Knowledge Base
Venture Capital Glossary
Plain-English definitions for the terms, metrics, and jargon that define the venture capital world — from textbook fundamentals to internet-native VC culture.
4
A
AI Native Company
A company built from the ground up with AI as a core product capability rather than an add-on feature.
AI Wrapper
A startup built primarily on top of an existing AI model or API rather than developing its own foundational model.
ARR
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.
ARR Multiple
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.
AUM
Assets Under Management — the total market value of investments a VC firm manages on behalf of its limited partners across all active funds.
Acceleration Clause
A provision that triggers immediate repayment of outstanding debt upon certain events like default or change of control.
Accelerator
An accelerator is a fixed-term, cohort-based program that invests a standard amount for equity, provides mentorship, and ends in a demo day.
Accordion Feature
A clause letting a borrower ask its lender to enlarge an existing facility later, up to a stated cap, usually at the lender's discretion.
Accredited Investor
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.
Accredited Investor Verification
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.
Acqui-hire
An acquisition made primarily to hire the target company's team rather than to acquire its product or technology.
Acquisition
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.
Active Investor
An investor who provides ongoing support, introductions, and strategic guidance beyond simply providing capital.
Active Portfolio Management
The practice of actively supporting and monitoring portfolio companies after investment to improve outcomes.
Additionality
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.
Adjacency Expansion
A company expanding into closely related products or markets to grow beyond its initial offering.
Adoption Curve
The pattern describing how new technologies are adopted over time by innovators, early adopters, early majority, late majority, and laggards.
Adverse Selection
The tendency for the worst deals to seek out less experienced or desperate investors, while the best deals go to top-tier funds.
Advisory Shares
Equity given to an outside adviser for guidance or introductions rather than cash, almost always as a nonstatutory stock option out of the company's equity plan.
Affirmative Covenant
A contractual obligation requiring a company to take specific actions, such as maintaining insurance, filing taxes, or providing regular financial reports.
Agency Problem
The conflict of interest that arises when a GP's incentives diverge from those of their LPs or portfolio company founders.
Aggregator Vehicle
A pooled entity that collects many small investors so they appear on the company's cap table as a single holder.
Allocation
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.
Alpha
Excess returns generated above a benchmark, attributed to skill rather than market conditions.
Alternative Assets
Investment categories outside traditional stocks and bonds — including venture capital, private equity, hedge funds, real estate, and commodities.
Alternative Investment Vehicle
A separate entity a fund manager forms so investors can make one particular investment outside the fund, for legal, tax or regulatory reasons.
Alternative Minimum Tax (AMT)
A parallel tax system that can create unexpected tax liability when exercising incentive stock options.
American Waterfall
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.
Anchor Investor
The first or largest investor in a funding round who sets the terms and signals confidence to other investors.
Anchor LP
The first and typically largest limited partner in a new fund, whose commitment signals credibility and helps attract subsequent investors.
Angel Investor
An individual who invests their own money in early-stage startups for equity, usually before institutional venture funds will write a check.
Angel Round
The earliest institutional funding round, typically $100K-$2M from individual angel investors.
Angel Syndicate
A group of angel investors who pool capital to co-invest in deals together, typically organized through platforms like AngelList.
Annex Fund
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.
Annual Contract Value (ACV)
The average annual revenue generated per customer contract, commonly used in SaaS businesses.
Anti-Dilution
A contractual protection for investors that adjusts their ownership percentage (or conversion price) if the company later raises money at a lower valuation.
Anti-Dilution Protection
Investor rights that adjust their conversion price downward if the company later issues shares at a lower price.
Anti-Dilution Ratchet
The specific mechanism used to adjust conversion prices in a down round, with full ratchet and weighted average being the two main types.
Anti-Portfolio
The collection of successful companies a VC firm passed on investing in — a humbling record of missed opportunities.
Asset-Light Model
A business model that minimizes physical assets and capital expenditure, relying instead on software, platforms, or third-party infrastructure.
Asymmetric Information
When one party in a transaction has more or better information than the other, creating an imbalance.
Asymmetric Returns
The defining characteristic of venture investing: limited downside (lose the investment) with potentially unlimited upside (100x+ returns).
B
B Corporation
A for-profit company certified by B Lab for meeting rigorous social and environmental standards — relevant for impact-focused VC investments.
Back-Channel Reference
An informal reference check conducted through personal networks rather than through references provided by the founder.
Back-Office Outsourcing
Delegating fund administration, compliance, accounting, and reporting functions to specialized third-party service providers.
Barbell Strategy
An investment strategy combining high-risk startup bets with more stable investments to balance overall risk.
Basket Threshold
A minimum damage amount that must be exceeded before indemnification claims can be made against sellers in an M&A transaction.
Batting Average
The percentage of a VC's investments that generate positive returns, as opposed to partial or total losses.
Belt and Suspenders
A conservative approach to deal structuring that layers multiple protective provisions to guard against downside risk.
Benchmark
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.
Beta Product
A product released to a limited audience for testing before full commercial launch.
Blended Finance
A structuring approach that combines concessionary capital from development institutions with commercial capital from private investors to fund ventures in underserved markets.
Blind Pool
A fund structure where LPs commit capital before knowing which specific investments will be made — the standard structure for most VC funds.
Blitzscaling
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.
Block Trade
A large, privately negotiated sale of shares, typically executed off the public exchange to minimize market impact.
Blocker Corporation
A corporation placed between a fund investment and certain investors so the investment's tax character stops at the corporation instead of flowing through.
Blue Ocean Strategy
Creating uncontested market space rather than competing in existing, crowded markets.
