Venture Capital Glossary

An independent appraisal of a private company's common stock fair market value, required for setting stock option exercise prices.

A company built from the ground up with AI as a core product capability rather than an add-on feature.

A startup built primarily on top of an existing AI model or API rather than developing its own foundational model.

Annual Recurring Revenue — the annualized value of a company's subscription or contract revenue. The primary revenue metric for SaaS and subscription businesses, used to benchmark growth, valuation, and fundraising.

A valuation metric expressing a company's enterprise value as a multiple of its Annual Recurring Revenue — the primary valuation benchmark for high-growth SaaS businesses.

Assets Under Management — the total market value of investments that a firm manages on behalf of investors.

Assets Under Management — the total market value of investments a VC firm manages on behalf of its limited partners across all active funds.

The cumulative impact of management fees on net returns over a fund's lifecycle.

The residual value of a startup's assets if the business were shut down, including IP, customer lists, equipment, and remaining cash.

A provision that triggers immediate repayment of outstanding debt upon certain events like default or change of control.

A fixed-term program that provides startups with mentorship, resources, and a small amount of capital in exchange for equity, culminating in a demo day.

An individual or entity meeting SEC income or net worth thresholds, qualifying them to invest in unregistered securities.

An individual or entity that meets the SEC's financial thresholds to invest in private securities — typically a net worth over $1M or annual income over $200K.

The additional amount paid in an acqui-hire beyond the company's asset value, reflecting the cost of recruiting the team through traditional channels.

An acquisition made primarily to hire the target company's team rather than to acquire its product or technology.

The additional price paid in an acquisition specifically to retain key talent beyond the value of the company's assets or technology.

A transaction in which one company purchases another, either for its technology, team, customers, revenue, or strategic position — the most common exit path for venture-backed startups.

An investor who provides ongoing support, introductions, and strategic guidance beyond simply providing capital.

The practice of actively supporting and monitoring portfolio companies after investment to improve outcomes.

A company expanding into closely related products or markets to grow beyond its initial offering.

The pattern describing how new technologies are adopted over time by innovators, early adopters, early majority, late majority, and laggards.

The tendency for the worst deals to seek out less experienced or desperate investors, while the best deals go to top-tier funds.

When the best startups don't need your money and the ones that do may not be the best investments.

Equity granted to advisors in exchange for guidance, introductions, or strategic support.

A contractual obligation requiring a company to take specific actions, such as maintaining insurance, filing taxes, or providing regular financial reports.

The conflict of interest that arises when a GP's incentives diverge from those of their LPs or portfolio company founders.

A conflict of interest that arises when a person or entity (the agent) is expected to act in the best interest of another (the principal).

The amount of capital an LP commits to a specific asset class or fund — e.g., a university endowment allocating 15% of its portfolio to venture capital.

The amount of investment capacity an LP is granted in a particular fund or deal.

An investor's right to invest a specific amount in a fund or deal, often negotiated based on relationship and commitment size.

The contractual right to invest a specific amount in future financing rounds of a portfolio company.

Excess returns generated above a benchmark, attributed to skill rather than market conditions.

Returns above what would be expected from the market or a benchmark, attributable to a manager's skill rather than market conditions.

Investment categories outside traditional stocks, bonds, and cash — including VC, PE, real estate, and hedge funds.

Investment categories outside traditional stocks and bonds — including venture capital, private equity, hedge funds, real estate, and commodities.

A parallel tax system that limits certain deductions and preferences, potentially affecting the tax treatment of carried interest and fund distributions.

A parallel tax system that can create unexpected tax liability when exercising incentive stock options.

The first or largest investor in a funding round who sets the terms and signals confidence to other investors.

The first major institutional investor to commit to a fund, providing credibility and momentum for fundraising.

The first and typically largest limited partner in a new fund, whose commitment signals credibility and helps attract subsequent investors.

A portfolio construction approach where one or two large initial investments anchor the fund, providing stability while smaller bets provide upside.

A small early-stage investment made by an individual investor, usually ranging from $10K to $250K.

An individual who invests personal capital in early-stage startups — typically at pre-seed or seed stage — in exchange for equity, often providing mentorship and connections alongside capital.

The earliest institutional funding round, typically $100K-$2M from individual angel investors.

A group of angel investors who pool capital to co-invest in startups, typically organized by a lead angel who sources and negotiates deals.

A group of angel investors who pool capital to co-invest in deals together, typically organized through platforms like AngelList.

The average annual revenue generated per customer contract, commonly used in SaaS businesses.

A contractual protection for investors that adjusts their ownership percentage (or conversion price) if the company later raises money at a lower valuation.

Investor rights that adjust their conversion price downward if the company later issues shares at a lower price.

The specific mechanism used to adjust conversion prices in a down round, with full ratchet and weighted average being the two main types.

The collection of successful companies a VC firm passed on investing in — a humbling record of missed opportunities.

A business model that minimizes physical assets and capital expenditure, relying instead on software, platforms, or third-party infrastructure.

When one party in a transaction has more or better information than the other, creating an imbalance.

When one party in a transaction has significantly more or better information than the other, creating an imbalance that affects decision-making.

The defining characteristic of venture investing: limited downside (lose the investment) with potentially unlimited upside (100x+ returns).

Employment that either party can terminate at any time for any lawful reason without prior notice.

A certification for companies meeting rigorous standards of social and environmental performance, accountability, and transparency.

A for-profit company certified by B Lab for meeting rigorous social and environmental standards — relevant for impact-focused VC investments.

Software-as-a-service products sold to businesses, the dominant investment category in venture capital.

An informal reference check conducted through personal networks rather than through references provided by the founder.

Delegating fund administration, compliance, accounting, and reporting functions to specialized third-party service providers.

A founder who demonstrates the qualities VCs look for: vision, resilience, domain expertise, and ability to attract talent and capital.

A funding round designed to bring in new investors to replace or supplement existing investors who can't or won't follow on.

In SaaS, the total value of contracted but not yet recognized revenue — a leading indicator of future ARR growth.

A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time.

An investment strategy combining high-risk startup bets with more stable investments to balance overall risk.

One hundredth of a percentage point (0.01%), used to describe small changes in financial metrics and fee structures.

One hundredth of a percentage point (0.01%), used to express small differences in rates, fees, or returns.

The risk that a hedging instrument does not perfectly offset the exposure it was designed to mitigate.

A minimum damage amount that must be exceeded before indemnification claims can be made against sellers in an M&A transaction.

The percentage of a VC's investments that generate positive returns, as opposed to partial or total losses.

The competitive process where multiple VCs pitch a founder to win an investment allocation in a hot deal.

A conservative approach to deal structuring that layers multiple protective provisions to guard against downside risk.

A performance standard used to evaluate a fund's returns — typically the median or top-quartile IRR among peer funds of the same vintage year.

The systematic distortion in VC performance benchmarks caused by survivorship bias, selection bias, and reporting delays.

Custom or non-standard terms in a fund's LPA that are tailored to specific LP requirements or GP preferences.

The most advantageous alternative a party can pursue if negotiations fail — the foundation of negotiating leverage.

A product released to a limited audience for testing before full commercial launch.

The gap between what a buyer is willing to pay and what a seller is willing to accept for a private company's shares.

The combined cost of acquiring knowledge about a market through both direct investment losses and indirect research expenses.

A fund where LPs commit capital without knowing which specific companies will be invested in, trusting the GP's judgment and strategy.

A fund where investors commit capital without knowing the specific investments that will be made.

A fund structure where LPs commit capital before knowing which specific investments will be made — the standard structure for most VC funds.

A strategy of prioritizing speed over efficiency to rapidly capture market share, accepting extreme capital burn and operational chaos in pursuit of winner-take-all scale.

A large, privately negotiated sale of shares, typically executed off the public exchange to minimize market impact.

Creating uncontested market space rather than competing in existing, crowded markets.

The structure and makeup of a company's board of directors, including the balance between founder, investor, and independent seats.

A person who attends board meetings and receives board materials but cannot vote on board decisions.

A non-voting participant in board meetings, typically a smaller investor, who can attend and speak but has no voting rights.

A position on a company's board of directors, giving the holder voting rights on major corporate decisions. VC investors typically receive a board seat as part of a lead investment.

The governing body of a corporation, responsible for major strategic decisions, hiring/firing the CEO, and representing shareholders.

The carrying value of a portfolio investment on a fund's books — usually the last round valuation or a write-down if performance has deteriorated.

The lead arranger of a funding round who coordinates terms, allocation, and investor participation.

Building and growing a company using only personal funds and operating revenue, without external investment.

A company that grows using revenue and founder capital rather than external investment.

The implied value of a self-funded company based on its revenue, profitability, or comparable transactions rather than a priced funding round.

Building and growing a company using only personal savings, revenue, and operating cash flow — without raising outside equity capital.

A market sizing approach that builds estimates from actual customer data and unit economics rather than top-down market reports.

When a company grows quickly and hires too many mediocre employees, reducing organizational effectiveness.

The reputational risk a VC firm faces from being associated with controversial or failed portfolio companies.

A penalty paid when a party withdraws from a transaction after signing a binding agreement but before closing.

The moment when a company's revenue equals its costs, requiring no additional external funding to sustain operations.

A startup that achieves exceptional growth and market traction relative to its peers.

Short-term debt financing that provides runway between equity rounds, typically converting into the next round's equity.

Short-term financing that helps a startup survive until it closes its next equity round — typically structured as a convertible note that converts into the new round.

A small fundraise between larger priced rounds, typically done via SAFE or convertible note to extend runway to a key milestone.

The most common and founder-friendly anti-dilution formula that accounts for the size of the down round relative to total shares outstanding.

A market phase where asset valuations significantly exceed fundamental value, driven by speculation, excess capital, and narrative rather than earnings or cash flows.

A founder or operator actively creating products or companies rather than purely investing or advising.

A valuation approach that calculates required return by adding risk premiums for each layer of investment risk.

A loan structure where the entire principal is repaid in a single lump sum at maturity rather than through periodic payments.

The ratio of net cash burned to net new ARR added, measuring how efficiently growth capital converts to revenue.

Net burn divided by net new ARR — a measure of how efficiently a company is converting cash spending into revenue growth. The lower the burn multiple, the more capital-efficient the growth.

The rate at which a company spends its cash reserves, typically expressed as a monthly figure. Gross burn is total monthly cash outflow; net burn subtracts revenue collected.

A legal doctrine that protects board members from liability for good-faith business decisions, even if those decisions turn out poorly.

A clause allowing a company to repurchase shares from investors or employees under specified conditions.

Customer Acquisition Cost — the total cost to acquire one new customer, including sales and marketing expenses. A core unit economics metric that determines whether a business model is economically viable at scale.

The number of months required to recover the cost of acquiring a customer from the gross profit that customer generates — a core measure of go-to-market efficiency.

The portion of an LP's committed capital that the GP has actually drawn down through capital calls — as opposed to committed but not yet transferred capital.

A spreadsheet or software record showing every equity holder in a company — founders, investors, employees — and their ownership percentages, share counts, and fully diluted stakes.

The process of maintaining accurate records of company ownership, including all shares, options, warrants, and convertible securities.

An individual LP's running balance in a fund, tracking contributions, distributions, allocated gains and losses, and fees.

A request from a VC fund’s general partner to limited partners to transfer a portion of their committed capital — triggered when the fund is ready to make investments.

The sequence and timing of requests for LPs to fund their committed capital, following the schedule and procedures set in the LPA.

