Hill Glossary
Learn the language of the Private Markets
A concise reference for the language of private markets and pre-IPO investing
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A
Accredited Investor
An investor who meets specific income, net worth, or professional criteria that allow them to participate in certain private investment opportunities.
Alternative Minimum Tax (AMT)
A parallel tax system designed to ensure high-income individuals pay a minimum amount of tax by limiting certain deductions and preferences.
B
C
Capitalization Table
A cap table is a snapshot of who owns what in a company, showing equity holders, their ownership percentages, and how financing events affect them.
Common Stock
The most basic class of equity, typically held by founders and employees, representing ownership with voting rights and residual claims on a company’s assets.
Convertible Note
A short-term debt instrument that converts into equity, commonly used in early-stage startup financing.
Crowdfunding
A way for startups to raise capital by offering equity to many individual investors through online platforms.
D
E
Early Exercise
Exercising stock options before they fully vest, often to start tax holding periods or pursue potential tax advantages, while taking on more risk.
Employee Stock Option Plan (ESOP)
A pool of shares and governing rules that startups use to grant equity to employees and other service providers.
F
Fair Market Value (FMV)
The price at which one share of a private company's stock would be valued on the open market, often determined via a 409A valuation.
Form 1099-B
An IRS tax form used to report the sale of capital assets, including private company stock, for calculating capital gains or losses.
Form D
A filing with the SEC that lets companies report a private securities offering instead of going through full registration.
Founders’ Preferred Stock
A special class of founders’ equity that can automatically convert into preferred stock, often used to manage tax on secondary sales.
Founders’ Stock
The initial common shares issued to a startup’s founders, usually purchased at a very low price and sometimes subject to vesting.
I
N
Non-Participating Stock
A class of preferred stock that gives investors a liquidation preference but generally no right to participate further in remaining proceeds.
Non-Qualified Stock Options (NQSOs)
Employee stock options that do not receive ISO tax treatment and are generally taxed as ordinary income on exercise.
O
P
Participating Stock
Preferred stock that gives investors both a liquidation preference and the right to share in remaining proceeds with common shareholders.
Preferred Stock
A class of stock with special rights and protections, commonly held by venture investors instead of common stock.
Primary Market
The market where a company issues new securities directly to investors to raise capital.
Q
R
Restricted Stock Units (RSUs)
A form of equity compensation where shares are delivered to a service provider once vesting conditions are met, without requiring an exercise.
Right of Co-Sale
A contractual right that lets certain investors sell their shares alongside another shareholder in a secondary sale, on the same terms.
Right of First Refusal (ROFR)
A contractual right giving certain parties the option to buy shares before they can be sold to an outside buyer.
Rule 701
A federal exemption that lets private companies issue equity compensation without registering with the SEC.
S
Secondary Market
A marketplace where investors buy and sell securities that have already been issued, including private company shares.
Section 83(b) Election
An election to have startup stock taxed at purchase rather than vesting, often used to lock in a lower tax basis early.
Simple Agreement for Future Equity (SAFE)
A non-debt security that converts into equity in the future, designed as a simpler alternative to convertible notes.
Strike Price
The fixed price at which an individual can purchase a share of company stock when exercising a stock option.
T
Tender Offer
A transaction where existing shareholders are given the chance to sell some or all of their shares at a specified price, often before an IPO or acquisition.
Transfer Restrictions
Limitations placed on how and when company shares can be transferred, often used to control the cap table in private companies.