Blue Sky Filing
State-level securities notice filings required alongside federal Regulation D exemptions, varying by state and typically involving fees and basic disclosure.
Board Composition
The structure and makeup of a company's board of directors, including the balance between founder, investor, and independent seats.
Board Observer
A non-voting participant in board meetings, typically a smaller investor, who can attend and speak but has no voting rights.
Board Seat
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.
Board of Directors
The governing body of a corporation, responsible for major strategic decisions, hiring/firing the CEO, and representing shareholders.
Book Value
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.
Bookrunner
The lead arranger of a funding round who coordinates terms, allocation, and investor participation.
Bootstrap
Building and growing a company using only personal funds and operating revenue, without external investment.
Bootstrapped Startup
A company that grows using revenue and founder capital rather than external investment.
Bootstrapping
Building and growing a company using only personal savings, revenue, and operating cash flow — without raising outside equity capital.
Bottom-Up Analysis
A market sizing approach that builds estimates from actual customer data and unit economics rather than top-down market reports.
Bozo Explosion
When a company grows quickly and hires too many mediocre employees, reducing organizational effectiveness.
Breakage Fee
A penalty paid when a party withdraws from a transaction after signing a binding agreement but before closing.
Breakout Company
A startup that achieves exceptional growth and market traction relative to its peers.
Bridge Loan
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.
Bridge Round
A small fundraise between larger priced rounds, typically done via SAFE or convertible note to extend runway to a key milestone.
Broad-Based Weighted Average
The most common and founder-friendly anti-dilution formula that accounts for the size of the down round relative to total shares outstanding.
Broken Deal Expenses
Costs incurred during due diligence and negotiation of investments that ultimately do not close, including legal fees, consultant fees, and travel expenses.
Builder
A founder or operator actively creating products or companies rather than purely investing or advising.
Bullet Repayment
A loan structure where the entire principal is repaid in a single lump sum at maturity rather than through periodic payments.
Burn Multiple
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.
Burn Rate
Burn rate is how much cash a company consumes per month: gross burn is total outflows, net burn subtracts customer collections.
C
CAC
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.
CAC Payback Period
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.
Called Capital
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.
Cap Table
A cap table is the ledger of who owns what in a company: every share, option, warrant and convertible, by holder, class and fully diluted percentage.
Cap Table Management
The process of maintaining accurate records of company ownership, including all shares, options, warrants, and convertible securities.
Capital Account
An individual LP's running balance in a fund, tracking contributions, distributions, allocated gains and losses, and fees.
Capital Account Statement
A periodic report provided to each LP showing their individual fund position including contributions, distributions, share of gains/losses, management fees, and current NAV.
Capital Call
A capital call is a manager's formal demand that investors fund part of the capital they already committed, by a stated deadline for a stated purpose.
Capital Call Schedule
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.
Capital Efficiency
How much growth a company buys with each dollar it burns, measured as a ratio rather than described as a virtue.
Capital Efficiency Ratio
The ratio of revenue generated to total capital raised, measuring how effectively a startup converts investment into growth.
Capital Markets
The financial markets where long-term debt and equity securities are bought and sold, including the IPO market.
Capital Recycling
The practice of reinvesting early investment returns back into the fund to increase total deployable capital.
Capital Stack
The full hierarchy of financing instruments in a company, including equity, preferred equity, debt, and convertible securities.
Carried Interest
Carried interest is a fund manager's share of profits, generally 20 percent of cumulative net gains, paid only after investors have their capital back.
Carried Interest Vesting
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.
Carry
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.
Carry Allocation
How a fund's carried interest is distributed among the investment team members.
Carve-Out Transaction
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.
Catalytic Capital
Patient, risk-tolerant capital that accepts below-market returns or higher risk to enable impact investments that would not otherwise attract commercial funding.
Catch-Up Provision
The waterfall tier that sends most or all distributions to the fund manager after investors get their preferred return, until the manager holds its full profit share.
Category Creation
A startup defining a new market segment rather than competing directly within an existing one.
Category King
The dominant company in a market category that captures most of the value.
Check Size
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.
Chinese Wall
An information barrier within a firm that prevents conflicts of interest by restricting the flow of material non-public information between departments.
Churn
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.
Churn Rate
The percentage of customers or revenue lost over a given period, a critical indicator of product-market fit.
Clawback
A provision requiring GPs to return previously distributed carry to LPs if the fund ultimately underperforms — protecting LPs from overpaying carry on early exits.
Clean Term Sheet
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.
Cliff
The minimum period an employee must work before any equity vests — typically one year, after which a lump sum of equity vests at once.
Closed-End Fund
A fund structure with a fixed term and no ongoing ability for investors to add or withdraw capital after the initial fundraising period.
Closet Indexing
When a fund claims to be actively managed but its portfolio closely mirrors a benchmark index, delivering index-like returns at active management fees.
Closing Conditions
Requirements that must be satisfied before a funding round officially closes and money transfers.
Closing Mechanics
The legal and administrative process of finalizing a funding round, including signing documents and wiring funds.
Club Deal
A funding round where multiple investors co-invest at the same terms without a clear lead investor.
Co-Investment
Direct investment by an LP alongside a VC fund in a specific portfolio company — often offered as a perk to large LPs.
Cohort Analysis
Tracking the behavior of a specific group of customers (cohort) acquired in the same period over time — the gold standard for measuring retention.
Cold Start Problem
The difficulty of building a network-based product before enough users exist to make the product valuable.
Collar
A price range that limits the upside and downside of a transaction, commonly used in M&A deals involving stock consideration.
Commitment Pacing
An LP's strategy for timing capital commitments to VC funds across vintage years to achieve target allocation and diversification.