The ratio of revenue or value generated per dollar of capital raised — a measure of how productively a company converts investment into growth.

The ratio of revenue generated to total capital raised, measuring how effectively a startup converts investment into growth.

A measure of how much value a company creates per dollar of investment, typically expressed as revenue or exit value divided by total capital raised.

The financial markets where long-term debt and equity securities are bought and sold, including the IPO market.

The period when market conditions are favorable for IPOs, fundraising, or other capital-raising activities.

The total amount of committed but undeployed capital in venture funds, which can inflate valuations and distort market dynamics.

The practice of reinvesting early investment returns back into the fund to increase total deployable capital.

Reinvesting returned capital from early exits back into new investments during the fund's investment period.

The full hierarchy of financing instruments in a company, including equity, preferred equity, debt, and convertible securities.

The ongoing process of maintaining accurate records of a company's ownership structure, including all equity holders and instruments.

A venture fund backed primarily or entirely by a single institutional investor, such as a corporation, university, or family office.

The share of a fund's profits (typically 20%) that goes to the general partners as performance compensation, paid after returning all LP capital.

A provision requiring GPs to return previously received carry if the fund's final performance doesn't justify it.

Carried interest — the share of investment profits (typically 20%) that a VC fund's general partners keep as performance compensation, paid after LPs have received their invested capital back.

How a fund's carried interest is distributed among the investment team members.

The separation of a business unit or product line from a larger company to operate as an independent entity, often backed by VC or PE investment.

A clause allowing the GP to receive a larger share of profits after LPs receive their preferred return, until the GP catches up to their carried interest percentage.

A mechanism that allows the GP to receive a disproportionate share of profits after the preferred return is met, until the GP has received their full carried interest percentage.

A clause in a fund's waterfall allowing GPs to receive 100% of distributions until they've caught up to their target carry percentage after LPs receive their preferred return.

A startup defining a new market segment rather than competing directly within an existing one.

A company that defines and dominates an entirely new market category rather than competing in an existing one.

The dominant company in a market category that captures most of the value.

A company that meets rigorous standards of social and environmental performance, accountability, and transparency, certified by B Lab.

When a company's different sales or distribution channels compete with each other, cannibalizing revenue.

The dollar amount a venture capital firm invests in a single company in a given round — a key signal of a fund's stage focus and conviction level.

An information barrier within a firm that prevents conflicts of interest by restricting the flow of material non-public information between departments.

The rate at which customers cancel or fail to renew their subscriptions over a given period, expressed as a percentage of total customers or revenue.

The percentage of customers or revenue lost over a given period, a critical indicator of product-market fit.

A provision requiring GPs to return previously distributed carry to LPs if the fund ultimately underperforms — protecting LPs from overpaying carry on early exits.

A term sheet with minimal investor-protective provisions beyond the standard — no full ratchets, no excessive liquidation preferences, no onerous governance rights. A founder-friendly sign.

A term sheet with straightforward, founder-friendly terms and minimal complex provisions or investor protections.

The minimum period an employee must work before any equity vests — typically one year, after which a lump sum of equity vests at once.

A vesting provision where no equity is earned until a specified period (usually one year) has passed, after which a large chunk vests at once.

A fund structure with a fixed term and no ongoing ability for investors to add or withdraw capital after the initial fundraising period.

When a fund claims to be actively managed but its portfolio closely mirrors a benchmark index, delivering index-like returns at active management fees.

Requirements that must be satisfied before a funding round officially closes and money transfers.

The legal and administrative process of finalizing a funding round, including signing documents and wiring funds.

A funding round where multiple investors co-invest at the same terms without a clear lead investor.

When multiple VC firms co-invest in a round by splitting the allocation rather than competing, reducing competitive pressure on terms.

A legal agreement between co-founders establishing equity splits, roles, vesting, IP ownership, and departure terms.

Direct investment by an LP alongside a VC fund in a specific portfolio company — often offered as a perk to large LPs.

Tracking the behavior of a specific group of customers (cohort) acquired in the same period over time — the gold standard for measuring retention.

Contractual rights allowing LPs to invest directly alongside a VC fund in specific portfolio companies.

The difficulty of building a network-based product before enough users exist to make the product valuable.

A price range that limits the upside and downside of a transaction, commonly used in M&A deals involving stock consideration.

An LP's strategy for timing capital commitments to VC funds across vintage years to achieve target allocation and diversification.

The window during which a fund's GP can make new investments, typically the first 3-5 years of a fund's life.

The total amount LPs have legally agreed to invest in a fund — distinct from called capital (money already transferred to the fund).

The standard share class held by founders and employees. Common stock has lower priority than preferred stock in liquidation events but participates fully in the company's upside above the preferred stock liquidation stack.

A valuation method that estimates a company's value based on the trading multiples of similar public or recently acquired companies.

The market environment of direct and indirect competitors a startup operates within.

A durable structural advantage that protects a company from competitors.

The cumulative cost and effort required for a fund to meet regulatory, reporting, and governance requirements.

The set of policies, procedures, and controls that a fund or company implements to ensure adherence to legal, regulatory, and ethical requirements.

A restriction in the fund's LPA that caps the percentage of the fund that can be invested in any single company or sector.

The risk of outsized losses from having too much capital invested in a single company, sector, or geographic region.

The risk of having too large a portion of a fund's capital in a single investment or sector, increasing vulnerability to that investment's failure.

An LP's agreement to invest in a fund contingent on specific conditions being met, such as reaching a minimum fund size or obtaining a key person.

A new fund entity created to hold select assets from a prior fund, giving the GP more time to maximize value on their best investments.

An investment approach that deliberately goes against prevailing market sentiment, betting that consensus views are wrong about a sector, company, or trend.

The right of preferred stockholders to convert their preferred shares into common stock, typically at a 1:1 ratio.

An investment that converts to equity at a future financing round, structured as equity rather than debt to avoid maturity dates and interest.

An investment instrument that converts into equity at a future financing event, similar to a convertible note but structured as equity rather than debt.

A short-term debt instrument that converts into equity at a future financing round. An early-stage fundraising tool that carries an interest rate and maturity date, unlike a SAFE.

The standard equity instrument issued to VC investors — preferred stock that can be converted to common stock, typically at IPO or acquisition.

A venture capital arm of a large corporation that invests in startups for strategic and financial returns — e.g., Google Ventures, Salesforce Ventures, Intel Capital.

Investment arms of large corporations that invest in startups for both strategic and financial returns.

A highly dilutive financing round where new investors receive favorable terms that significantly dilute existing shareholders who don't participate.

A financing round where new investors impose severely dilutive terms on existing shareholders, often restructuring the cap table to their advantage.

A digital economy built around individuals monetizing audiences through platforms, tools, and communities.

A venture fund that invests across multiple countries or regions, navigating different legal, regulatory, and tax frameworks.

Linking the economics of multiple funds so that losses in one fund offset gains in another for fee or carry calculation purposes.

When multiple funds managed by the same GP invest in the same portfolio company, creating potential conflicts between fund vintages.

Investment firms that participate in both private and public markets, often investing in late-stage startups approaching IPO.

The total cost of acquiring a new customer, including all sales and marketing expenses.

The number of months it takes for the gross profit from a new customer to repay the cost of acquiring that customer.

The step-by-step journey a potential customer takes from awareness to purchase.

The risk created when a large percentage of revenue comes from a small number of customers.

The ratio between lifetime value (LTV) and customer acquisition cost (CAC), commonly used to evaluate SaaS business health.

Dividing customers into groups based on behavior, industry, size, or needs.

The degree to which customers continue using a product due to habit, switching costs, or embedded workflows.

A function focused on ensuring customers achieve value from a product and remain long-term subscribers.

Distributions to Paid-In Capital — the ratio of cash actually returned to LPs divided by the capital they invested. The only VC performance metric based on realized, distributed cash.

Distributions to Paid-In capital — the ratio of cash returned to investors versus cash invested, measuring realized returns.

The stage in fund distributions where GPs begin receiving carried interest after LPs have received back their full invested capital plus preferred return.

A secure digital repository where a company shares confidential documents with potential investors, acquirers, or partners during due diligence.

A secure digital repository where companies share confidential documents with potential investors during fundraising or M&A.

A secure online repository where startups share sensitive business documents with potential investors during due diligence.

A temporary recovery in a declining company's performance or valuation before it continues downward — a false signal of recovery.

Equity held by individuals who no longer actively contribute to the company, creating misaligned incentives and cap table friction.

Equity held by individuals who are no longer contributing to the company, creating a drag on the cap table and reducing available equity for active contributors.

The assignment of credit for sourcing, winning, and managing specific investments within a VC firm, which affects carry allocation and reputation.

Investor anxiety about missing a competitive deal that appears to be attracting strong demand.

The exhaustion and diminished judgment that occurs when a deal process drags on too long, often leading to either over-compromise or deal collapse.

The pipeline of investment opportunities a VC firm sees — more and better-quality deal flow is a key competitive advantage for top firms.

An internal document prepared by investors summarizing the rationale for an investment.

The process by which VCs identify and access new investment opportunities.

The speed at which a venture firm evaluates and closes investments.

Raising capital through loans or credit rather than selling equity, preserving ownership but creating repayment obligations.

A private company valued at $10 billion or more.

A private company valued at $10 billion or more — a step above unicorn status.

Startups built on significant scientific or engineering innovation that creates fundamental technological advantages.

A venture fund specializing in companies built on substantial scientific or engineering innovation rather than business model innovation.

A company that would reach profitability on its current trajectory before running out of cash — without needing to raise additional capital.

A company that will run out of cash before reaching profitability if it maintains its current trajectory — the opposite of default alive.

The percentage of LPs who fail to meet capital calls, or the percentage of venture debt borrowers who default on their obligations.

A company's ability to prevent competitors from replicating or overtaking its business.

SEC correspondence identifying issues in a company's regulatory filing that must be addressed before approval.

Marketing and sales activities designed to create awareness and interest in a product, driving qualified leads into the sales pipeline.

Investor rights that allow them to compel a company to register their shares with the SEC for public sale.

The right of investors to compel a company to register their shares with the SEC for public sale, typically exercisable after an IPO.

The culminating event of an accelerator program where startups pitch their companies to a room of investors.

When declining public market valuations shrink an LP's total portfolio, making their venture allocation appear disproportionately large relative to targets.

When falling public market values shrink an LP's total portfolio, making their VC allocation appear disproportionately large and potentially triggering a pullback from new commitments.

The timeframe during which a VC fund actively makes new investments, typically the first 3-5 years of a fund's life.

An early customer that works closely with a startup to shape product development before broad launch.

A venture fund focused specifically on investing in technology companies that serve the healthcare industry, from telemedicine to health data analytics.

The reduction in an existing shareholder's ownership percentage that occurs when a company issues new shares — through equity rounds, option grants, or convertible instrument conversions.

Future dilution risk created by options, convertibles, or other securities that may convert into equity.

Contractual mechanisms that protect investors from having their ownership percentage reduced by future issuances — primarily anti-dilution provisions and pro-rata rights.

A path to going public in which a company lists existing shares directly on a stock exchange without issuing new shares or using investment bank underwriters — no IPO lockup, no underwriting fee.

A transaction where company shares are sold directly between parties rather than through a company-sponsored event.

In SAFE/convertible note context: the percentage reduction applied to the next round's price to reward early investors. Typically 15-20%.

