Venture Capital Glossary

The baseline maximum amount of capital gains—$10 million per issuer—that a single taxpayer can exclude under Section 1202 QSBS rules.

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

The minimum duration an investor must hold qualified small business stock before being eligible to exclude capital gains under Section 1202.

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

The process of confirming that an investor meets SEC criteria for accredited status, required under Rule 506(c) through documentation review and optional under Rule 506(b) via self-certification.

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.

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.

The QSBS rule requiring that at least 80% of a company's assets be used in the active conduct of a qualified trade or business during substantially all of the holding period.

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.

The concept that an impact investment generates social or environmental outcomes that would not have occurred without that specific investment, beyond what the market would have delivered anyway.

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.

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.

The Section 1202 requirement that a corporation's total gross assets must not exceed $50 million at the time it issues stock for that stock to qualify as QSBS.

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.

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

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 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.

A deal-by-deal distribution structure where the GP can receive carried interest on profitable exits before the fund as a whole has returned all capital to LPs.

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

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 deals together, typically organized through platforms like AngelList.

A supplemental fund raised alongside or after a main fund to invest exclusively in follow-on rounds of the main fund's portfolio companies, providing additional reserves.

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.

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 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 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.

A structuring approach that combines concessionary capital from development institutions with commercial capital from private investors to fund ventures in underserved markets.

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

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.

An organization that builds and launches Web3 startups from scratch using internal teams and resources, typically retaining significant equity and token allocations in each project.

A corporate entity interposed between a fund and certain investors (tax-exempt or foreign) to block the flow-through of unrelated business taxable income or U.S. tax filing obligations.

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

State-level securities notice filings required alongside federal Regulation D exemptions, varying by state and typically involving fees and basic disclosure.

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

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 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.

Costs incurred during due diligence and negotiation of investments that ultimately do not close, including legal fees, consultant fees, and travel expenses.

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.

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.

The requirement that a company be organized as a domestic C-corporation to issue stock eligible for QSBS tax benefits under Section 1202.

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.

A thorough review of a company's capitalization table during due diligence to verify ownership percentages, outstanding securities, option pools, and any irregularities.

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 periodic report provided to each LP showing their individual fund position including contributions, distributions, share of gains/losses, management fees, and current NAV.

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 pattern and timing of capital call notices sent to LPs requesting they fund portions of their committed capital as the GP identifies and executes investments.

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.

The maximum amount of gain an investor can exclude from taxes under Section 1202 QSBS rules—the greater of $10 million or 10x the adjusted basis.

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.

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.

The schedule by which individual GP team members earn their share of the fund's carried interest over time, typically tied to continued service at the firm.

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 total carried interest allocation for a fund, typically 20% of profits, which is divided among the GP entity's partners and key investment professionals.

The sequential distribution structure that determines the order in which fund profits are allocated between LPs and the GP, including the return of capital, preferred return, and carried interest.

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.

Patient, risk-tolerant capital that accepts below-market returns or higher risk to enable impact investments that would not otherwise attract commercial funding.

A mechanism in the distribution waterfall that allows the GP to receive a larger share of profits after LPs hit their preferred return, until the GP reaches their target carried interest percentage.

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.

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.

Excess investment returns generated specifically from climate-related opportunities, driven by regulatory tailwinds, technology shifts, and increasing demand for decarbonization solutions.

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.

A contractual privilege allowing LPs to invest directly alongside the fund in specific portfolio companies, typically at no additional management fee or carried interest.

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 fund restriction capping the maximum percentage of committed capital that can be invested in any single portfolio company, typically 10-15% of fund size.

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 by a GP to acquire select portfolio companies from a maturing fund, giving high-performing investments more time to grow while providing liquidity to existing LPs who want to exit.

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 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 maximum valuation at which a convertible note converts into equity, protecting early investors from excessive dilution if the company raises at a very high valuation.

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 severely dilutive funding round, often at a fraction of the previous valuation, that dramatically reduces the ownership of founders and earlier investors who cannot participate.

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.

Specialized back-office services for crypto investment funds, including NAV calculation, token custody reconciliation, tax reporting, and investor accounting across on-chain and off-chain assets.

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.

The governance-driven process of managing a decentralized autonomous organization's financial reserves, including budgeting, diversification, and capital allocation decisions.

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.

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

An investment approach using decentralized finance protocols to generate returns through lending, liquidity provision, staking, or yield farming with fund assets.

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 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.