Commitment Period
The window during which a fund's GP can make new investments, typically the first 3-5 years of a fund's life.
Committed Capital
The total investors have contractually promised a fund over its life, whether or not the money has yet been transferred. It is the figure quoted as fund size.
Common Stock
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.
Comparable Company Analysis
A valuation method that estimates a company's value based on the trading multiples of similar public or recently acquired companies.
Competitive Landscape
The market environment of direct and indirect competitors a startup operates within.
Competitive Moat
A durable structural advantage that protects a company from competitors.
Compliance Burden
The total cost of meeting a fund's regulatory and contractual obligations, in outside fees and in the manager's own time.
Concentration Limit
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.
Concentration Risk
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.
Conditional Commitment
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.
Continuation Vehicle
A new fund the same manager raises to buy assets out of its own older fund, so existing investors can either take cash or roll their exposure forward.
Contrarian Investing
An investment approach that deliberately goes against prevailing market sentiment, betting that consensus views are wrong about a sector, company, or trend.
Conversion Rights
The right of preferred stockholders to convert their preferred shares into common stock, typically at a 1:1 ratio.
Convertible Note
A convertible note is startup debt that converts into stock at the next priced round, priced by a valuation cap or a discount, whichever favors the investor.
Corporate VC (CVC)
A venture investing arm funded by an operating company, judged on strategic value to the parent as well as on financial return.
Corporate Venture Capital
Investment arms of large corporations that invest in startups for both strategic and financial returns.
Cram Down
A highly dilutive financing round where new investors receive favorable terms that significantly dilute existing shareholders who don't participate.
Creator Economy
A digital economy built around individuals monetizing audiences through platforms, tools, and communities.
Cross-Fund Investment
When multiple funds managed by the same GP invest in the same portfolio company, creating potential conflicts between fund vintages.
Crossover Investor
Investment firms that participate in both private and public markets, often investing in late-stage startups approaching IPO.
Customer Acquisition Cost
The total cost of acquiring a new customer, including all sales and marketing expenses.
Customer Acquisition Funnel
The step-by-step journey a potential customer takes from awareness to purchase.
Customer Concentration Risk
The risk created when a large percentage of revenue comes from a small number of customers.
Customer Lifetime Value Ratio
The ratio between lifetime value (LTV) and customer acquisition cost (CAC), commonly used to evaluate SaaS business health.
Customer Segmentation
Dividing customers into groups based on behavior, industry, size, or needs.
Customer Stickiness
The degree to which customers continue using a product due to habit, switching costs, or embedded workflows.
Customer Success
A function focused on ensuring customers achieve value from a product and remain long-term subscribers.
D
DAO Treasury Management
The governance-driven process of managing a decentralized autonomous organization's financial reserves, including budgeting, diversification, and capital allocation decisions.
DPI
DPI is distributions to paid-in capital: cash actually returned to investors divided by capital actually called. It counts realized money only.
DPI
Distributions to Paid-In — the ratio of cash actually returned to LPs versus capital contributed, measuring realized (not paper) returns.
Data Room
A secure online repository where startups share sensitive business documents with potential investors during due diligence.
Deal Attribution
The assignment of credit for sourcing, winning, and managing specific investments within a VC firm, which affects carry allocation and reputation.
Deal FOMO
Investor anxiety about missing a competitive deal that appears to be attracting strong demand.
Deal Fatigue
The exhaustion and diminished judgment that occurs when a deal process drags on too long, often leading to either over-compromise or deal collapse.
Deal Flow
The stream of investment opportunities a firm sees, measured both as volume and as whether the good companies in a category arrive early enough to act on.
Deal Flow CRM
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.
Deal Memo
An internal document prepared by investors summarizing the rationale for an investment.
Deal Sourcing
The process by which VCs identify and access new investment opportunities.
Deal Velocity
The speed at which a venture firm evaluates and closes investments.
Debt Financing
Raising capital through loans or credit rather than selling equity, preserving ownership but creating repayment obligations.
Decacorn
A private company valued at $10 billion or more — a step above unicorn status.
Deep Tech
Startups built on significant scientific or engineering innovation that creates fundamental technological advantages.
Default Alive
A company that would reach profitability on its current trajectory before running out of cash — without needing to raise additional capital.
Default Dead
A company that will run out of cash before reaching profitability if it maintains its current trajectory — the opposite of default alive.
Default Rate
The percentage of LPs who fail to meet capital calls, or the percentage of venture debt borrowers who default on their obligations.
Defensibility
A company's ability to prevent competitors from replicating or overtaking its business.
Deficiency Letter
SEC correspondence identifying issues in a company's regulatory filing that must be addressed before approval.
Demand Generation
Marketing and sales activities designed to create awareness and interest in a product, driving qualified leads into the sales pipeline.
Demand Registration Rights
The right of investors to compel a company to register their shares with the SEC for public sale, typically exercisable after an IPO.
Demo Day
The culminating event of an accelerator program where startups pitch their companies to a room of investors.
Denominator Effect
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.
Deployment Period
The timeframe during which a VC fund actively makes new investments, typically the first 3-5 years of a fund's life.
Design Partner
An early customer that works closely with a startup to shape product development before broad launch.
Dilution
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.
Dilution Overhang
Future dilution risk created by options, convertibles, or other securities that may convert into equity.
Direct Listing
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.
Direct Secondary
A purchase of shares in a private company directly from an existing holder, rather than a purchase of an interest in the fund that owns them.
Discount Rate
In SAFE/convertible note context: the percentage reduction applied to the next round's price to reward early investors. Typically 15-20%.
Distressed Debt
Debt securities of companies in financial difficulty, trading at significant discounts to face value, which can be purchased as an investment strategy.