When a smaller company with fewer resources successfully challenges established incumbents by targeting overlooked segments.

A portfolio company in financial difficulty — low runway, declining metrics, or inability to raise additional capital at acceptable terms.

Debt securities of companies in financial difficulty, trading at significant discounts to face value, which can be purchased as an investment strategy.

A structural advantage in acquiring customers more efficiently than competitors.

A competitive advantage derived from superior access to customers through unique distribution channels.

A distribution of actual securities (like stock in a public company) to LPs rather than converting to cash first.

The practice of using your own product internally to test and improve it.

An equity provision that accelerates vesting when two events occur: a change of control (acquisition) AND termination of the employee.

Full or partial vesting acceleration that requires two events to trigger, typically a change of control plus termination of the employee.

A financing round completed at a lower valuation than the previous round. Down rounds trigger anti-dilution protections for existing investors and can be highly dilutive for founders and employees.

Contractual mechanisms designed to reduce investor losses if a company underperforms.

Shorthand for drag-along rights — allowing majority shareholders to compel minority shareholders to vote in favor of a sale.

A clause that allows majority shareholders to force minority shareholders to join in a sale of the company on the same terms.

Provisions that allow majority shareholders to force minority shareholders to participate in a company sale.

A provision allowing majority shareholders to force minority shareholders to vote in favor of an acquisition or other liquidity event.

The ownership percentage required to trigger drag-along rights, forcing all shareholders to participate in a sale of the company.

Committed but undeployed capital available for new investments or follow-on rounds — a measure of a fund's remaining investment capacity.

A share structure with two classes of common stock carrying different voting rights, typically giving founders disproportionate control relative to their economic ownership.

The investigative process a VC conducts before investing — reviewing financials, references, technology, legal documents, and market assumptions.

A comprehensive list of items a VC reviews before making an investment, covering financials, legal, technology, market, and team aspects.

A comprehensive list of items VCs review before committing to an investment, covering financial, legal, technical, and market aspects.

A comprehensive list of items investors need to review and verify before finalizing an investment.

Earnings Before Interest, Taxes, Depreciation, and Amortization — a proxy for operating cash flow and profitability, especially relevant for growth equity and PE deals.

A valuation metric expressing a company's value as a multiple of its EBITDA — commonly used in growth equity and private equity but less in early-stage VC.

Entrepreneur in Residence — an experienced operator or founder who joins a VC firm temporarily to explore new startup ideas, evaluate investments, or eventually spin out a new company.

Environmental, Social, and Governance — criteria used by impact investors to evaluate companies beyond purely financial metrics.

The first customers who embrace a new product before it's proven, often willing to tolerate bugs in exchange for innovation.

The investment phase covering pre-seed through Series A, when companies are building their initial product and proving out their business model.

A post-acquisition payment structure where the seller receives additional consideration if the acquired company hits agreed performance milestones after closing.

A profitability metric that shows operating earnings before accounting for financing costs and taxes.

The degree to which reported earnings reflect sustainable, recurring business performance rather than one-time events.

A portion of an acquisition price paid contingent on the target company meeting post-acquisition performance milestones.

A portion of an acquisition price paid contingent on the acquired company hitting specific post-close performance milestones.

A contingent payment in an acquisition where the seller receives additional compensation if the acquired company meets specified performance targets after closing.

A specific performance target that must be achieved post-acquisition for sellers to receive additional contingent consideration.

A startup strategy focused on building a platform or network that becomes central to an industry's operations, creating lock-in through interconnected services.

A concise, compelling summary of a business that can be delivered in 30-60 seconds.

Hidden options within a VC investment that could create additional value beyond the primary thesis, such as adjacent markets, platform expansion, or strategic value.

A GP raising their first, second, or third institutional fund, typically with less than $500M in total AUM.

A first-time or early-vintage fund manager, typically raising Fund I or Fund II, often with differentiated strategy, diverse backgrounds, or access to underserved markets.

A dedicated allocation within an LP's portfolio specifically for investing in first-time or early-career fund managers.

A company program allowing employees to purchase company stock at a discount, typically after IPO.

A company benefit that allows employees to purchase company stock at a discount, typically through payroll deductions.

An investment approach pioneered by Yale's David Swensen that allocates heavily to alternative assets including venture capital.

A sales strategy focused on large organizations with complex procurement processes.

The longer, more complex sales process typically required to close deals with large organizations.

The total value of a company including equity and debt minus cash, representing what it would cost to acquire the entire business.

The total value of a company including equity and net debt — a more complete measure of company value than market cap alone.

A company's total value including equity, debt, and cash — a more comprehensive measure than market capitalization alone.

A valuation multiple that compares a company's total enterprise value to its annual revenue, commonly used to benchmark SaaS and tech companies.

An experienced founder or executive temporarily based at a VC firm to evaluate deals, support portfolio companies, and develop their next venture.

Ownership in a company, represented as shares. In venture capital, equity is the primary mechanism through which investors participate in a company's upside.

Raising capital from many small investors online, enabled by SEC regulations like Regulation CF and Regulation A+.

The practice of raising capital from a large number of small investors through online platforms, enabled by regulations like Regulation CF and Regulation A+.

A projection of how ownership percentages decline across future funding rounds.

Raising capital by selling ownership shares in the company.

Funds held by a neutral third party in an acquisition to cover potential post-closing liabilities — sellers receive escrowed funds after a holdback period.

A portion of acquisition proceeds held in escrow for a specified period to cover potential indemnification claims or purchase price adjustments.

A venture fund with no fixed end date that reinvests returns rather than distributing them to LPs.

A fund with no fixed end date that continuously reinvests returns rather than distributing them and winding down.

A clause that automatically renews or extends an agreement unless one party takes active steps to terminate it.

The possibility that a startup fails not because of market conditions but because the team cannot execute effectively.

The price per share at which an option holder can purchase shares — same as strike price, set at fair market value on the grant date.

A liquidity event that allows investors to realize returns on their investment — typically an IPO or acquisition.

The ratio of exit proceeds to the total capital invested in a company, measuring the return on a specific investment.

The valuation multiple at which a company is sold or goes public, typically expressed as a multiple of revenue or EBITDA.

The ratio of exit value relative to the invested capital.

The planned path for investors and founders to realize returns on their investment — typically through IPO, acquisition, or secondary sale.

Additional recurring revenue generated from existing customers through upgrades or expanded usage.

Additional recurring revenue generated from existing customers through upsells, cross-sells, seat additions, or usage growth — a key driver of net revenue retention above 100%.

The growth phase after product-market fit where a startup scales operations, team, and revenue aggressively.

A term sheet with an artificially short deadline designed to pressure founders into accepting before they can shop the deal to other investors.

An independent appraisal of a private company's fair market value of common stock, required by IRS rules to set the exercise price of employee stock options.

Fear of Missing Out — the psychological phenomenon in VC where investors rush to invest in hyped deals to avoid being left out of potentially large returns.

A contractual threshold based on a company's fair market value that activates certain rights, obligations, or conversion mechanisms.

The estimated market value of an investment, used by VC funds to mark portfolio companies on their books between financing events.

A private wealth management firm serving ultra-high-net-worth families, often investing in VC funds and direct startup deals.

A private wealth management organization serving ultra-high-net-worth families — many family offices allocate to VC funds or invest directly in startups.

A private wealth management entity for a high-net-worth family that invests in VC funds, often with different motivations and timelines than institutional LPs.

The gradual addition of excessive product features that can complicate the product and dilute its value.

The practice of offsetting management fees against future carry distributions, reducing the total fees paid by LPs over the fund's life.

The legal obligation to act in the best interest of another party, such as a GP's duty to their LPs or a board member's duty to shareholders.

The legal obligation to act in the best interest of another party — critical for board members, GPs, and fund managers.

A clause allowing a board to withdraw from a previously agreed deal if doing so is required by their fiduciary duties to shareholders.

The highest legal standard of care requiring a person to act in the best interest of another party.

An acquirer — typically private equity — focused purely on investment returns rather than operational or strategic synergies with the acquired company.

Using complex financial structures or instruments to improve returns, often at the expense of transparency or alignment.

The initial closing of a venture fund where the GP receives commitments from enough LPs to begin deploying capital — typically 30–50% of the fund's target size.

Capital that bears the initial losses in a fund structure, protecting other investors from downside risk in exchange for enhanced returns on the upside.

The competitive benefit gained by being the first company to enter a market, though this advantage is often overstated.

A funding round where the company's valuation stays the same as the previous round — not a down round, but not progress either.

The strategic and psychological implications of raising a round at the same valuation as the previous round, signaling neither growth nor decline.

A self-reinforcing growth loop where each element of the business drives the next — the more the flywheel spins, the harder it becomes to stop.

Additional capital invested by an existing investor in a portfolio company's subsequent funding rounds.

An additional investment made by an existing investor in a later funding round of a portfolio company — to maintain ownership, signal conviction, or support growth.

The percentage of a fund's capital set aside for additional investments in existing portfolio companies versus initial investments in new companies.

A provision that automatically converts preferred stock to common stock upon certain events, typically an IPO meeting minimum size and price thresholds.

Governance structures that allow founders to maintain decision-making power despite outside investment.

The reduction in a founder's ownership percentage as new shares are issued through funding rounds and option grants.

A deal structure or investor with minimal control provisions — founders retain more board seats, decision-making power, and downside protection than in traditional VC terms.

The phenomenon where successful founders receive investment, media coverage, and credibility for new ventures based primarily on their previous success rather than the merits of the current idea.

A personal narrative from the founder included in fundraising materials that explains their mission, motivation, and vision.

Cash received by founders through selling a portion of their shares before an exit.

The degree to which a founder's background, expertise, and passion align with the market they're pursuing, often considered the strongest predictor of startup success.

A management philosophy where founders stay deeply involved in operational decisions rather than delegating to professional managers — popularized by Paul Graham's 2024 essay.

A situation where founders have multiple strategic paths available (raise more capital, sell, remain independent).

A requirement that founders earn their equity over time rather than owning it outright from day one.

A provision that immediately vests some or all of a founder's unvested shares upon certain trigger events like acquisition or termination.

A restructuring of founder vesting schedules during later funding rounds.

The alignment between a founder's expertise, experience, and passion and the market they're targeting.

The degree to which a founder's background, expertise, and personal connection to a problem uniquely position them to solve it.

Cash generated by a business after accounting for capital expenditures — a measure of true financial health and the basis for many valuation models.

A business model offering a free basic product to drive adoption, with premium features available for a fee.

The most aggressive anti-dilution provision — resets an investor's conversion price to match any lower future round price, regardless of how many shares are issued.

A company that owns the complete value chain in its industry rather than providing tools to existing players.

The total number of shares outstanding assuming all options, warrants, and convertible securities have been exercised — representing true economic ownership.

The total number of shares that would be outstanding if all convertible securities, options, and warrants were exercised.

Preferred stock that participates in both its liquidation preference AND the remaining proceeds after conversion — the most investor-favorable liquidation structure.

Third-party services handling a fund's accounting, reporting, compliance, and investor communications.

A third-party service provider that handles a fund's accounting, reporting, capital calls, and LP communications.

The legal and operational process of establishing a new venture capital fund, from entity creation to closing LP commitments.

The planned duration of a VC fund, typically 10 years — with an investment period of 3-5 years and a harvest period of 5-7 years.

The economic logic determining what size exits a fund needs to generate strong returns.