A specialized customer relationship management system used by VC firms to track, evaluate, and manage the pipeline of potential investment opportunities from sourcing through closing.

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 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.

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 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 rate at which a fund invests its committed capital over the investment period, measured as the percentage of capital deployed per quarter or year.

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.

The secure storage and management of cryptocurrency private keys and digital assets, typically provided by regulated custodians using cold storage, multi-signature, and institutional-grade security.

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%.

A percentage reduction applied to the price per share in a future equity round when converting a note or SAFE, typically 15-25%, rewarding early investors for their risk.

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.

The ratio of cash and securities actually distributed to LPs relative to their total contributed capital, measuring realized (not paper) returns.

A structural advantage in acquiring customers more efficiently than competitors.

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

The contractual sequence governing how fund proceeds flow from exits to LPs and the GP, specifying the order of capital return, preferred return, catch-up, and profit sharing.

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 investment philosophy that evaluates success based on both financial returns and social or environmental impact, treating both as equally important objectives.

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.

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.

The total amount of committed but undeployed capital available to venture capital funds, indicating the industry's capacity for future investment activity.

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.

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.

A quantitative rating assessing how thoroughly environmental, social, and governance factors are incorporated into a fund's or company's investment process and operations.

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 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 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 portion of an LP's venture capital budget specifically reserved for investing in first-time or early-vintage fund managers who lack established track records.

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.

The investment approach pioneered by Yale's David Swensen that allocates heavily to alternative assets like venture capital, private equity, and real assets for superior long-term returns.

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 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+.

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 GP carried interest held in escrow to ensure the GP can satisfy clawback obligations if the fund underperforms on a whole-fund basis.

A whole-fund distribution structure where the GP receives carried interest only after LPs have received back all contributed capital plus their preferred return across the entire fund.

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.

A negotiated window, typically 30-60 days, during which a startup agrees not to solicit or engage with other potential investors while the lead investor completes due diligence.

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

An experienced executive hosted by a VC firm who evaluates deal flow, supports portfolio companies, and often launches or joins a portfolio company as CEO or C-suite executive.

A category of investment adviser exempt from full SEC registration but required to file reports, available to managers of venture capital funds and smaller private funds.

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 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.

A corporate entity that shields foreign investors from U.S. tax filing and withholding obligations under the Foreign Investment in Real Property Tax Act when a fund holds U.S. real property interests.

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 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 ultra-high-net-worth families that allocates capital to venture funds, often with more flexible mandates and faster decision-making than institutional LPs.

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.

A provision that reduces management fees by the amount of fees or compensation the GP receives from portfolio companies, such as board fees, monitoring fees, or transaction fees.

A fund vehicle that pools investor capital and channels it into a master fund, used in master-feeder structures to accommodate different investor types and jurisdictions.

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.

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.

The last date on which a venture fund accepts new LP commitments, marking the end of the fundraising period and establishing the fund's total committed capital.

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 raises capital at approximately the same valuation as the previous round, indicating stagnant growth or a challenging fundraising environment.

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.

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.

An SEC filing required within 15 days of the first sale of securities in a Regulation D private placement, disclosing basic information about the offering and the issuer.

A private or corporate foundation's investment in venture capital funds, often guided by both return objectives and mission alignment through program-related investments.

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 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.

A formal extension of a fund's term beyond its original 10-year life, requiring LP or LPAC approval, to allow more time for remaining portfolio companies to reach exits.

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 allocates capital across multiple venture funds rather than investing directly in startups, providing LPs with diversified venture exposure and manager selection expertise.

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.

The defined timeframe during which a GP actively raises capital from LPs for a new fund, typically lasting 6-18 months from first close to final close.

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.

A contractual obligation requiring the GP to return previously distributed carried interest if the fund's final performance does not justify the carry already received.

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

The origin of the capital that general partners contribute to their own fund, which can come from personal funds, management fee waivers, or GP financing facilities.

A contractual mechanism allowing a supermajority of LPs to remove the general partner and replace them with a new manager, typically requiring 66-80% of LP interests.

A secondary transaction initiated and structured by the GP rather than an LP, typically involving a continuation vehicle or tender offer for existing fund positions.

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%.

An investment strategy that intentionally incorporates gender-based analysis into investment decisions to advance gender equity while generating competitive financial returns.

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 fund — responsible for investment decisions, fund management, and bearing unlimited liability for fund obligations.

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.

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 (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.

Total Value to Paid-In capital before deducting management fees and carried interest, showing the fund's raw investment performance multiplier.