Distribution Advantage
A structural advantage in acquiring customers more efficiently than competitors.
Distribution Waterfall
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.
Distribution in Specie
A distribution of actual securities (like stock in a public company) to LPs rather than converting to cash first.
Dogfooding
The practice of using your own product internally to test and improve it.
Double Bottom Line
An investment philosophy that evaluates success based on both financial returns and social or environmental impact, treating both as equally important objectives.
Double Trigger Acceleration
Full or partial vesting acceleration that requires two events to trigger, typically a change of control plus termination of the employee.
Down Round
A down round is a financing priced below the previous round's price per share, which triggers anti-dilution adjustments for existing preferred holders.
Downside Protection
Contractual mechanisms designed to reduce investor losses if a company underperforms.
Drag-Along Rights
A provision allowing majority shareholders to force minority shareholders to vote in favor of an acquisition or other liquidity event.
Dry Powder
The total amount of committed but undeployed capital available to venture capital funds, indicating the industry's capacity for future investment activity.
Dry Powder
Dry powder is capital that investors have committed to a fund but the manager has not yet called or deployed.
Dual-Class Stock
A share structure with two classes of common stock carrying different voting rights, typically giving founders disproportionate control relative to their economic ownership.
Due Diligence
The investigative process a VC conducts before investing — reviewing financials, references, technology, legal documents, and market assumptions.
Due Diligence Checklist
A comprehensive list of items a VC reviews before making an investment, covering financials, legal, technology, market, and team aspects.
E
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization — a proxy for operating cash flow and profitability, especially relevant for growth equity and PE deals.
EBITDA Multiple
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.
EIR
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.
ESG
Environmental, Social, and Governance — criteria used by impact investors to evaluate companies beyond purely financial metrics.
ESG Integration Score
A quantitative rating assessing how thoroughly environmental, social, and governance factors are incorporated into a fund's or company's investment process and operations.
Early Adopter
The first customers who embrace a new product before it's proven, often willing to tolerate bugs in exchange for innovation.
Early Stage
The investment phase covering pre-seed through Series A, when companies are building their initial product and proving out their business model.
Earn-Out
A post-acquisition payment structure where the seller receives additional consideration if the acquired company hits agreed performance milestones after closing.
Earnout
A contingent payment in an acquisition where the seller receives additional compensation if the acquired company meets specified performance targets after closing.
Elevator Pitch
A concise, compelling summary of a business that can be delivered in 30-60 seconds.
Emerging Manager
A fund manager early in its institutional life, usually raising Fund I, II or III with a small asset base and a short verifiable track record.
Emerging Manager Allocation
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.
Emerging Manager Program
A dedicated allocation within an LP's portfolio specifically for investing in first-time or early-career fund managers.
Enterprise Sales
A sales strategy focused on large organizations with complex procurement processes.
Enterprise Sales Cycle
The longer, more complex sales process typically required to close deals with large organizations.
Enterprise Value
The total value of a company including equity and net debt — a more complete measure of company value than market cap alone.
Enterprise Value (EV)
A company's total value including equity, debt, and cash — a more comprehensive measure than market capitalization alone.
Enterprise Value to Revenue
A valuation multiple that compares a company's total enterprise value to its annual revenue, commonly used to benchmark SaaS and tech companies.
Entrepreneur in Residence (EIR)
An experienced founder or executive temporarily based at a VC firm to evaluate deals, support portfolio companies, and develop their next venture.
Equity
Ownership in a company, represented as shares. In venture capital, equity is the primary mechanism through which investors participate in a company's upside.
Equity Dilution Curve
A projection of how ownership percentages decline across future funding rounds.
Equity Financing
Equity financing raises money by selling ownership in the company. There is nothing to repay, but the buyers own a permanent claim on the outcome.
Escrow
Funds held by a neutral third party in an acquisition to cover potential post-closing liabilities — sellers receive escrowed funds after a holdback period.
Escrow Holdback
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.
European Waterfall
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.
Evergreen Fund
A fund with no fixed end date that continuously reinvests returns rather than distributing them and winding down.
Exclusivity Period
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.
Execution Risk
The possibility that a startup fails not because of market conditions but because the team cannot execute effectively.
Executive in Residence
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.
Exempt Reporting Adviser
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.
Exercise Price
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.
Exit
A liquidity event that allows investors to realize returns on their investment — typically an IPO or acquisition.
Exit Multiple
The ratio of exit value relative to the invested capital.
Exit Strategy
The planned path for investors and founders to realize returns on their investment — typically through IPO, acquisition, or secondary sale.
Expansion Revenue
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%.
Expansion Stage
The growth phase after product-market fit where a startup scales operations, team, and revenue aggressively.
Exploding Term Sheet
An investment offer with a deliberately short expiry, designed to close before the founder can collect a competing bid.
F
FIRPTA Blocker
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.
FOMO
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.
Fair Value
The estimated market value of an investment, used by VC funds to mark portfolio companies on their books between financing events.
Family Office
A private wealth management organization serving ultra-high-net-worth families — many family offices allocate to VC funds or invest directly in startups.
Feature Creep
The gradual addition of excessive product features that can complicate the product and dilute its value.
Fee Offset Mechanism
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.
Feeder Fund
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.
Fiduciary Duty
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.
Fiduciary Out
A clause allowing a board to withdraw from a previously agreed deal if doing so is required by their fiduciary duties to shareholders.
Final Close
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.
Financial Buyer
An acquirer — typically private equity — focused purely on investment returns rather than operational or strategic synergies with the acquired company.
Financial Engineering
Using complex financial structures or instruments to improve returns, often at the expense of transparency or alignment.
First Close
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.