The practice of reinvesting early exit proceeds back into the fund rather than distributing them to LPs, effectively increasing the fund's investable capital.

A portfolio investment that by itself returns the fund's entire invested capital — typically requiring a 10-30x return depending on fund size and ownership.

The total capital committed by LPs to a venture fund, which determines the fund's investment capacity and check size range.

An investment vehicle that invests in multiple VC funds rather than directly in startups.

An investment vehicle that invests in a portfolio of VC funds rather than directly in companies, providing LP exposure to the VC asset class with diversification.

A measurable goal achieved by a company that enables raising the next funding round.

The exhaustion and diminished effectiveness that comes from prolonged fundraising efforts, typically after 3+ months.

Generally Accepted Accounting Principles — the standard accounting framework required for audited financial statements in the US.

Revenue recognized according to Generally Accepted Accounting Principles, which may differ significantly from bookings or cash received.

The difference between standardized accounting principles (GAAP) and company-adjusted metrics that exclude certain items for a 'cleaner' view of performance.

General Partner — the managing partner(s) of a venture capital fund who make investment decisions, manage the portfolio, and are compensated through management fees and carried interest.

The personal capital that general partners invest in their own fund, typically 1-5% of total fund size.

Gross Revenue Retention — the percentage of recurring revenue retained from existing customers over a period, excluding expansion revenue. Unlike NRR, GRR can never exceed 100%.

The managing partner(s) of a venture capital fund who make investment decisions, manage fund operations, and are legally responsible for the fund's obligations.

The managing partner(s) of a venture capital fund — responsible for sourcing deals, making investment decisions, managing the portfolio, and generating returns for limited partners.

The managing partner(s) of a venture fund — responsible for investment decisions, fund management, and bearing unlimited liability for fund obligations.

Publicly advertising or marketing a private securities offering, which is restricted under most SEC exemptions.

Publicly advertising a fundraise to non-preexisting relationships — allowed under Rule 506(c) for funds raising from accredited investors only.

The regulatory prohibition on publicly advertising private investment offerings, with exemptions under certain SEC rules.

A venture fund investing across multiple sectors rather than specializing in a specific industry.

A company's strategy for reaching customers and generating revenue — including sales motion, pricing, channel selection, and marketing approach.

The specific distribution channel used to acquire customers (direct sales, marketplaces, partnerships).

Alignment between a company's product and the channels used to sell it effectively.

The repeatable system through which a company acquires customers and grows revenue.

The plan for how a company will reach and acquire customers, including pricing, channels, and sales approach.

The contractual rights investors receive to influence or control key company decisions beyond their voting shares.

Contractual rights that give investors influence over company decisions through board seats, voting provisions, and consent requirements.

A comprehensive mapping of which shareholders hold which governance rights, including voting, consent, information, and board appointment rights.

The percentage of a fund's portfolio companies that successfully raise the next round of financing, indicating deal quality and portfolio momentum.

A provision that exempts existing arrangements from new rules or terms, allowing prior agreements to continue under their original conditions.

Building a new operation or company from scratch rather than acquiring or investing in an existing one.

The total amount of cash a company spends each month across all operating expenses, before any revenue is subtracted.

Revenue minus cost of goods sold, expressed as a percentage of revenue.

Revenue minus cost of goods sold (COGS), expressed as a percentage — a fundamental measure of how much value a business retains from each dollar of revenue after direct costs.

The percentage of recurring revenue retained from existing customers over a period, excluding any expansion revenue from upsells — measures pure churn.

Funding for companies that have proven their model and need capital to accelerate expansion rather than discover product-market fit.

Investment in established, profitable or near-profitable companies seeking capital for expansion rather than survival.

A type of private equity investment in relatively mature companies that need capital to expand, typically taking minority positions in profitable or near-profitable businesses.

A type of private equity investment targeting established, profitable or near-profitable companies looking for capital to accelerate growth without full ownership change.

An investment strategy that blends venture capital's growth orientation with private equity's focus on profitability and operational efficiency.

Rapid, data-driven experimentation to find scalable, low-cost user acquisition strategies — associated with early-stage consumer tech companies.

The point where revenue or user growth accelerates significantly.

An investor specializing in later-stage companies scaling revenue.

A self-reinforcing growth mechanism where existing users or actions generate additional users.

A late-stage funding round focused on scaling a proven business model, typically Series C and beyond.

The phase where companies scale revenue and market share after product-market fit.

A strategy of prioritizing revenue growth over profitability, often fueled by venture capital, with the assumption that scale will eventually drive margins.

The maximum amount a fund will raise — once the hard cap is reached, no additional LP commitments are accepted.

A legally binding LP commitment to a fund, as opposed to a soft commitment which is an informal expression of interest that carries no legal obligation.

The risk that negative media coverage could damage a company's reputation, valuation, or ability to operate.

An investor who takes significant positions in companies and pushes for changes to increase shareholder value.

The tendency for VCs to follow each other into the same sectors, stages, or deals, creating bubbles and crowded investment categories.

The tendency for VCs to follow each other into the same deals, sectors, or trends rather than developing independent conviction.

A growth pattern characterized by a flat or slow early period followed by a sudden, steep upward trajectory — resembling the shape of a hockey stick.

A growth pattern showing flat or slow early progress followed by a sharp, exponential uptick — resembling the blade of a hockey stick.

The duration after an exit event during which a portion of proceeds is withheld from distribution, typically for indemnification or working capital adjustments.

A corporate structure where one parent company owns controlling stakes in multiple subsidiaries.

The length of time an investor holds an investment before exiting, typically 5-10 years in venture capital.

Software products designed to serve multiple industries rather than a specific vertical.

An acquisition attempt made directly to shareholders or through a proxy fight, bypassing the target company's board of directors.

A fundraise with multiple competing investors, often closing above target amount and at better-than-expected valuations for the startup.

The minimum return LPs must receive before the GP earns carried interest, typically 8% annually.

The minimum return LPs must receive before the GP starts collecting carried interest — typically 7-8% annually.

The specific methodology used to compute whether a fund's preferred return threshold has been met, which determines when the GP begins receiving carried interest.

Extremely rapid startup growth, often defined as 100%+ annual revenue expansion.

A startup focused on highly localized markets or services.

Initial Public Offering — the process by which a private company sells shares to the public on a stock exchange for the first time, enabling liquidity for founders, employees, and investors.

Periods when public market conditions are favorable for technology IPOs — characterized by investor appetite, high valuations, and strong aftermarket performance.

A period of favorable market conditions when companies can successfully go public at attractive valuations.

Internal Rate of Return — the annualized rate of return on a portfolio or investment, accounting for the timing of cash flows. The primary time-weighted performance metric used by VC funds.

Incentive Stock Option — a type of employee stock option with favorable tax treatment if holding period requirements are met, available only to employees of the granting company.

The complex set of decisions and strategic pathways a founder must navigate to build a successful company.

A detailed description of the type of company or person most likely to become a successful, long-term customer.

An investment that cannot be quickly converted to cash without potentially significant loss in value.

The additional return investors expect for holding assets that cannot be easily sold, like venture capital fund interests.

Investments made with the intention of generating measurable social or environmental impact alongside financial returns.

Investing with the explicit intention of generating positive social or environmental impact alongside financial returns.

A structured system for quantifying and reporting the social or environmental impact of investments alongside financial returns.

A company's inferred value based on the price paid for a portion of its equity, which may differ from its actual enterprise or intrinsic value.

Interest income the IRS assumes exists on below-market loans, even if no interest is actually charged.

A calculated or inferred value for a company or asset based on comparable transactions, multiples, or other indirect methods rather than a direct market price.

Distribution of actual portfolio company shares to LPs (rather than cash) when a portfolio company goes public.

A contractual provision requiring diversity standards in hiring, governance, or vendor selection as a condition of investment.

An organization that supports very early-stage startups with workspace, mentorship, and resources over an extended period.

An organization that supports very early-stage startups with resources, mentorship, and sometimes space — typically without a defined program end date, unlike accelerators.

A board member with no financial relationship to the company or its investors beyond their board role.

A board member who is not affiliated with the company's investors or management, providing neutral perspective on governance decisions.

A deal-by-deal investor who sources and manages transactions without a committed fund, raising capital from LPs on a per-deal basis.

An investment strategy focused on identifying companies at the point where growth is about to accelerate dramatically.

A moment when a company's growth trajectory accelerates significantly due to product-market fit or scaling.

A critical moment when a company's growth trajectory fundamentally changes, typically marking the transition from early traction to rapid scaling.

The economic cost borne by the less-informed party in a transaction due to the other party having superior information about the asset's true value.

Investor rights to receive regular financial reports and key metrics from portfolio companies.

Contractual obligations requiring a startup to share financial statements and other operational data with investors on a regular basis.

Building new companies by applying existing technology or business models to underdeveloped markets.

A funding round led by existing investors without participation from new outside investors.

A funding round primarily led by existing investors rather than new external capital.

Meeting the governance, reporting, compliance, and operational standards required by institutional LPs like pension funds, endowments, and insurance companies.

Legally protected creations of the mind — patents, trade secrets, copyrights, and trademarks — that create competitive advantages.

Legal transfer of all IP rights from founders and employees to the company.

The annualized return rate that makes the net present value of all cash flows equal to zero — the standard VC performance metric.

The decision-making body within a VC firm that evaluates and approves investment decisions — typically composed of the firm's general partners.

A detailed internal document prepared by a VC to analyze and recommend an investment opportunity to the firm's partnership.

A formal internal document written by a VC analyst or associate summarizing an investment thesis and recommendation for a potential portfolio company.

The rate at which a venture fund deploys capital over time.

The rate at which a GP deploys fund capital into new investments over the investment period, measured as deals per quarter or capital per year.

The first phase of a fund's life (typically years 1-5) during which the GP actively deploys capital into new investments.

A detailed version of the pitch deck designed to be read independently by investors, with more data and narrative.

The practice of managing communication and relationships between a fund or company and its investors.

The overall attitude of investors toward a sector or market cycle.

A group of investors who pool capital together to participate in a single investment round.

The process of multiple investors participating together in a financing round.

A periodic report sent by founders to investors summarizing company performance and needs.

The typical return pattern of a VC fund: negative returns early (fees, early losses) followed by positive returns as successful companies mature and exit.

The pattern where VC fund returns initially show negative performance before turning positive as portfolio companies mature.

A fundraising approach where capital is raised in smaller, more frequent rounds timed to specific milestones rather than in large infrequent rounds.

The tax document LPs receive from funds showing their share of income, losses, deductions, and credits for the tax year.

A reporting tool summarizing the most important performance indicators for a company.

A measurable metric that tracks progress toward a critical business objective.

An LPA provision that pauses fund investing if designated key GPs depart or reduce their involvement.

An LPA provision that suspends the fund's investment activities if specified key individuals leave or reduce their involvement.

A fund provision allowing LPs to suspend further capital contributions or terminate the fund if a named key GP leaves the fund.

A triggering event that occurs when designated key persons are unable to devote sufficient time to the fund, typically suspending the investment period.

The percentage of startups in a portfolio that fail or return less than invested capital.

Building companies by applying knowledge from one industry to another.

Limited Partner — an investor in a venture capital fund who provides capital but has no role in investment decisions and whose liability is limited to their committed amount.

A committee of selected LPs that reviews and approves potential conflicts of interest and other sensitive fund decisions.

Limited Partner Advisory Committee — a formal group of select LPs within a fund that advises the GP on conflicts of interest, valuation disputes, and other sensitive fund governance matters.