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

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 phase of a fund's life after the investment period ends, focused on managing existing portfolio companies toward exits and distributing proceeds to LPs.

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.

An individual investor with sufficient wealth to qualify as an accredited investor, often a former founder or executive who invests directly in venture funds or through syndicates.

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.

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 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 standardized catalog of impact performance metrics maintained by the GIIN, used by impact investors to measure and compare social and environmental outcomes across investments.

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.

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

The systematic process of collecting, analyzing, and reporting data on the social and environmental outcomes generated by impact investments, using standardized frameworks and metrics.

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

A fund's articulated framework for how its investments will generate measurable positive social or environmental outcomes alongside financial returns.

A spectrum describing whether an impact investor prioritizes social/environmental outcomes or financial returns when the two objectives conflict.

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 resources, mentorship, and sometimes space — typically without a defined program end date, unlike accelerators.

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.

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.

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.

Large organizations—pension funds, endowments, insurance companies, sovereign wealth funds—that allocate significant capital to venture funds as part of a diversified investment portfolio.

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 degree to which venture capital valuations, fundraising activity, and exit markets are affected by changes in prevailing interest rates and monetary policy.

Any fund closing between the first close and final close where additional LP commitments are accepted, bringing the fund closer to its target size.

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.

The formal decision-making workflow within a VC firm for evaluating and approving new investments, typically involving multiple stages of review by the 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 defined window, typically 3-5 years from final close, during which a fund actively makes new investments from committed capital.

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 venture fund returns initially show negative performance due to management fees and unrealized investments, before turning positive as portfolio companies mature and exit.

The principle that the shift to a low-carbon economy should be fair and inclusive, ensuring that workers and communities dependent on fossil fuel industries are not left behind.

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.

The loss of unvested or sometimes vested carried interest when a designated key person departs the fund before the end of the vesting period or fund life.

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.

A governance role on a fund's advisory committee, typically granted to the largest LPs, providing input on conflicts of interest, valuation matters, and fund extensions.

The risk that arises when a fund is overly dependent on one or a few LPs for the majority of its committed capital, creating vulnerability if those LPs default or do not re-up.

The contractual remedies available to a fund when a limited partner fails to meet a capital call, including interest penalties, forfeiture of fund interest, and forced sale of the LP's position.

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.

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 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 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 governing legal document of a venture fund that defines the rights, obligations, and economic relationship between the general partner and limited partners.

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

A crypto investment fund structured to hold and trade liquid, publicly available tokens with regular liquidity windows, as opposed to traditional closed-end VC fund structures.

A venture investment strategy focused on publicly tradeable tokens and digital assets rather than traditional illiquid private equity stakes.

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

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.

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.

A Most Favored Nation clause guaranteeing an investor receives terms at least as favorable as those given to any subsequent investor in the same round or instrument.

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 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 financial structure of the GP's management company, which collects management fees and covers the operating expenses of running the venture fund.

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.

The capital amount on which management fees are calculated, which shifts from committed capital during the investment period to invested capital or NAV during the harvest period.

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.

A mechanism allowing GPs to convert their management fee income into a profits interest in the fund, potentially converting ordinary income into lower-taxed capital gains.

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 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 multi-entity fund architecture where multiple feeder funds (domestic, offshore, tax-exempt) pool capital into a single master fund that makes all investment decisions.

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.

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 weekly all-partners meeting at a VC firm where new deal opportunities are presented, portfolio company updates are shared, and investment decisions are made.

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

The process of determining a venture fund's Net Asset Value by valuing all portfolio holdings, adding cash, and subtracting liabilities and accrued fees.

Loans secured by a fund's portfolio Net Asset Value rather than LP commitments, used to fund investments, distributions, or bridge liquidity when traditional sources are unavailable.

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.

A revenue structure where creators or investors earn ongoing royalties from secondary sales of non-fungible tokens, enforced through smart contract logic.

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).

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.

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 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.

Total Value to Paid-In capital after deducting all management fees, carried interest, and expenses—the actual return multiple that LPs receive.

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 fund provision allowing LPs to remove the GP or suspend the investment period without proving cause, typically requiring a supermajority vote.

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-structured fund entity (typically the management company or GP entity), defining member rights, profit sharing, and operational procedures.

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.

A VC firm structure employing experienced operators who work hands-on with portfolio companies to accelerate growth, distinct from traditional investment-only partner roles.

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 strategy combining Qualified Opportunity Zone Fund benefits with venture investing, allowing investors to defer and potentially reduce capital gains by investing in startups located in designated zones.