First Loss Capital
Capital that bears the initial losses in a fund structure, protecting other investors from downside risk in exchange for enhanced returns on the upside.
First Mover Advantage
The competitive benefit gained by being the first company to enter a market, though this advantage is often overstated.
Flat Round
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.
Flywheel
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.
Follow-On Investment
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.
Follow-On Reserve Ratio
The percentage of a fund's capital set aside for additional investments in existing portfolio companies versus initial investments in new companies.
Form D Filing
The electronic notice an issuer files with the SEC on EDGAR within 15 calendar days of the first sale in a Regulation D private placement.
Founder Control
Governance structures that allow founders to maintain decision-making power despite outside investment.
Founder Dilution
The reduction in a founder's ownership percentage as new shares are issued through funding rounds and option grants.
Founder Letter
A personal narrative from the founder included in fundraising materials that explains their mission, motivation, and vision.
Founder Liquidity
Cash received by founders through selling a portion of their shares before an exit.
Founder Market Fit
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.
Founder Mode
A management philosophy where founders stay deeply involved in operational decisions rather than delegating to professional managers — popularized by Paul Graham's 2024 essay.
Founder Optionality
A situation where founders have multiple strategic paths available (raise more capital, sell, remain independent).
Founder Vesting
A requirement that founders earn their equity over time rather than owning it outright from day one.
Founder Vesting Reset
A restructuring of founder vesting schedules during later funding rounds.
Founder-Market Fit
The degree to which a founder's background, expertise, and personal connection to a problem uniquely position them to solve it.
Free Cash Flow
Cash generated by a business after accounting for capital expenditures — a measure of true financial health and the basis for many valuation models.
Freemium
A business model offering a free basic product to drive adoption, with premium features available for a fee.
Full Ratchet
An anti-dilution term that resets a preferred holder's conversion price all the way down to the price of any cheaper later issuance, however small.
Fully Diluted
The total number of shares outstanding assuming all options, warrants, and convertible securities have been exercised — representing true economic ownership.
Fully Diluted Shares
The total number of shares that would be outstanding if all convertible securities, options, and warrants were exercised.
Fund Administrator
An outside firm a fund manager hires to keep the partnership's books, strike net asset value, issue call and distribution notices, and report to investors.
Fund Formation
The legal and regulatory work of standing up a fund: forming the entities, papering the terms, choosing an adviser exemption, and closing capital.
Fund Life
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.
Fund Math
The economic logic determining what size exits a fund needs to generate strong returns.
Fund Recycling
The practice of reinvesting early exit proceeds back into the fund rather than distributing them to LPs, effectively increasing the fund's investable capital.
Fund Returner
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.
Fund Size
The total capital committed by LPs to a venture fund, which determines the fund's investment capacity and check size range.
Fund of Funds
A fund that commits capital to other funds rather than to companies, buying diversified access and manager selection for a second layer of fees.
Funding Milestone
A measurable goal achieved by a company that enables raising the next funding round.
Fundraising Period
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.
G
GAAP
Generally Accepted Accounting Principles — the standard accounting framework required for audited financial statements in the US.
GAAP Revenue
Revenue recognized according to Generally Accepted Accounting Principles, which may differ significantly from bookings or cash received.
GAAP vs. Non-GAAP
The difference between standardized accounting principles (GAAP) and company-adjusted metrics that exclude certain items for a 'cleaner' view of performance.
GP
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.
GP Clawback
The contractual promise that a general partner will return carried interest it was paid early if the fund's overall results do not justify keeping it.
GP Commit
The personal capital that general partners invest in their own fund, typically 1-5% of total fund size.
GP Commit
The amount of personal capital the general partner invests in their own fund, typically 1-5% of fund size, signaling skin in the game to LPs.
GP-Led Secondary
A secondary transaction the general partner initiates, offering fund investors a choice between cashing out and rolling into a new vehicle the same manager runs.
GRR
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%.
General Partner
The general partner is the entity that manages a fund, chooses its investments, bears its liabilities, and earns the management fee and carried interest.
General Partner (GP)
The managing partner(s) of a venture fund — responsible for investment decisions, fund management, and bearing unlimited liability for fund obligations.
General Solicitation
Publicly advertising a fundraise to non-preexisting relationships — allowed under Rule 506(c) for funds raising from accredited investors only.
Generalist Fund
A venture fund investing across multiple sectors rather than specializing in a specific industry.
Go-To-Market
A company's strategy for reaching customers and generating revenue — including sales motion, pricing, channel selection, and marketing approach.
Go-To-Market Channel
The specific distribution channel used to acquire customers (direct sales, marketplaces, partnerships).
Go-To-Market Fit
Alignment between a company's product and the channels used to sell it effectively.
Go-To-Market Motion
The repeatable system through which a company acquires customers and grows revenue.
Go-to-Market Strategy
The plan for how a company will reach and acquire customers, including pricing, channels, and sales approach.
Graduation Rate
The percentage of a fund's portfolio companies that successfully raise the next round of financing, indicating deal quality and portfolio momentum.
Grandfathering Clause
A provision that exempts existing arrangements from new rules or terms, allowing prior agreements to continue under their original conditions.
Gross Burn
The total amount of cash a company spends each month across all operating expenses, before any revenue is subtracted.
Gross Margin
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.
Gross Revenue Retention
The percentage of recurring revenue retained from existing customers over a period, excluding any expansion revenue from upsells — measures pure churn.
Gross TVPI
Total Value to Paid-In capital before deducting management fees and carried interest, showing the fund's raw investment performance multiplier.
Growth Equity
Growth equity buys a minority stake in an established, growing company, usually without control and usually without the leverage a buyout uses.