Lifetime Value — the total revenue a business expects to earn from a single customer over the entire duration of their relationship.

Lifetime Value — the total revenue or gross profit a business earns from a single customer over the entire relationship.

Lifetime Value — the total revenue (or gross profit) a company expects to generate from a single customer over the entire duration of their relationship. The numerator in the LTV:CAC ratio.

The total revenue a business expects to earn from a customer over the entire duration of the relationship.

A SaaS growth strategy where companies start with a small initial contract and expand revenue over time.

Venture investments in mature, scaled companies — typically Series C and beyond — that have proven business models and are approaching IPO or acquisition.

Public market investors (hedge funds, mutual funds) who invest in late-stage private companies, typically in pre-IPO rounds.

Companies at Series C and beyond that have proven business models and are scaling toward profitability or IPO.

The process of attracting and capturing potential customer interest for a product or service.

The primary investor in a funding round who sets terms, leads due diligence, and typically takes a board seat.

The investor that sets the terms for a funding round, invests the largest check, and often takes a board seat.

The process of determining whether potential customers are a good fit before investing time in the sales process.

The stages through which potential customers move before becoming paying customers.

A product development approach emphasizing rapid experimentation, validated learning, and iterative build-measure-learn cycles.

A methodology for building startups through rapid experimentation, validated learning, and iterative product development.

The collection of software tools and platforms used by VC funds and portfolio companies to manage legal documents, cap tables, and compliance.

The market failure where information asymmetry causes high-quality deals to leave the market, leaving mostly poor-quality opportunities for less-informed investors.

A non-binding document outlining the preliminary terms of a deal, commonly used in M&A and some venture transactions.

A preliminary agreement outlining the key terms of a proposed transaction — similar to a term sheet but more commonly used in M&A contexts.

An acquisition financed primarily with debt, where the target company's assets and cash flows secure the borrowed funds.

An extremely fast financing round where investors commit capital quickly with minimal process.

An investor in a venture capital fund who provides capital but has no role in investment decisions. LPs have limited liability — they can only lose what they invest — and receive the majority of fund returns after carry.

An investor in a venture capital fund who provides capital but has limited liability and no role in fund management — the LPs are the fund's underlying investors.

An investor in a venture fund who provides capital but has limited liability and no role in investment decisions.

The legal document governing the relationship between GPs and LPs in a venture fund, including economics, governance, and operations.

A calculation showing how exit proceeds would be distributed among shareholders based on their liquidation preferences and rights.

Any transaction that converts company equity into cash for shareholders, including M&A, IPO, or dissolution.

Any transaction that triggers distribution of proceeds to shareholders — including company sale, merger, or dissolution.

When accumulated liquidation preferences exceed the company's realistic exit value, making common shares effectively worthless.

A contractual right giving preferred shareholders the right to receive their investment back (often with a multiplier) before common shareholders receive anything in a liquidation event.

The ordered hierarchy of how different shareholder classes receive proceeds in a liquidity event, from most senior to most junior.

Any transaction that allows shareholders — founders, employees, and investors — to convert equity in a private company into cash.

Stacking multiple liquidation preferences across funding rounds.

The hierarchy of investor claims on proceeds during an exit.

A post-IPO restriction preventing insiders from selling their shares, typically lasting 90-180 days.

The post-IPO period (typically 180 days) during which insiders and pre-IPO investors are prohibited from selling their shares.

A market composed of many small customer segments that collectively represent significant demand.

Maintaining strategic flexibility for future opportunities.

Mergers and Acquisitions — the consolidation of companies through purchase, merger, or other corporate transactions. A primary exit path for VC-backed companies.

Most Favored Nation clause — a provision in a SAFE or convertible note giving the holder the right to adopt any better terms offered to future investors in subsequent rounds.

Multiple on Invested Capital — the total return on an investment expressed as a multiple of the original capital deployed. A 3x MOIC means you received $3 for every $1 invested.

Monthly Recurring Revenue — the total predictable subscription revenue a company earns each month. The month-by-month building block of ARR and the most closely tracked revenue metric for early-stage SaaS.

Minimum Viable Product — the simplest version of a product that can validate core assumptions with real users.

Minimum Viable Product — the simplest version of a product that allows a team to collect validated learning about customers with the least effort.

A SaaS efficiency metric measuring how much ARR growth is generated per dollar of sales and marketing spend — above 0.75 is generally considered efficient.

The legal entity that employs the GP team and receives management fees for operating the fund.

The legal entity through which GPs operate the fund, employ staff, and receive management fees.

The legal entity that employs the fund's staff and receives management fees, separate from the fund itself and the general partner entity.

An annual fee paid by LPs to the GP to cover fund operating expenses — typically 2% of committed capital per year. It funds salaries, rent, due diligence, and operations throughout the fund's life.

A period during which the GP waives or reduces management fees, typically offered to early-closing LPs or during the fund's wind-down phase.

A provision that reduces management fees by a percentage of other income the GP receives, such as deal fees, monitoring fees, or consulting fees from portfolio companies.

The gap between an investment's price and its estimated intrinsic value, providing a buffer against errors in analysis.

Adjusting the carrying value of portfolio investments to reflect current market prices or estimated fair values.

The total market value of a company's outstanding shares, calculated as share price multiplied by total shares.

Entering new geographic or industry markets to grow revenue.

A visual overview of a startup ecosystem or market segment — mapping companies by category, stage, geography, or other characteristics.

The percentage of a total market currently captured by a company.

A state where most potential customers already use competing products.

The process of quantifying the revenue opportunity for a product using TAM, SAM, and SOM frameworks.

The alignment between a startup's launch and the broader readiness of the market.

The strategy of entering or exiting investments based on predictions about future market conditions.

The risk that a fund's vintage year coincides with a market peak, leading to elevated entry prices and compressed returns.

A platform that connects buyers and sellers, taking a percentage of each transaction as revenue.

A significant negative event that fundamentally alters the value or prospects of a company, potentially voiding agreements.

A contractual provision allowing investors to back out of a deal if the company experiences a significant negative change before closing.

An investment approach that relies primarily on quantitative data and KPIs rather than qualitative judgment or narrative.

A hybrid of debt and equity financing, often used as a late-stage bridge to IPO or acquisition.

Late-stage private financing that bridges a company toward an IPO, combining debt and equity characteristics with significant downside protection.

Small, niche SaaS businesses often built by solo founders.

A venture fund typically under $100M focused on early-stage seed and pre-seed investments — often run by a solo GP or small team.

Companies typically valued between $100M-$1B, too large for early-stage VCs and too small for the largest growth funds.

A specific, measurable achievement that a startup must reach to unlock additional funding, demonstrate progress, or meet investor expectations.

A financing structure where capital is released in tranches contingent on the company achieving predefined performance milestones.

The early signals that indicate product-market fit may be emerging.

A founder motivated primarily by solving a specific problem rather than financial gain — considered more credible and resilient by many investors.

A sustainable competitive advantage protecting a company from competitors.

An investment style that prioritizes investing in companies showing strong recent growth, regardless of valuation — the opposite of value investing.

The number of paying or engaged customers in a given month.

The risk that someone will take greater risks because they don't bear the full consequences of their actions.

A clause ensuring an investor receives terms at least as favorable as those given to any other investor in the same or subsequent round.

A startup expanding beyond a single core product into multiple product lines to increase revenue and defensibility.

A fund that invests across multiple asset classes, stages, or strategies within a single vehicle rather than focusing on one approach.

A SaaS infrastructure where multiple customers share a single instance of the software.

Net Asset Value — the total value of a fund's holdings minus liabilities, representing the fund's current worth.

Net Asset Value — the current estimated value of a fund's portfolio holdings, used to mark the portfolio to market and calculate fund performance metrics.

Net Dollar Retention (also Net Revenue Retention or NRR) — the percentage of recurring revenue retained from existing customers over a period, including expansions and contractions.

Net Revenue Retention — the percentage of recurring revenue retained from existing customers over a period, including expansions and contractions. Same concept as NDR (Net Dollar Retention).

Net Revenue Retention — the percentage of recurring revenue retained from existing customers after accounting for upgrades, downgrades, and cancellations. The definitive measure of product stickiness and revenue quality.

Non-Qualified Stock Option — a stock option that does not receive the favorable ISO tax treatment, taxed as ordinary income upon exercise. Can be granted to employees, contractors, and advisors.

Backing companies based primarily on compelling stories about the future rather than current metrics or fundamentals — common in early-stage venture but criticized when applied to later stages.

Investing decisions influenced by compelling stories about future market outcomes rather than current metrics.

A less founder-friendly anti-dilution formula that only counts preferred shares in the denominator, resulting in greater conversion price adjustments in down rounds.

A contractual restriction that prohibits a company from taking certain actions without investor consent, such as issuing new equity or taking on debt.

Information or events that cause investors to question a company's prospects, making fundraising more difficult.

When an existing investor's decision not to participate in a follow-on round sends a bearish signal to potential new investors.

When a fund's secondary market price is below its reported NAV, reflecting buyer skepticism about the accuracy of portfolio valuations.

The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.

The actual cash a company loses each month after accounting for all incoming revenue — total monthly expenses minus total monthly revenue.

The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction.

The percentage of revenue retained from existing customers year-over-year, including upsells and expansions. NRR above 100% means existing customers are growing.

The strength of connections between users within a network product.

A strengthening of network effects as interactions between users increase.

User acquisition driven by network interactions between customers.

A growth advantage created through strong partnerships, integrations, or user networks.

The phenomenon where a product or service becomes more valuable as more people use it — one of the most powerful competitive moats in technology.

A competitive advantage that strengthens as more users join a platform, making it increasingly difficult for competitors to displace the incumbent.

A provision allowing LPs to terminate the GP's management without proving cause, typically requiring a supermajority vote.

A contractual provision preventing a company from soliciting or entertaining competing offers for a specified period during deal negotiations.

A provision preventing a company from soliciting or negotiating with other potential investors or acquirers for a specified period.

A provision in a term sheet that prevents a startup from soliciting competing offers from other investors for a defined period — typically 30-60 days.

A contract restricting someone from working for competitors or starting a competing business for a specified period.

Capital sources that don't require giving up equity — including grants, loans, revenue-based financing, and government programs.

A legal contract preventing the sharing of confidential information between parties.

A legal agreement preventing parties from sharing confidential information shared during discussions — less common in early-stage VC, more common in later-stage and M&A.

The barriers and complexity new users face when first using a product, which directly impacts conversion and retention.

The governing document for an LLC that outlines ownership, management structure, profit distribution, and member rights.

The consistent execution of processes and cost controls within a company.

The degree to which a company can increase revenue without proportionally increasing costs, driving margin expansion at scale.

Revenue minus operating expenses expressed as a percentage of revenue.

An experienced executive embedded within a VC firm who provides hands-on operational support to portfolio companies.

Consistently strong execution across hiring, product, sales, and operations.

An experienced executive or founder who has run operations inside a company — often contrasted with pure investors, and increasingly sought after as VC partners.

A startup operator who invests personal capital into startups while still actively working in the industry.

An investor who previously built or ran companies in the same industry.

The evaluation of what returns or value are forgone by choosing one investment or action over the next best alternative.

A separate, dedicated pool of capital raised by a VC firm specifically to make larger follow-on investments in its best-performing portfolio companies.

