— Valuation: This is the dollar value of 100 percent of the company stock. The terms pre-money valuation and post-money valuation refer to the dollar value of the stock before an investment is made and after the funds have come in.

— Warrants: The right to purchase stock in the future at a predetermined price, which is called the strike price. Warrants are used to reward early investors, consultants, lenders or as an incentive for new investors.

— X-times: Many times the investor will insist that he or she must receive "x-times" their investment back before the founders and other investors are allowed to participate in any harvest. If the x-times number is two, then the investors want two times their money back before anyone else gets a piece of the pie.

There may be other important words for entrepreneurs to know, but these provide a good, solid basis for understanding. If a potential investor uses a word you're unfamiliar with, stop and ask for a definition. It's better to look ignorant than to make a decision based on incomplete, inaccurate or misinterpreted information.

That would indeed be a "very grave danger."

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Joseph Ollivier is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at cfe@byu.edu.