Growth Hacking
Rapid, data-driven experimentation to find scalable, low-cost user acquisition strategies — associated with early-stage consumer tech companies.
Growth Inflection
The point where revenue or user growth accelerates significantly.
Growth Investor
An investor specializing in later-stage companies scaling revenue.
Growth Loop
A self-reinforcing growth mechanism where existing users or actions generate additional users.
Growth Round
A late-stage funding round focused on scaling a proven business model, typically Series C and beyond.
Growth Stage
The phase where companies scale revenue and market share after product-market fit.
Growth at All Costs
A strategy of prioritizing revenue growth over profitability, often fueled by venture capital, with the assumption that scale will eventually drive margins.
H
Hard Cap
The maximum amount a fund will raise — once the hard cap is reached, no additional LP commitments are accepted.
Hard Commitment
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.
Harvest Period
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.
Herd Mentality
The tendency for VCs to follow each other into the same sectors, stages, or deals, creating bubbles and crowded investment categories.
Hockey Stick Growth
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.
Horizontal SaaS
Software products designed to serve multiple industries rather than a specific vertical.
Hot Round
A fundraise with multiple competing investors, often closing above target amount and at better-than-expected valuations for the startup.
Hurdle Rate
A hurdle rate is the minimum return investors must receive before a fund manager can take carried interest. It is also called the preferred return.
Hurdle Rate Calculation
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.
Hypergrowth
Extremely rapid startup growth, often defined as 100%+ annual revenue expansion.
I
IPO
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.
IPO Window
Periods when public market conditions are favorable for technology IPOs — characterized by investor appetite, high valuations, and strong aftermarket performance.
IRIS+ Metrics
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.
IRR
IRR is the annualized rate that makes the present value of an investment's cash flows equal zero. It is the timing-sensitive companion to a multiple.
IRR Bridge
A waterfall that decomposes the change in a fund's internal rate of return between two measurement dates into the drivers that produced it.
ISO
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.
Idea Maze
The complex set of decisions and strategic pathways a founder must navigate to build a successful company.
Illiquid Asset
An investment that cannot be quickly converted to cash without potentially significant loss in value.
Illiquidity Premium
The additional return investors expect for holding assets that cannot be easily sold, like venture capital fund interests.
Impact Investing
Investing with the explicit intention of generating positive social or environmental impact alongside financial returns.
Impact Measurement Framework
A structured system for quantifying and reporting the social or environmental impact of investments alongside financial returns.
Impact-First vs Finance-First
A spectrum describing whether an impact investor prioritizes social/environmental outcomes or financial returns when the two objectives conflict.
Implied Valuation
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.
Imputed Interest
Interest income the IRS assumes exists on below-market loans, even if no interest is actually charged.
In-Kind Distribution
Distribution of actual portfolio company shares to LPs (rather than cash) when a portfolio company goes public.
Inclusion Rider
A contractual provision requiring diversity standards in hiring, governance, or vendor selection as a condition of investment.
Incubator
An incubator supports companies at the earliest stage with space, mentorship and services, usually with no fixed end date and often without taking equity.
Independent Director
A board member who is not affiliated with the company's investors or management, providing neutral perspective on governance decisions.
Independent Sponsor
A deal-by-deal investor who sources and manages transactions without a committed fund, raising capital from LPs on a per-deal basis.
Inflection Investing
An investment strategy focused on identifying companies at the point where growth is about to accelerate dramatically.
Inflection Point
A moment when a company's growth trajectory accelerates significantly due to product-market fit or scaling.
Information Asymmetry Cost
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.
Information Rights
Contractual obligations requiring a startup to share financial statements and other operational data with investors on a regular basis.
Innovation Arbitrage
Building new companies by applying existing technology or business models to underdeveloped markets.
Inside Round
A funding round led by existing investors without participation from new outside investors.
Insider Round
A funding round primarily led by existing investors rather than new external capital.
Institutional LP
Large organizations—pension funds, endowments, insurance companies, sovereign wealth funds—that allocate significant capital to venture funds as part of a diversified investment portfolio.
Institutional Quality
Meeting the governance, reporting, compliance, and operational standards required by institutional LPs like pension funds, endowments, and insurance companies.
Institutional Venture Capital
Venture investing done through a professionally managed pooled fund that raises capital from outside investors, rather than by an individual investing their own money.
Internal Rate of Return (IRR)
The annualized return rate that makes the net present value of all cash flows equal to zero — the standard VC performance metric.
Investment Committee
The decision-making body within a VC firm that evaluates and approves investment decisions — typically composed of the firm's general partners.
Investment Committee Process
The formal decision-making workflow within a VC firm for evaluating and approving new investments, typically involving multiple stages of review by the partnership.
Investment Memo
A formal internal document written by a VC analyst or associate summarizing an investment thesis and recommendation for a potential portfolio company.
Investment Pace
The rate at which a venture fund deploys capital over time.
Investment Pacing
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.
Investment Period
The defined window, typically 3-5 years from final close, during which a fund actively makes new investments from committed capital.
Investor Syndication
The process of multiple investors participating together in a financing round.
Investor Update
A periodic report sent by founders to investors summarizing company performance and needs.
J
K
Key Metrics Dashboard
A reporting tool summarizing the most important performance indicators for a company.
Key Performance Indicator (KPI)
A measurable metric that tracks progress toward a critical business objective.
Key Person Carry Forfeiture
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.
Key Person Clause
A fund provision allowing LPs to suspend further capital contributions or terminate the fund if a named key GP leaves the fund.
Key Person Event
A triggering event that occurs when designated key persons are unable to devote sufficient time to the fund, typically suspending the investment period.
Kill Rate
The percentage of startups in a portfolio that fail or return less than invested capital.