A separate fund vehicle raised by a VC firm specifically to make larger follow-on investments in their best-performing portfolio companies.

Shares reserved by a company to grant as equity compensation to employees, advisors, and service providers — typically representing 10–20% of the fully diluted cap table.

A block of company shares reserved for future employee stock option grants.

The value of having multiple possible paths forward, allowing a company or investor to choose the best option as information unfolds.

Revenue or user growth achieved without acquisitions or paid marketing.

Performance exceeding benchmark returns.

A large amount of shares or investor rights that could create future selling pressure or governance challenges.

A fundraising round that receives more investor commitments than the company (or fund) is seeking to raise — creating scarcity and competitive pressure.

The percentage of a company that a VC fund aims to own after making an investment, typically used to determine check size.

The percentage of a company a VC fund aims to acquire, typically 15-25% for lead investors.

Acronym for Product-Led Growth — a go-to-market strategy where the product itself is the primary driver of user acquisition, conversion, and expansion.

Product-Market Fit — the degree to which a product satisfies strong market demand. When you have it, growth feels pull-based; when you don't, every customer feels like a push.

The stage where a product strongly satisfies market demand and grows organically.

Simultaneously pursuing multiple deal process steps or negotiations to compress timelines and maintain competitive position.

Latin for 'on equal footing' — describes securities that have equal rights and priority in distributions.

Equal ranking among securities or creditors, meaning they share proportionally in payments, distributions, or losses without priority over each other.

Latin for 'on equal footing' — meaning two or more parties have equal rights, typically regarding payment priority or liquidation preferences.

Latin for 'equal step' — describes securities or investors treated equally, with no one having priority over others in the same class.

Preferred shares that get their liquidation preference AND participate pro-rata in remaining proceeds — double-dipping.

A limit on how much participating preferred investors can receive before their participation rights terminate and they must convert to common stock.

A funding round with many small investors and no clear lead investor — often assembled quickly during hot markets, with minimal due diligence.

A VC's ability to identify success signals in startups based on experience with similar companies, teams, and markets.

A provision requiring existing investors to participate in future rounds or lose preferential rights.

A provision requiring existing investors to participate in future down rounds or lose certain rights — typically conversion rights on preferred stock.

The time required for a company to recover its Customer Acquisition Cost (CAC) from the gross margin generated by that customer.

A measure of how efficiently a company recovers sales and marketing spend.

A cash bonus plan that mimics the economics of equity ownership without actually granting shares or options.

A contractual right that provides economic benefits equivalent to equity ownership without actual ownership of shares.

In sales: the total value of potential deals in progress. In VC fundraising: the pool of potential investors a startup is engaging.

The percentage of potential deals that convert into paying customers.

A presentation used by founders to communicate their company's story, metrics, and investment opportunity to potential investors.

A slide presentation used by founders to communicate their business to potential investors, typically 10-15 slides covering problem, solution, market, traction, and team.

A fundamental change in a startup's business strategy, product, or target market based on market feedback.

A deliberate, strategic shift in a startup's product, market, business model, or core technology in response to evidence that the current direction isn't working.

A firm that helps fund managers find and close institutional LP commitments, typically for a fee of 1-2% of capital raised.

In VC: a team or set of services provided by a fund to its portfolio companies — talent, marketing, BD, technical resources beyond just capital.

In PE/growth context, an initial acquisition that serves as a base for adding complementary bolt-on acquisitions.

A company that creates value by enabling interactions between multiple user groups rather than producing goods directly.

A VC firm's organized approach to providing portfolio companies with operational support beyond capital, including talent, marketing, and business development resources.

The risk of building a company dependent on another platform (e.g., Apple, Amazon, Google APIs).

The risk that a startup's business depends on a platform controlled by a larger company that could change policies, compete directly, or restrict access.

A startup that a VC fund has invested in and holds in its portfolio.

The framework of board oversight, reporting requirements, and decision-making processes that VCs establish at their portfolio companies.

The degree to which a fund's value is concentrated in a small number of portfolio companies, which increases both upside potential and downside risk.

The deliberate strategy a venture fund uses to allocate capital across investments — including check size, number of investments, reserve ratios, stage focus, and diversification approach.

The practice of spreading investments across multiple companies or sectors.

Updating the internal valuation of portfolio companies based on new information.

Active management of a fund's portfolio to maximize returns through follow-on decisions, exits, and resource allocation.

Adjusting investment allocations within a fund to optimize risk-return profile, often through secondary sales or follow-on decisions.

A SAFE where the valuation cap is calculated on a post-money basis, giving investors more predictable ownership percentages.

How the post-money SAFE calculates ownership: investors know their exact percentage at conversion, unlike pre-money SAFEs.

A company's valuation immediately after a financing round, equal to pre-money valuation plus the amount raised.

A company's valuation immediately after a funding round closes, including the new capital raised.

The mathematical principle underlying VC returns: a small number of exceptional investments generate most of a fund's returns, while most investments return little or nothing.

Highly engaged users who derive significant value from a product and often influence others to adopt it.

An investor's right to maintain their ownership percentage by investing in future rounds before new investors.

A company's valuation before a funding round closes — the negotiated price of the company excluding the new capital being raised.

The earliest stage of startup funding — typically $250K-$2M raised before having a product or significant traction, often from angels and pre-seed funds.

An investor offering to lead a round before the company formally begins fundraising.

A funding round initiated by an investor approaching a company before it was planning to fundraise, often at a premium valuation.

The minimum annual return (typically 6-8%) LPs receive before the GP begins taking carried interest — also called a hurdle rate.

The class of stock issued to venture investors, carrying special rights including liquidation preferences, anti-dilution protection, and governance provisions not available to common stockholders.

A class of equity that gives investors priority over common shareholders in liquidation events and often includes additional rights — like anti-dilution protection and voting provisions. The standard share class for VC investors.

How strongly customer demand changes when pricing changes.

A valuation metric comparing a company's market value to its revenue, commonly used to evaluate SaaS company valuations.

A financing round where the company sets a specific per-share price, issuing preferred stock at a defined valuation.

A financing round that establishes a specific per-share price and valuation — as opposed to a convertible note or SAFE which convert at a future price.

The ability of a company to raise prices without losing customers.

New equity capital raised directly by a company and added to its balance sheet — as opposed to secondary capital, where existing shareholders sell their shares.

A broad category of investment in private companies — encompassing venture capital, growth equity, leveraged buyouts, and distressed investing.

The right of an existing investor to participate in future financing rounds to maintain their ownership percentage. A key investor protection that allows early backers to avoid dilution as the company grows.

Distinct product characteristics that set a company apart from competitors.

A self-reinforcing cycle where product usage generates data, network effects, or content that makes the product better, attracting more users.

The likelihood that customers continue using a product due to habit or switching costs.

The speed at which a product team ships features, improvements, and iterations.

A go-to-market strategy where the product itself drives user acquisition, conversion, and expansion — reducing reliance on traditional sales and marketing.

A go-to-market strategy where the product itself drives acquisition, conversion, and expansion through self-serve usage.

A go-to-market strategy where the product itself drives user acquisition, expansion, and retention — rather than relying primarily on sales or marketing teams.

The stage where a startup's product strongly satisfies a genuine market need — characterized by organic growth, strong retention, and users who would be 'very disappointed' if the product disappeared.

The degree to which a product satisfies strong market demand — typically evidenced by rapid organic growth, high retention, and users who would be very disappointed if the product disappeared.

A projected capitalization table showing post-round ownership percentages after a proposed financing — used to model the dilution impact of a new investment.

A small-scale test demonstrating that a product or technology works in practice, often used to win enterprise customers.

Veto rights that give preferred shareholders the ability to block certain major corporate actions.

Contractual rights giving preferred stockholders veto power over certain major company decisions — such as raising new funding, selling the company, or changing the capital structure.

A methodology for comparing VC fund returns against what the same capital would have earned in public markets.

Qualified Small Business Stock — a tax exclusion allowing founders and investors to exclude up to $10M (or 10x basis) of capital gains on qualifying startup investments.

An individual with $5M+ in investments or an entity with $25M+ in investments, qualifying for certain fund types.

An investor with $5M+ in investments — a higher standard than accredited investor, required for Section 3(c)(7) funds targeting institutional LP bases.

A federal tax provision (Section 1202) that allows investors to exclude up to 100% of capital gains on qualifying startup investments held for five or more years.

Stock in a qualifying C-corporation that may be eligible for significant capital gains tax exclusion under Section 1202.

A tax provision allowing investors to exclude up to $10M or 10x their investment in gains from federal capital gains tax if specific requirements are met.

A tax provision allowing investors to exclude up to $10M or 10x their investment in capital gains from federal taxes.

A SaaS growth efficiency metric comparing new and expansion revenue against churned and contracted revenue — above 4 is considered excellent for early-stage companies.

A regulatory restriction on public communications by a company and its underwriters during the IPO process.

The time it takes for a new sales rep, product, or market to reach full productivity or expected performance levels.

The time it takes for a new sales rep, product, or market to reach full productivity.

An anti-dilution mechanism that adjusts an investor's conversion price to match a lower price in a subsequent round, fully protecting against dilution.

An aggressive anti-dilution mechanism that resets an investor's conversion price to the lower of the original price or any subsequent lower price — also called full ratchet.

An IPO where late-stage investors have contractual protections guaranteeing minimum returns, shifting downside risk to earlier investors and founders.

The conversion of portfolio investment value into actual cash through an exit event — IPO, acquisition, or secondary sale.

A restructuring of a company's capital structure, often involving conversion or exchange of existing securities.

A restructuring of a company's capital structure — changing the mix of equity and debt, or renegotiating existing equity terms.

A revised cap table showing how ownership changes after a restructuring event like a down round, cram down, or debt conversion.

When a fund returns enough capital to LPs to cover their original investment, making all subsequent distributions pure profit.

A fund structure provision allowing GPs to reinvest early capital returns back into new portfolio investments rather than distributing them immediately to LPs.

Conversations with former colleagues, investors, and customers of a founder to verify their character, skills, and track record before investing.

The statistical tendency for extreme performance (very high or very low) to move toward average over time.

SEC exemptions that allow companies to raise capital through private placements without full public registration.

The SEC safe harbor allowing companies to raise capital from accredited investors without registering the securities offering — the legal basis for most private financings.

Exploiting differences between regulatory regimes to gain competitive advantages, common in fintech and cross-border startup strategies.

Formal statements of fact made by parties in a transaction agreement, creating legal liability if untrue.

Statements of fact made by a seller in an M&A transaction that the buyer relies on — breaches can result in indemnification obligations.

Funds set aside by a VC fund for follow-on investments in existing portfolio companies rather than new investments.

The ongoing discipline of managing a fund's follow-on capital reserves, deciding which portfolio companies merit additional investment and how much to allocate.

A fund's plan for allocating capital between initial investments and follow-on investments in existing portfolio companies.

The percentage of customers who continue using a product over time.

When a large share of revenue comes from a few customers.

The growth rate of revenue generated from existing customers.

A valuation metric calculated by dividing a company's enterprise value by its annual revenue, used to compare relative valuations.

A valuation metric expressing company value as a multiple of revenue — used when EBITDA multiples aren't applicable because the company is pre-profit or early-stage.

The reliability of future revenue projections.

The predictability of future revenue based on contracts or subscription models.

A non-dilutive funding model where a company repays investors with a percentage of monthly revenue until a predetermined return multiple is reached.

Funding where repayment is tied to a percentage of monthly revenue rather than fixed interest payments.

