

Microfinance institution (MFI)

Organization that provides financial services targeted to a clientele poorer and more vulnerable than traditional bank clients.

Monitoring Committee (MC)

Member States are required to appoint monitoring committees to check that Operational Programmes (OPs) which use Structural and Cohesion funding are being correctly implemented. As defined in Article 47 of the CPR, these committees are chaired by the relevant Member State (or managing authority) and comprise regional, economic and social partners. A monitoring committee's key tasks include: 1. assessing the effectiveness and quality of OPs; 2. approving criteria for financing under each OP; 3. making periodical reviews of OPs and their progress towards specific targets; 4. examining the results of implementation to assess whether those targets have been met; 5. where necessary, proposing revisions to OPs, including changes related to their financial management.

Muliplier ratio

An appropriate multiplier ratio shall be established through a prudent ex-ante risk assessment for the specific guarantee product to be offered, in addition to the ex-ante assessment in accordance with Article 37 (2) of the CPR, taking into account the specific market conditions, the investment strategy of the financial instrument, and the principles of economy and efficiency. Such ex-ante risk assessment may be reviewed where it is justified by subsequent market conditions.

Multi-region assistance (MRA)

This initiative aims to support the potential use of financial instruments in investment priority areas that are shared by regions from at least two different EU states.

Official Journal of the European Union (OJEU)

The Official Journal of the European Union is the publication in which all tenders from the public sector which are valued above a certain EU‐ defined financial threshold must be published. Broadly speaking , the legislation covers organisations and projects that receive public money.

Operation

A project, contract, action or group of projects selected by the managing authorities of the programmes concerned, or under their responsibility, that contributes to the objectives of a priority or priorities; in the context of financial instruments, an operation is constituted by the financial contributions from a programme to financial instruments and the subsequent financial support provided by those financial instruments. In the case of financial instruments organised through a fund of funds, an operation is constituted by the contribution to the fund of funds, subsequent contributions to financial intermediaries and subsequent investments in final recipients.

Other Revolving Instruments

Funds which are similar to the FIs, for the eligible sectors, but which are not established under Title IV of the CPR.

Pari Passu

Situation where a transaction is made under the exact same terms and conditions by public and private investors, with private investor contribution which has economic significance and with simultaneous interventions by both types of investors.

Preferential investor treatment

Term used to describe situations when the public sector is not treated pari passu because the private sector (e.g. commercial banks, private investors) is treated preferentially. That means that public sector funds are in a lower class in terms of repayment rights.The opposite of preferential investor/private sector treatment is pari passu treatment.

Private equity

Investment of equity capital in firms not quoted on a stock market. Venture capital is strictly speaking a subset of private equity, which also includes replacement capital and buyouts.

Proportionality principle

The proportionality principle means that, to achieve its aims, the EU will only take the action it needs to and no more. The principle is enshrined in the Community Treaty under Article 5, which states: "The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein."
This approach to responsibility and decision-making is applied as part of Cohesion Policy. It reduce the level of bureaucracy facing those administering Operational Programmes by streamlining rules and regulations.

Public Private Partnerships (PPPs)

Forms of cooperation between public bodies and the private sector, which aim to improve the delivery of investments in infrastructure projects or other types of operations, delivering public services through risk sharing, pooling of private sector expertise or additional sources of capital.

Public procurement

Public procurement refers to contracts covering supplies, services and works purchased by the public sector. Public procurement is subject to EU and international rules, although not all public procurement is subject to these obligations. Under these rules public sector procurement must follow transparent open procedures, ensuring fair conditions of competition for suppliers.

Public procurement rules

Rules governing the award of contracts by public administration. The principles of Public procurement Directive that Member States must transpose into national law are also applicable to the contracts of the Community institutions.

Quasi-equity investments

A type of financing that ranks between equity and debt, having a higher risk than senior debt and a lower risk than common equity. Quasi-equity investments can be structured as debt, typically unsecured and subordinated and in some cases convertible into equity, or as preferred equity.

Resources returned

Resources returned to the Financial Instruments from investments in Final Recipients can be categorised as ‘capital receipts’ and ‘income receipts’.

Risk Assessment

Risk Assessment is a step in a risk management procedure and relates to the determination of the quantitative or qualitative value of the credit risk ('valuation'). This exercise is specifically (but not only) relevant for the issue of Guarantees. Quantitative credit Risk Assessment requires the estimation and calculation of risk (including 'expected loss' and 'unexpected loss'), the magnitude of the potential loss and the probability that the loss will occur.

Risk-sharing instrument

Risk-sharing instrument means a financial engineering instrument which allows for the sharing of a defined risk between two or more entities, where appropriate in exchange for an agreed remuneration.

Securitisation

A transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having both of the following characteristics:
(a) payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures;
(b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme.
For ESIF, securitisation is possible under the SME initiative (Article 39 CPR) only i.e. for ERDF and EAFRD contributions to the SMEI.

Seed Capital

Seed Capital is the financing provided to study, assess and develop an initial concept. The seed phase precedes the start-up phase. The two phases together are called the early stage.

