Initial/Seed
A relatively small amount of capital provided to an investor or entrepreneur, usually to prove a concept. It may involve product development, but rarely involves initial marketing.

First Stage
Financing provided to companies that have expended their initial capital and require funds, often to initiate commercial manufacturing and sales.

Second Stage
Working capital for the initial expansion of a company that is producing and shipping and has growing accounts receivable and inventories. Although the company has clearly made progress, it may not yet be showing a profit.

Third Stage
Funds provided for the major growth of a company whose sales volume is increasing and that is beginning to break even or turn profitable. These funds are typically for plant expansion, marketing and working capital development of an improved product.

Follow-on/Later Stage
A subsequent investment made by an investor who has made a previous investment in the company -- generally a later stage investment in comparison to the initial investment.

Buyout
Funds provided to enable operating management to acquire a product line or business, which may be at any stage of development, from either a public or private company.

Secondary Purchase
Purchase of stock in a company from a shareholder, rather than purchasing stock directly from the company.

Bridge/Mezzanine
Financing for a company expecting to go public usually within six months to a year. Often bridge financing is structured so that it can be repaid from proceeds of a public underwriting.

IPO/Initial Public Offering
A company's first offering of stock to the public.

Equity
Equity is ownership interest in a corporation, represented by the shares of stock which are held by investors.

Equity Offerings
Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.

Equity Related Loan
Equity related loans are loans convertible into equity ownership or loans collateralized with equity positions

Investment Banks
An investment banking firm acts as underwriter or agent, serving as intermediary between an issuer of securities and the investing public. Investment bankers handle the distribution of blocks of previously issued securities, either through secondary offerings or through negotiations, maintain markets for securities already distributed, and act as finders in private placements of securities.

Private Placement
The sale of securities to a small group of investors (generally 35 or fewer) which is exempt from SEC registration requirements. The investors execute an investment letter stating that the securities are being purchased for investment without a view towards distribution. Secondary Public Offering
This refers to a public offering subsequent to an initial public offering. A secondary public offering can be either an issuer offering or an offering by a group that has purchased the issuer's securities in the public markets.

Underwriting
An investment banking firm acting as underwriter sells securities from the issuing corporation to the public. A group of firms may from a syndicate to pool the risk and assure successful distribution of the issue. There are two types of underwriting arrangements: best efforts and firm commitment. With best efforts, the underwriters have the option to buy and authority to sell securities, or if unsuccessful, may cancel the issue and forgo any fees. This arrangement is more common with speculative securities and with new companies. With a firm commitment, the underwriters purchase outright the securities being offered by the issuer.

Venture Capital
Venture Capital is the process by which investors fund early stage, more risk oriented business endeavors. A venture capital funding arrangement will typically entail relinquishing some level of ownership and control of the business. Offsetting the high risk the investor takes is the promise of high return on the investment.  

Harvard Business School definitions of the stages of investment (1987)

Seed Financing is the earliest stage of funding. A small investment (typically $25,000 to $300,000) is made to support an entrepreneur's exploration of an idea. Often there is no business plan, an incomplete management team, and little assurance that the basic technology is feasible. Sometimes, when the product technology is well-established, seed money is raised simply to finance the recruitment of key managment and the writing of a business plan, both of which are generally necessary for startup funding. See investors expect to provide basic business advice, and perhaps even office facilities, for their entrepreneurs. Seed investors often apply discount rates of over 80% to the projects in which they invest. [I.e., they expect a return of over 80% over the course of their investment.]

Startup Financing entails the commitment of more significant funds ot an organization that is prepared to commence operations. A startup should be able to demonstrate a competitive advantage. Most high-tehcnology firms should have a product in prototype form embodying a proprietary technology. A research-oriented venture, such as a biotechnology firm, might instead exhibit an impressive research staff. Low-technology ventures, usch as specialty retailing or entertainment, should have a powerful concept with pre-emption advantages and a superior management. Investors in startup ventures frequently provide assistance to management in recruiting key personnel, establishing sound management practices, and providing access to suppliers, banks, and potential customers. Startup investors apply discount rates of 50% to 70%.

First-Stage Financing is provided to on-going businesses. A first-stage company is generally not profitable, but it normally has an established organization, a working product, and, preferably, some revenues. First-stage funds are usually used to establish a company's first major marketing efforts, and to hire sales and support personnel in anticipation of higher sales volume. Often, funds are also applied to product enhancements or product line expansion. First-stage investors attmept to monitor closely a venture's head count, ensuring that staffing levels correspond to attainable sales levels. They often become more actively involved as problems develop in production or sales, and are prepared to replace key managers as necessary, sometimes filling in key positions themselves while searching for new managers. Discount rates applied to a first-stage venture are generally 40% to 60%.

Second-Stage Financing is typically provided for working captial and fixed asset needs to support the growth of a company with active production, sustainalble sales, and, preferably, some profits. Whereas earlier-stage funds were largely dedicated toward proving a venture's viability, second- and later-stage capital is oriented towards the expansion of a tested contender. Since the capital invested in the later stages is more likely to pay for assets rather than operating expenses, it is more readily recoverable in the event of liquidation, thus lowering the overall risk to investors. Second-stage investors do not generally expect to become actively involved in problem-solving as often as first-stage investors. The do monitor performance closely, generally by comparison to a business plan. Discount rates for second-stage investments range from 30% to 50%.

Bridge Financing is intended to carry a company until its initial public offering (IPO). Although and IPO is not yet appropriate due to market timing or the size and performance of the company, it is generally expected within a year after the bridge. Bridge investors might provide funds to satisfy ongoing capital needs, with an expectation of selling out again in the IPO as part of a secondary offering (an offering of sharholders', as distinct from company, stock). Alternatively, bridge investors might apply some or all of their funds to buy out early-stage investors who are anxious to liquidate their holdings. Such an investor often expects to hold the stock past the IPO date, as a long-term investment. Bridge investors are generally passive investors. They apply discount rates of 20% to 35%.