A non-dilutive funding structure where investors receive a percentage of monthly revenue until a predetermined multiple is repaid.

A private company going public by merging with an existing public shell company, bypassing the traditional IPO process.

A structure where a founder receives all shares upfront but the company has the right to repurchase unvested shares if the founder leaves.

A contractual right giving a party the first opportunity to match any offer before shares can be sold to a third party.

A contractual right allowing a company (or existing investors) to purchase shares before a shareholder sells them to an outside party.

A contractual right requiring a shareholder to offer their shares to existing investors before selling to third parties.

Capital invested with the understanding that it may be completely lost, accepted in exchange for the potential of outsized returns.

Return on investment measured relative to the risk taken — a 3x return in venture capital represents a different risk-adjusted return than a 3x return in bonds.

A continuously open venture fund structure where investors subscribe quarterly rather than committing the full amount upfront to a traditional 10-year closed-end fund.

A startup strategy focused on acquiring and consolidating many smaller companies in a fragmented market.

A discrete fundraising event where a company raises a specific amount of capital at a set valuation — named sequentially (Seed, Series A, B, C, etc.).

A SaaS benchmark where growth rate plus profit margin should equal at least 40%.

A benchmark for SaaS company health stating that a company's revenue growth rate plus its profit margin should equal or exceed 40%.

A SaaS health metric: a company's revenue growth rate plus profit margin should equal or exceed 40%, balancing growth and profitability.

Projected annual revenue based on current monthly or quarterly performance.

The number of months a company can continue operating at its current burn rate before running out of cash. One of the most critical metrics for managing fundraising timing and operational survival.

The formula for determining how many months a startup can operate before running out of cash: cash balance divided by monthly burn rate.

Measures taken to extend a startup's cash runway, including cost cuts, bridge financing, or revenue acceleration.

Actions taken to extend the time before a company runs out of cash.

Operational strategies used by startups to extend their cash runway without raising additional equity, from cost cuts to revenue acceleration.

The registration statement a company files with the SEC to go public, containing comprehensive financial and business disclosures.

A Simple Agreement for Future Equity — a financing instrument that converts into equity at a future priced round. The dominant early-stage fundraising tool, replacing convertible notes for most pre-seed and seed raises.

Serviceable Addressable Market — the portion of the TAM (Total Addressable Market) that a company can realistically target and serve given its current product, geography, and business model.

Serviceable Addressable Market — the portion of TAM that a company can realistically target given its product, geography, business model, and go-to-market approach.

Small Business Investment Company — an SBIC license allows VC funds to borrow government money (3:1 leverage) to invest in qualifying small businesses.

Serviceable Obtainable Market — the realistic portion of SAM a company can capture in the near term given its current resources, competitive position, and go-to-market capacity.

Serviceable Obtainable Market — the realistic share of SAM a company can capture in the near term, based on competitive position, resources, and execution capability.

Special Purpose Acquisition Company — a shell company that raises capital through a public offering specifically to acquire a private company, taking it public without a traditional IPO process.

Special Purpose Acquisition Company — a shell company that raises public market capital via IPO with the sole purpose of merging with a private company to take it public.

Special Purpose Vehicle — a single-purpose investment entity that allows a group of investors to co-invest in a specific deal through a unified cap table entry.

Software as a Service — cloud-delivered software accessed via subscription, generating recurring revenue. The dominant business model in modern enterprise software.

The standard set of KPIs used to evaluate software-as-a-service business performance.

Legal provisions that protect parties from liability if they meet specific conditions, commonly referenced in 409A valuations.

The average time from first contact with a prospect to closing a deal, a critical factor in startup cash flow planning.

A measure of how much revenue a company generates relative to its sales and marketing spend — often tracked as the Magic Number or CAC Payback Period.

The stages customers pass through from awareness to purchase.

A growth model driven primarily by outbound sales teams rather than product-led adoption.

A business model capable of growing revenue much faster than costs.

Competitive advantage gained through larger operational scale.

A company that has found product-market fit and is focused on rapidly expanding its customer base, team, and revenue.

Growth capital provided to companies that have achieved product-market fit and need funding to rapidly scale operations, sales, and market presence.

The stage where startups focus on rapid growth after validating product-market fit.

The valuation premium investors assign to companies that have demonstrated the ability to grow efficiently at increasing scale.

A program where VC firms give capital to trusted individuals — founders, operators, academics — to source and invest in early-stage deals on behalf of the fund.

An entrepreneur starting another company after previously founding one.

The market for buying and selling existing private company shares or LP interests in VC funds — providing liquidity before traditional exit events.

The sale of existing shares in a private company by current shareholders (founders, employees, early investors) to new investors, without the company raising new capital.

A venture fund focused on a specific industry such as fintech or healthcare.

Additional seed-stage capital raised to extend runway when the company isn't ready for a Series A.

An additional round of seed-stage funding raised before a formal Series A, typically from existing investors to extend runway and hit key milestones.

An additional round of funding at or near the seed stage valuation, typically raised when a startup needs more runway before it's ready for a Series A.

An additional fundraise at the same terms as a previous seed round — used when a company needs more capital before being ready for a Series A.

A venture fund that specializes in very early-stage investments, typically writing first checks of $500K-$3M.

An investor specializing in early-stage startup funding.

The first institutional financing round for a startup, typically ranging from $500K to $5M. Used to fund initial product development, early hiring, and customer validation.

A distortion in data or conclusions caused by non-random sampling, common in VC when analyzing success patterns.

The first major institutional venture round, typically ranging from $5M to $20M. Raised after demonstrating product-market fit and initial revenue traction, used to scale go-to-market and team.

The third major institutional funding round, typically raised after demonstrating product-market fit and early revenue traction, used to scale sales, marketing, and operations.

A later-stage venture round typically raised by companies with proven growth, used to scale aggressively, enter new markets, or position for an eventual IPO or large acquisition.

A standardized set of legal documents for priced seed rounds, simpler and cheaper than traditional Series A documents.

An informal advisory group that operates alongside the official board, sometimes used by investors to exert influence without formal board representation.

An informal advisory group that operates parallel to the formal board of directors, often consisting of additional investors or advisors without formal board seats.

A contract among shareholders governing their rights, obligations, and the company's governance structure.

Releasing product updates, features, or fixes to users — used in startup culture to signal execution velocity and bias toward action over planning.

A supplemental agreement granting specific investors special terms beyond the standard fund or deal documents.

A supplemental agreement between a GP and specific LP modifying standard fund terms — granting MFN rights, co-investment rights, or fee discounts for that LP.

An investor's reputation or prior success influencing other investors to participate in a round.

The distinction between metrics and signals that reflect genuine business health versus vanity metrics that look impressive but don't predict outcomes.

The market signal sent by a VC's actions — most importantly, whether an existing investor participates (positive) or declines (negative) in a follow-on round.

The information conveyed to the market when a known investor participates in or passes on a funding round.

The danger that an investor's decision (to invest or not) sends a negative signal to the market about a company.

An equity provision that fully accelerates vesting upon a single event, typically a change of control (acquisition).

Capital from investors who bring significant value beyond the investment itself: expertise, connections, brand, and operational support.

A verbal or informal commitment from an investor to participate in a round — not legally binding, but typically considered a moral commitment.

A venture capital firm run by a single general partner rather than a partnership of multiple GPs — increasingly common at the seed stage.

A venture fund managed by a single general partner without co-managing partners, increasingly common among emerging managers.

The rate at which a startup builds product, hires, and enters markets.

When multiple preferred stock series stack their liquidation preferences, each getting paid before common shareholders.

The practice of funding startups through sequential rounds, each with increasing amounts and valuations as the company de-risks.

When a portfolio company's valuation is based on an outdated funding round that no longer reflects current fair value.

Founder or team exhaustion resulting from prolonged high-intensity startup work.

The network of investors, founders, accelerators, universities, and service providers supporting startups.

Capital raised by early-stage companies from angels, venture funds, accelerators, or other investors to build products, hire teams, and grow revenue.

An organization that builds multiple startups in-house using shared resources, teams, and processes.

An organization that builds multiple startups internally rather than investing in external founders.

A tax provision that resets the cost basis of inherited assets to their fair market value at the time of the owner's death.

The right to purchase company stock at a fixed price (strike price) in the future — the primary equity compensation tool for startup employees.

A legal document granting an individual the right to purchase company shares at a specified price within a set timeframe.

The right to purchase company shares at a fixed price (the strike price) granted to employees and service providers as part of equity compensation.

A company that acquires another business for strategic value like technology, talent, or market access rather than purely financial returns.

An acquisition by a company seeking operational synergy, market access, technology, or talent — as opposed to a financial buyer seeking pure investment returns.

A corporate or institutional investor that invests for strategic reasons (partnerships, market intelligence, acquisition pipeline) in addition to financial returns.

A collaboration between companies designed to accelerate growth.

The additional price a strategic acquirer pays above financial value, reflecting synergies, competitive defense, or strategic benefits unique to that buyer.

The additional worth a company has to a specific acquirer beyond its standalone financial value.

The price at which an option holder can purchase company shares — set at fair market value at time of grant, as determined by a 409A valuation.

Excess returns generated through unique structural advantages in how a fund operates rather than just better stock picking.

An exit transaction that includes complex terms beyond a simple cash purchase, such as earnouts, escrows, or contingent payments.

When a fund deviates from its stated investment strategy, such as investing outside its target stage, sector, or check size.

The legal contract through which an LP commits capital to a fund and agrees to the fund's terms.

A line of credit secured by LP capital commitments that lets funds make investments before calling capital from LPs.

A loan facility backed by LP commitments that allows a fund to make investments before calling capital from LPs, smoothing cash management.

A new fund raised by the same GP after their previous fund, typically with a similar strategy but larger size.

A clause that causes a right or obligation to expire automatically after a specified period or triggering event.

A prolific individual angel investor who writes many checks across numerous startups, often at institutional scale — blurring the line between angels and micro-VCs.

The balance between available capital seeking deals and quality startups seeking funding in the venture market.

The logical error of focusing only on successful outcomes while ignoring the many failures, distorting perceived probabilities.

Ownership stake earned through labor and effort rather than financial investment.

A group of investors who co-invest in a deal, typically organized by a lead investor who negotiates terms.

A group of investors co-investing in a deal together, often organized by a lead investor who does diligence and brings in other investors at the same terms.

Total Addressable Market — the total revenue opportunity available if a company captured 100% of its target market.

A narrative used by startups to argue that their addressable market is larger than it appears today — either because they will expand into adjacent markets or because they will grow the market itself.

Total Value to Paid-In capital — the ratio of a fund's total value (distributions plus remaining value) to total capital invested.

Total Value to Paid-In Capital — the sum of all distributions made and remaining portfolio value, divided by invested capital. The all-in performance multiple combining realized and unrealized returns.

Rights that allow minority shareholders to join a transaction when a majority shareholder sells their stake.

Rights allowing minority shareholders to join a sale when majority shareholders sell their shares, ensuring equal treatment in a transaction.

A fund nearing the end of its life that still holds a few remaining portfolio companies.

The percentage of each transaction a marketplace or platform retains as revenue — the fundamental monetization lever for two-sided marketplace businesses.

A detailed description of the ideal startup a fund seeks to invest in, including stage, sector, metrics, and team characteristics.

A distribution from a fund to partners specifically to cover their tax liabilities from the fund's income, even if the fund hasn't made regular distributions.