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.

The practice of requiring founders to expand the employee option pool before a funding round, effectively shifting dilution to existing shareholders while the new investors get a clean post-money ownership percentage.

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.

A contractual limit on the amount of fund formation costs—legal fees, regulatory filings, travel—that can be charged to the fund and borne by LPs.

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.

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.

A separate fund vehicle that invests alongside the main fund on identical terms, created to accommodate investors with specific legal, tax, or regulatory requirements.

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

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.

QSBS benefits that flow through partnerships and LLCs taxed as partnerships to their individual partners, allowing each partner to claim their own exclusion.

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

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 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).

A dedicated non-investment team within a VC firm that provides operational support services—recruiting, marketing, business development, engineering—to portfolio companies.

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 strategic framework for determining a fund's optimal number of investments, check sizes, reserve ratios, and ownership targets to maximize the probability of generating strong returns.

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 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.

The mathematical phenomenon in venture capital where a tiny fraction of investments generate the vast majority of total fund returns, making individual outliers more important than portfolio averages.

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.

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 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 comprehensive legal disclosure document provided to potential investors in a private offering, detailing the fund's strategy, terms, risks, fees, and conflicts of interest.

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.

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.

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 pool of tokens and assets controlled by a decentralized protocol's governance, used to fund development, incentives, grants, and ecosystem growth.

A benchmarking methodology that compares venture fund returns to what the same cash flows would have generated if invested in a public market index like the S&P 500.

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.

A federal tax benefit allowing investors to exclude up to 100% of capital gains from the sale of qualified small business stock held for at least five years.

A tax planning strategy that multiplies the QSBS exclusion by distributing stock across multiple taxpayers such as trusts, family members, and entities.

An investor with $5 million+ in net investments, a higher threshold than accredited investor, required for participation in funds exempt from Investment Company Act registration.

Stock in a domestic C-corporation that meets IRS criteria under Section 1202, making gains potentially excludable from federal capital gains tax.

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 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 percentage of existing LPs who commit to a GP's next fund, serving as a key indicator of LP satisfaction and the fund manager's track record.

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 — 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.

A fund term allowing the GP to reinvest proceeds from early exits back into new investments rather than distributing them to LPs, effectively increasing the fund's total investment capacity.

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.

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

A set of SEC rules exempting private securities offerings from full registration requirements, enabling startups and funds to raise capital from accredited investors.

The practice of structuring investments or operations to take advantage of differences in regulatory frameworks between jurisdictions, commonly seen in fund structuring and crypto ventures.

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.

The percentage of a fund's committed capital set aside for follow-on investments in existing portfolio companies, typically 30-50% of total fund size.

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 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 startups repay investors through a fixed percentage of monthly revenue until a predetermined total return cap is reached.

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 fundraising approach where a fund accepts new LP commitments continuously over a defined period rather than waiting for specific closing dates.

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.).

The most commonly used securities exemption for venture fundraising, allowing unlimited capital raises from accredited investors without general solicitation.

A securities exemption allowing general solicitation and public advertising of private offerings, but requiring verification that all investors are accredited.

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.

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.

A dual investment structure pairing a standard SAFE for equity with a separate side letter granting rights to future token allocations from the project.

The current standard Y Combinator SAFE where the valuation cap represents the post-money valuation including the SAFE investment, making ownership percentage calculations straightforward.

The original Y Combinator SAFE variant where the valuation cap represents the pre-money valuation, meaning ownership percentage depends on total capital raised across all SAFEs.

A Simple Agreement for Future Tokens—a pre-functional token investment contract where investors fund development in exchange for tokens delivered at network launch.

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.

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

The practice of mapping an investment fund's or portfolio company's impact to one or more of the UN's 17 Sustainable Development Goals.

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.

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 structured initiative where a VC firm empowers external operators, founders, or angels to source and invest in early-stage startups on the firm's behalf.

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 tax provision allowing investors to defer capital gains from selling QSBS by reinvesting proceeds into new qualified small business stock within 60 days.

The IRS code section that provides the legal basis for excluding capital gains on qualified small business stock, enabling tax-free returns for eligible venture investors.

A partnership tax election that adjusts the tax basis of fund assets when LP interests are transferred, preventing new LPs from being taxed on gains that accrued before they joined.

A tax election allowing founders and employees to pay income tax on the fair market value of restricted stock at the time of grant rather than at vesting, potentially saving substantial taxes.