Knowledge Arbitrage
Building companies by applying knowledge from one industry to another.
L
LP
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.
LP Advisory Committee (LPAC)
A committee of selected LPs that reviews and approves potential conflicts of interest and other sensitive fund decisions.
LP Advisory Committee Seat
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.
LP Concentration Risk
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.
LP Default Remedy
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.
LP Reporting
The recurring statements a fund manager owes its investors: quarterly capital accounts and fee detail, call and distribution notices, annual audits and K-1s.
LPAC
Limited partner advisory committee: a small committee of a fund's investors that advises the GP and clears conflicts, without making investment decisions.
LTV
Lifetime Value — the total revenue a business expects to earn from a single customer over the entire duration of their relationship.
Land and Expand
A SaaS growth strategy where companies start with a small initial contract and expand revenue over time.
Late Stage
Venture investments in mature, scaled companies — typically Series C and beyond — that have proven business models and are approaching IPO or acquisition.
Lead Investor
The investor that sets the terms for a funding round, invests the largest check, and often takes a board seat.
Lead Qualification
The process of determining whether potential customers are a good fit before investing time in the sales process.
Lead Qualification Funnel
The stages through which potential customers move before becoming paying customers.
Lean Startup
A methodology for building startups through rapid experimentation, validated learning, and iterative product development.
Lemon Problem
The market failure where information asymmetry causes high-quality deals to leave the market, leaving mostly poor-quality opportunities for less-informed investors.
Letter of Intent
A non-binding document outlining the preliminary terms of a deal, commonly used in M&A and some venture transactions.
Letter of Intent (LOI)
A preliminary agreement outlining the key terms of a proposed transaction — similar to a term sheet but more commonly used in M&A contexts.
Lightning Round
An extremely fast financing round where investors commit capital quickly with minimal process.
Limited Partner
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.
Limited Partner (LP)
A fund investor in a limited partnership who supplies capital, has no management authority, and is shielded from partnership debts while not controlling the business.
Liquid Token Fund
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.
Liquidation Analysis
A calculation showing how exit proceeds would be distributed among shareholders based on their liquidation preferences and rights.
Liquidation Event
Any transaction that triggers distribution of proceeds to shareholders — including company sale, merger, or dissolution.
Liquidation Preference
A liquidation preference is the right of preferred stockholders to be paid a set amount out of exit proceeds before common stockholders receive anything.
Liquidation Stack
The ordered hierarchy of how different shareholder classes receive proceeds in a liquidity event, from most senior to most junior.
Liquidity Event
Any transaction that allows shareholders — founders, employees, and investors — to convert equity in a private company into cash.
Liquidity Preference Layering
Stacking multiple liquidation preferences across funding rounds.
Liquidity Preference Stack
The hierarchy of investor claims on proceeds during an exit.
Lock-Up Period
The post-IPO period (typically 180 days) during which insiders and pre-IPO investors are prohibited from selling their shares.
Long Tail Market
A market composed of many small customer segments that collectively represent significant demand.
Long-Term Optionality
Maintaining strategic flexibility for future opportunities.
M
M&A
Mergers and Acquisitions — the consolidation of companies through purchase, merger, or other corporate transactions. A primary exit path for VC-backed companies.
MFN Provision
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.
MOIC
MOIC is multiple on invested capital: total value, realized plus unrealized, divided by the capital invested. It ignores time entirely.
MOIC
Multiple on Invested Capital — the total value returned divided by the total capital invested, expressed as a multiple (e.g., 3x means tripling your money).
MRR
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.
MVP
Minimum Viable Product — the simplest version of a product that allows a team to collect validated learning about customers with the least effort.
Magic Number
A sales efficiency ratio: the quarter-over-quarter change in recurring revenue, annualized, divided by the prior quarter's sales and marketing spend.
Management Company
The legal entity that employs the GP team and receives management fees for operating the fund.
Management Fee
A management fee is the annual charge a fund pays its manager to operate: a percentage of committed capital that steps down after the investment period.
Management Fee Holiday
A period during which the manager waives or reduces the management fee it would otherwise collect, leaving the stated fee rate itself unchanged.
Management Fee Offset
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.
Mark-to-Market
Adjusting the carrying value of portfolio investments to reflect current market prices or estimated fair values.
Market Expansion Strategy
Entering new geographic or industry markets to grow revenue.
Market Map
A visual overview of a startup ecosystem or market segment — mapping companies by category, stage, geography, or other characteristics.
Market Penetration
The percentage of a total market currently captured by a company.
Market Saturation
A state where most potential customers already use competing products.
Market Timing
The alignment between a startup's launch and the broader readiness of the market.
Market Timing Risk
The risk that a fund's vintage year coincides with a market peak, leading to elevated entry prices and compressed returns.
Master-Feeder Structure
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.
Material Adverse Change
A significant negative event that fundamentally alters the value or prospects of a company, potentially voiding agreements.
Micro-SaaS
Small, niche SaaS businesses often built by solo founders.
Micro-VC
A micro-VC is a small institutional venture fund, commonly under 100 million dollars, investing at pre-seed and seed, often run by a solo GP.
Milestone
A specific, measurable achievement that a startup must reach to unlock additional funding, demonstrate progress, or meet investor expectations.
Milestone-Based Funding
A financing structure where capital is released in tranches contingent on the company achieving predefined performance milestones.
Minimum Viable Traction
The early signals that indicate product-market fit may be emerging.
Missionary Founder
A founder motivated primarily by solving a specific problem rather than financial gain — considered more credible and resilient by many investors.
Moat
A sustainable competitive advantage protecting a company from competitors.
Monday Partner Meeting
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.