Shared Management

Refers to funds whose management is shared between the EU and the Member States, e.g. the Structural Funds and the Cohesion Fund. The EU entrusts management of the latter to the Member States. The bulk of EU spending involves funds which come under shared management by the EU Member States. For funds in 'shared management', the Commission currently entrusts the Member States with implementing programmes at national level. Member States then allocate these funds to end recipients (e.g. companies, farmers, municipalities, etc.). The Member State has primary responsibility for setting up a management and control system which complies with the requirements of the Regulations, ensuring that this system functions effectively and also preventing, detecting, and correcting irregularities. The Commission plays a supervisory role by satisfying itself that the arrangements governing the management and control system are compliant. It does so by verifying the effective functioning of this system and making financial corrections, where necessary.

Start-up Capital

Capital provided to enterprises for product development and initial marketing. Enterprises may be in the process of being set up or may exist but have yet to sell their product or service commercially.

State aid

'State aid' means aid falling under Article 107 (1) of the Treaty, which shall be deemed for the purpose of this Regulation, to also include de minimis aid within the meaning of Commission Regulation (EC) No 1407/213 of 18 December 2013 on the application of Articles 87 and 88 of the Treaty to de minimis aid, Commission Regulation (EC) No 1408/2013 of 18 December 2013 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid in the sector of agricultural production and Commission Regulation (EC) No 875/2007 f 24 July 2007 or its successor Regulation on th application of Aricless 87 and 88 of the Treaty to de minimis aid in fisheries sector and amending Regulation (EC) No 1860/2004.

Subsidiarity principle

The subsidiarity principle aims to ensure that decisions are taken as closely as possible to the citizen. Except in cases where the EU has exclusive competence, action at European level should not be taken unless it is more effective than action taken at national, regional or local level. Susbsidiarity is closely bound up with the principles of proportionality and necessity, meaning that any action by the Union should not go beyond what is necessary to achieve the objectives of the Treaty.

Support from the ESI

Support from the ESI Funds means support from one or more of the following funds: European Regional Development Fund, European Social Fund, Cohesion Fund, European Agriculture Fund for Rural Development, European Maritime and Fisheries Fund. Support from the ESI Funds does not include the national co-financing.

Tailor-made Financial Instruments

Already existing or newly created financial instruments, specifically designed to achieve the specific objectives set out under a relevant priority. Financial Instruments other than Off-the-shelf Financial Instruments.

Technical Support

Grants for technical support, which are combined with a financial instrument (FI) in a single operation are provided for the preparation of the prospective investment (please refer to Article 37 (7), (9) of the CPR).

Thematic Objectives

Objectives supported by each ESI Fund in accordance with its mission to contribute to the Union strategy for smart, sustainable and inclusive growth (see Article 9 of the CPR): 1. strengthening research, technological development and innovation; 2. enhancing access to, and use and quality of, ICT; 3. enhancing the competitiveness of SMEs, of the agricultural sector (for the EAFRD) and of the fishery and aquaculture sector (for the EMFF); 4. supporting the shift towards a low-carbon economy in all sectors; 5. promoting climate change adaptation, risk prevention and management; 6. preserving and protecting the environment and promoting resource efficiency; 7. promoting sustainable transport and removing bottlenecks in key network infrastructures; 8. promoting sustainable and quality employment and supporting labour mobility; 9. promoting social inclusion, combating poverty and any discrimination; 10. investing in education, training and vocational training for skills and lifelong learning; 11. enhancing institutional capacity of public authorities and stakeholders and efficient public administration.

Union priorities for rural development

For the EU rural development policy (EAFRD) ‘Thematic objectives’ are translated into Union priorities for rural development as defined by Article 5 of the specific EAFRD proposal for a new Regulation [COM(2011) 627 final/2]. So, the term ‘Thematic objectives’ will also cover the Union priorities for rural development

Venture Capital (VC)

Investment in unquoted enterprises by Venture Capital firms who, acting as Principals, manage individual, institutional or in-house money. In Europe, the main financing stages included in Venture Capital are early-stage (covering seed and start-up) and expansion. Strictly defined, Venture Capital is a subset of private Equity. Venture capital is thus professional Equity co-invested with the entrepreneur to fund an early-stage (seed and start-up) or expansion venture. Offsetting the high risk the investor takes is the expectation of a higher-than-average return on the investment.

Venture Capital Fund (VCF)

An investment fund that manages money from professional investors seeking private equity and equity -related securities (such as quasi-equity) in small and medium-sized firms (investee companies) with strong growth potential. The venture capital fund is usually an unincorporated arrangement such as a limited partnership . A management company that usually has several funds under its control may be a limited company, a limited partnership or a company quoted on a stock market.

Winding-up

A process that entails selling all the assets of a fund, paying off creditors, distributing any remaining assets to the Principals, and then dissolving the fund. Essentially, 'Winding up' is to be understood as 'liquidation'.

Working Capital

Difference between current assets and current liabilities of an enterprise.