The shifting of venture capital investment focus from one technology sector to another as market cycles, hype curves, and macro trends evolve.

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

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.

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 special purpose vehicle created alongside the main fund to accommodate additional capital for a specific deal, typically for LP co-investments or oversized opportunities.

A supplemental agreement between a GP and specific LP granting customized terms beyond the standard LPA, such as fee discounts, enhanced reporting, or co-investment rights.

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.

A state-owned investment fund that deploys national wealth into venture capital and other asset classes, often with very long time horizons and strategic national objectives.

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 internally rather than investing in external founders.

A reduction in the management fee rate after the investment period ends, typically calculated on invested capital or NAV rather than committed capital.

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.

A secondary transaction where a GP sells a portfolio of multiple fund assets together as a package to a secondary buyer, rather than selling individual company positions.

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 document through which an LP formally commits capital to a fund, including representations about accredited investor status, commitment amount, and acceptance of fund terms.

A line of credit secured by LP capital commitments that lets funds make investments before calling capital from LPs.

A credit facility secured by LP commitments that allows a GP to fund investments quickly without issuing capital calls, later repaid when LPs are called.

A GP's next fund in sequence (e.g., Fund III after Fund II), continuing the same strategy with updates based on lessons learned from prior vintages.

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.

An investment strategy where an existing investor invests more than their pro-rata share in a follow-on round to increase their ownership percentage, signaling high conviction in the company.

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 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 sum of all distributions made and remaining portfolio value, divided by invested capital. The all-in performance multiple combining realized and unrealized returns.

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.

An increase in the tax basis of an asset, often occurring at death or through certain transactions, which reduces the taxable capital gain upon future sale.

A distribution from a fund specifically to help partners cover tax liabilities arising from fund income allocated to them on K-1 statements.

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 evaluation of a startup's technology stack, code quality, architecture, scalability, and technical team capabilities conducted as part of the investment due diligence process.

The timeline of how new technologies spread through markets.

The possibility that a company's core technology will fail or be overtaken.

The set of software tools and frameworks used to build and run a product.

A structured offer to purchase shares from existing shareholders at a specified price, used in private companies to provide liquidity to employees and early investors.

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 detailed model mapping how an investment or intervention leads to intended social or environmental outcomes through a chain of causal steps and assumptions.

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.

The initial creation and distribution of a cryptocurrency token to the public, analogous to an IPO in traditional markets, often triggering investor token vesting schedules.

A predetermined timeline governing when tokens allocated to investors, team members, or advisors become transferable, often enforced via smart contracts.

A legal instrument giving an investor the right to receive tokens from a blockchain project at a future token generation event, separate from their equity investment.

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.

Measurable evidence that a startup's product is gaining market adoption — revenue growth, user growth, retention, and engagement are common traction metrics.

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.

An expanded framework evaluating business and investment performance across three dimensions: financial profit, social impact on people, and environmental sustainability.

A corporate entity specifically designed to shield tax-exempt investors from Unrelated Business Taxable Income generated by fund investments that use debt or operate businesses.

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).

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 used to calculate conversion price for SAFEs and convertible notes, setting a ceiling on the effective price per share for early investors.

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.

An SEC exemption from investment adviser registration for managers who solely advise venture capital funds meeting specific criteria around investment type, leverage, and redemption rights.

A professional investor who deploys capital from a managed fund into high-growth private companies in exchange for equity, targeting outsized financial returns.

Debt financing for venture-backed startups that supplements equity rounds, typically structured as term loans with warrants from specialized lenders like SVB and WTI.

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 or deal-by-deal contributor to a VC firm who sources investments, provides expertise, or supports portfolio companies — without being a full general partner.

A contractual arrangement defining a part-time partner's role at a VC firm, including deal sourcing expectations, board responsibilities, carry allocation, and time commitment.

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).

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 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 phenomenon where a fund's performance is significantly influenced by the year it began investing, due to prevailing market conditions, entry valuations, and macroeconomic environment.

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 right for a lender or investor to purchase a specified percentage of equity at a predetermined price, commonly issued alongside venture debt as additional compensation.

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 liquidity event generating significant financial gains for founders and investors.

A structured program providing Web3 startups with funding, mentorship, technical resources, and ecosystem connections in exchange for equity or token allocations.

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 final phase of a fund's life focused on liquidating remaining portfolio positions, resolving outstanding obligations, and making final distributions to LPs.

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.

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 carrying value of a portfolio investment — typically reflecting poor company performance or a down round financing.

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 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 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.