A distribution from a fund specifically to help partners cover tax liabilities arising from fund income allocated to them on K-1 statements.

Cash distributed to fund partners specifically to cover their tax obligations on fund income, even before profits are fully realized.

A competitive advantage created through proprietary technology, infrastructure, or intellectual property.

A prolonged downturn in venture funding, startup valuations, and tech hiring — characterized by layoffs, down rounds, and reduced VC activity.

An assessment of a company's technology architecture, code quality, engineering team, and technical risks conducted as part of the investment process.

The timeline of how new technologies spread through markets.

The possibility that a company's core technology will fail or be overtaken.

The risk that a startup's core technology won't work as intended, can't scale, or becomes obsolete.

The set of software tools and frameworks used to build and run a product.

A structured offer to purchase shares from existing shareholders, often used to provide employee liquidity in private companies.

A company-sponsored process where a company (or acquirer) offers to purchase existing shares from current shareholders at a specified price, providing liquidity before an IPO or acquisition.

A non-binding document outlining the key terms of a proposed investment, including valuation, investment amount, and investor rights. The starting point for negotiating a financing round.

The process of negotiating the key business and governance terms of an investment before detailed legal documentation.

The estimated value of a business beyond the explicit forecast period, often the largest component of a DCF valuation.

A VC fund's core investment hypothesis — defining what kinds of companies they invest in, why those companies will succeed, and why this fund is positioned to find them.

When a venture fund begins investing outside of its stated strategy.

An investment approach where the fund develops a specific thesis about market trends and proactively seeks companies that fit.

An integrated financial model linking the income statement, balance sheet, and cash flow statement.

An LP protection that requires the GP to return previously distributed carry if the fund ultimately underperforms.

The market disruption caused when crossover hedge funds deploy massive capital into venture at unprecedented speed and scale.

The speed at which a product moves from concept to commercial launch.

Funds whose returns rank in the top 25% of all funds from the same vintage year.

An investment approach starting with macro themes, sectors, or trends and then identifying companies positioned to benefit — opposite of bottom-up (company-first).

The total revenue opportunity available if a product achieved 100% market share.

An expanded concept of TAM that includes additional value created through ecosystem effects.

The total revenue value of a customer contract including recurring and one-time charges.

The total potential economic value a company could capture in a market.

A fund performance metric that measures total value (distributions plus remaining NAV) relative to total capital contributed by LPs.

Evidence of market demand and business progress, typically measured by revenue, users, or engagement metrics.

Measurable evidence that a startup's product is gaining market adoption — revenue growth, user growth, retention, and engagement are common traction metrics.

A portion or installment of an investment that is released upon achieving specific milestones or conditions.

A portion of a larger investment, released upon meeting specific milestones — used in milestone-based financing to reduce investor risk.

Investment capital released in multiple installments tied to the company hitting specific milestones.

Contractual limitations on an investor's ability to sell, transfer, or assign their fund interest or shares.

An event that activates a contractual provision — such as anti-dilution adjustments triggered by a down round, or acceleration triggered by an acquisition.

A startup strategy where a company breaks apart an existing platform or industry and focuses on a single component.

Stock options with an exercise price higher than the current fair market value of the underlying shares, making them worthless if exercised.

A private startup valued at $1 billion or more. The term was coined by Aileen Lee in 2013 to describe the rarity of such companies.

An investment strategy focused exclusively on finding and investing in potential unicorn companies (those likely to reach $1B+ valuation).

An investment strategy focused primarily on finding and backing companies that can reach $1B+ valuations.

The direct revenues and costs associated with a single unit of a business's core transaction.

The direct revenues and costs associated with a single customer or unit — used to assess whether a business can be profitable at scale.

Growth achieved through subsidized unit economics — where each new customer or transaction loses money — justified by the expectation of future scale or market dominance.

The paper profit on investments that haven't been sold or exited yet.

The current estimated value of portfolio investments that have not yet been exited — also called paper gains or unrealized gains.

A financing round where a startup raises at a higher valuation than its previous round — the normal, positive progression of a healthy startup.

The ability of an investor to benefit from value appreciation above their guaranteed returns.

The cost required to acquire a new user, commonly used in consumer tech.

A measurement of how frequently and deeply users interact with a product.

The percentage of users who continue using a product over time.

The estimated worth of a company, used to determine investor ownership percentages and share pricing in a funding round.

The maximum company valuation at which a convertible note or SAFE converts to equity.

The maximum valuation at which a SAFE or convertible note will convert into equity, protecting early investors from excessive dilution if the company's valuation rises sharply before conversion.

A decrease in startup valuations during market downturns.

The analytical frameworks used to determine a company's worth, including DCF, comparable analysis, and precedent transactions.

The ability of a company to convert market demand into revenue and profit.

The process of increasing a company's worth through revenue growth, margin improvement, or strategic positioning.

A structured roadmap outlining specific initiatives to increase a portfolio company's value during the investment holding period.

A specific milestone or achievement that causes a step-change increase in a company's valuation, such as product launch, regulatory approval, or key customer win.

The core benefit or problem a product solves for its customers.

An investment approach where the VC provides strategic support beyond capital to help portfolio companies succeed.

Pricing based on the value delivered to customers rather than the cost of production.

The speed of execution across product development, hiring, and fundraising — used as a qualitative signal of a startup team's operating rhythm and competitive edge.

An investor known for making decisions and closing deals quickly.

An organization that creates startups from scratch using internal ideas, resources, and teams rather than investing in external founders.

A form of private equity financing provided to early-stage, high-growth companies in exchange for equity, with the expectation of outsized returns from a few breakout investments.

A professional investor who deploys capital from a managed fund into high-growth private companies in exchange for equity, targeting outsized financial returns.

Loans made to venture-backed startups, typically used to extend runway between equity rounds without additional dilution.

Debt financing for VC-backed startups, typically structured as a term loan with warrants, used to extend runway without additional equity dilution.

Financial or operational conditions that a startup must maintain to remain in compliance with its venture debt agreement.

The interconnected network of founders, investors, talent, and institutions supporting venture-backed companies.

A part-time role at a VC firm for experienced operators or investors who source deals and advise portfolio companies.

A part-time or deal-by-deal contributor to a VC firm who sources investments, provides expertise, or supports portfolio companies — without being a full general partner.

The operational team inside a VC fund that provides non-capital support to portfolio companies — including recruiting, marketing, business development, and community programs.

A business capable of reaching very large outcomes (often $1B+ valuations).

A business opportunity large enough to generate the outsized returns that VC fund economics require.

An organization that systematically builds multiple startups simultaneously, providing ideas, capital, talent, and operational support from inception.

An organization that conceives, builds, and launches startup companies internally — co-founding startups with the studio team rather than backing external founders.

Software designed for a specific industry such as healthcare, construction, or finance.

The schedule by which a founder or employee earns their equity over time. Standard startup vesting is 4 years with a 1-year cliff, ensuring team members are incentivized to stay and contribute over the long term.

Provisions that speed up an employee's equity vesting schedule, typically triggered by acquisition or termination events.

The year a venture fund makes its first investment, used to group funds for performance comparison.

The year a VC fund made its first investment — used to benchmark fund performance against peer funds of the same vintage.

The practice of spreading LP commitments across multiple fund vintage years to smooth returns and reduce market timing risk.

The right of shareholders to vote on major corporate decisions like board elections, M&A, and charter amendments.

The rights of shareholders to vote on major company decisions — common shareholders typically vote on general matters, while preferred shareholders have special protective votes.

Weighted Average Cost of Capital — the blended cost of a company's debt and equity financing.

A right to purchase company shares at a fixed price (the exercise price) before an expiration date, typically issued alongside debt or as a sweetener in deals.

The percentage of a loan or investment amount that determines the number of warrants issued to the lender, giving them the right to purchase equity at a set price.

Financial instruments giving the holder the right to purchase shares at a predetermined price before expiration.

The distribution order determining how sale or liquidation proceeds flow to different shareholder classes — senior preferred shareholders are paid before junior preferred, who are paid before common.

A detailed calculation showing how exit proceeds are distributed among all shareholders based on their specific rights, preferences, and terms.

A model showing how exit proceeds flow through different stakeholders based on their priority and rights.

A liquidity event generating significant financial gains for founders and investors.

An anti-dilution mechanism that adjusts the conversion price based on the size and price of the dilutive round.

The most common form of anti-dilution protection, adjusting an investor's conversion price based on both the new lower price and the number of shares issued.

A voting structure where different shareholders have different numbers of votes per share, altering the balance of control relative to economic ownership.

A large customer that contributes a disproportionately large share of revenue.

An underserved market opportunity with limited existing competition.

The key question a startup must answer: what has changed recently that makes this opportunity possible or necessary right now — as opposed to 5 years ago or 5 years from now.

The percentage of sales opportunities that convert into paying customers.

The tendency for the winning bidder in a competitive process to overpay because they have the most optimistic valuation.

A market where a single dominant company captures the majority of value.

The difference between a company's current assets and current liabilities.

The difference between current assets and current liabilities, measuring a company's short-term financial health.

A post-closing mechanism in M&A that adjusts the purchase price based on the difference between estimated and actual working capital at closing.

Short-term financing used to cover operational expenses.

A reduction in the reported value of a portfolio investment to reflect a decline in its fair market value.

A reduction in the carrying value of a portfolio investment — typically reflecting poor company performance or a down round financing.

The complete elimination of an investment's value from a fund's books, typically when a portfolio company fails.

A total write-down of a portfolio investment to zero — when a company has failed and the investment is a complete loss.

An increase in the carrying value of a portfolio investment on a fund's books, typically triggered when the company raises a new financing round at a higher valuation.

A founder with exceptional qualities that significantly increase the probability of startup success.

A highly speculative investment round driven by hype rather than disciplined diligence.

A comparison of revenue or other metrics between the same period across two years.

The influence of macroeconomic interest rates on venture capital investment activity.

Strategies used to increase the current income generated from a venture portfolio beyond capital appreciation.

A measure comparing the expected return from an investment relative to its risk.

Investment capital primarily seeking consistent income returns rather than capital appreciation, which can enter VC markets during low-interest-rate environments.

Growth driven entirely by organic or viral adoption rather than paid marketing.

The concept from Peter Thiel's book describing true innovation — creating something genuinely new (0→1) rather than incrementally improving what already exists (1→n).

A budgeting approach where expenses must be justified from scratch each period rather than carried forward.

A budgeting method where every expense must be justified from scratch each period rather than based on prior budgets.

A macroeconomic environment of near-zero interest rates that historically fueled aggressive venture investing.

A negotiation dynamic where one party's gain comes directly at the other party's expense, common in valuation, liquidation preference, and board control discussions.

A startup that generates enough revenue to survive but not enough growth to attract follow-on funding or achieve a meaningful exit.

A fund that has passed its intended life but still holds illiquid portfolio companies, generating management fees for the GP but providing little value to LPs.

A VC fund that is still technically active but effectively unable to return meaningful capital — often because the portfolio has insufficient value to generate positive returns.

A company that continues operating but has little realistic chance of significant growth or exit.

The financial state where a company's liabilities approach or exceed its assets, triggering expanded fiduciary duties to creditors alongside shareholders.

The period when a company approaches inability to pay debts, shifting board fiduciary duties from shareholders to creditors.

The period when a company approaches insolvency, triggering expanded fiduciary duties from the board to consider creditor interests alongside shareholder interests.