Monthly Active Customers (MAC)
The number of paying or engaged customers in a given month.
Moral Hazard
The risk that someone will take greater risks because they don't bear the full consequences of their actions.
Most Favored Nation
A clause ensuring an investor receives terms at least as favorable as those given to any other investor in the same or subsequent round.
Multi-Product Company
A startup expanding beyond a single core product into multiple product lines to increase revenue and defensibility.
N
NAV
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.
NAV Calculation
The process of determining a venture fund's Net Asset Value by valuing all portfolio holdings, adding cash, and subtracting liabilities and accrued fees.
NAV Lending
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.
NDR
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.
NRR
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).
NSO
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.
Narrative Investing
Investing decisions influenced by compelling stories about future market outcomes rather than current metrics.
Narrow-Based Weighted Average
A less founder-friendly anti-dilution formula that only counts preferred shares in the denominator, resulting in greater conversion price adjustments in down rounds.
Negative Covenant
A contractual restriction that prohibits a company from taking certain actions without investor consent, such as issuing new equity or taking on debt.
Negative Signal
Information or events that cause investors to question a company's prospects, making fundraising more difficult.
Negative Signaling
When an existing investor's decision not to participate in a follow-on round sends a bearish signal to potential new investors.
Net Burn
The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.
Net Dollar Retention
Net dollar retention is this year's revenue from last year's customers divided by last year's revenue from those same customers, expressed as a percentage.
Net Revenue Retention
The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction.
Network Density
The strength of connections between users within a network product.
Network Density Effect
A strengthening of network effects as interactions between users increase.
Network Distribution
User acquisition driven by network interactions between customers.
Network Distribution Advantage
A growth advantage created through strong partnerships, integrations, or user networks.
Network Effects
The phenomenon where a product or service becomes more valuable as more people use it — one of the most powerful competitive moats in technology.
No-Fault Divorce Clause
A fund provision allowing LPs to remove the GP or suspend the investment period without proving cause, typically requiring a supermajority vote.
No-Shop Clause
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.
Non-Dilutive Funding
Capital sources that don't require giving up equity — including grants, loans, revenue-based financing, and government programs.
Non-Disclosure Agreement (NDA)
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.
O
Onboarding Friction
The barriers and complexity new users face when first using a product, which directly impacts conversion and retention.
Operating Agreement
The governing document for an LLC-structured fund entity (typically the management company or GP entity), defining member rights, profit sharing, and operational procedures.
Operating Discipline
The consistent execution of processes and cost controls within a company.
Operating Leverage
The degree to which a company can increase revenue without proportionally increasing costs, driving margin expansion at scale.
Operating Margin
Revenue minus operating expenses expressed as a percentage of revenue.
Operating Partner
An experienced executive embedded within a VC firm who provides hands-on operational support to portfolio companies.
Operating Partner Model
A VC firm structure employing experienced operators who work hands-on with portfolio companies to accelerate growth, distinct from traditional investment-only partner roles.
Operational Excellence
Consistently strong execution across hiring, product, sales, and operations.
Operator
An experienced executive or founder who has run operations inside a company — often contrasted with pure investors, and increasingly sought after as VC partners.
Operator Angel
A startup operator who invests personal capital into startups while still actively working in the industry.
Operator Investor
An investor who previously built or ran companies in the same industry.
Opportunity Fund
A separate, dedicated pool of capital raised by a VC firm specifically to make larger follow-on investments in its best-performing portfolio companies.
Option Pool
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.
Option Pool Shuffle
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.
Optionality
The value of having multiple possible paths forward, allowing a company or investor to choose the best option as information unfolds.
Organic Growth
Revenue or user growth achieved without acquisitions or paid marketing.
Organizational Expenses Cap
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.
Overhang
A large amount of shares or investor rights that could create future selling pressure or governance challenges.
Oversubscribed
A fundraising round that receives more investor commitments than the company (or fund) is seeking to raise — creating scarcity and competitive pressure.
Ownership Target
The percentage of a company that a VC fund aims to own after making an investment, typically used to determine check size.
P
PMF
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.
Parallel Fund
A separate fund vehicle that invests alongside the main fund on identical terms, created to accommodate investors with specific legal, tax, or regulatory requirements.
Pari Passu
Latin for 'equal step' — describes securities or investors treated equally, with no one having priority over others in the same class.
Participating Preferred Stock
Preferred shares that get their liquidation preference AND participate pro-rata in remaining proceeds — double-dipping.
Participation Cap
A limit on how much participating preferred investors can receive before their participation rights terminate and they must convert to common stock.
Party Round
A funding round with many small investors and no clear lead investor — often assembled quickly during hot markets, with minimal due diligence.
Pattern Recognition
A VC's ability to identify success signals in startups based on experience with similar companies, teams, and markets.
Pay-to-Play
A provision requiring existing investors to participate in future down rounds or lose certain rights — typically conversion rights on preferred stock.
Payback Period
The time required for a company to recover its Customer Acquisition Cost (CAC) from the gross margin generated by that customer.
Payback Ratio
A measure of how efficiently a company recovers sales and marketing spend.
Pipeline
In sales: the total value of potential deals in progress. In VC fundraising: the pool of potential investors a startup is engaging.
Pipeline Conversion Rate
The percentage of potential deals that convert into paying customers.
Pitch Deck
A slide presentation used by founders to communicate their business to potential investors, typically 10-15 slides covering problem, solution, market, traction, and team.
Pivot
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.
Placement Agent
A firm that helps fund managers find and close institutional LP commitments, typically for a fee of 1-2% of capital raised.
Platform
In VC: a team or set of services provided by a fund to its portfolio companies — talent, marketing, BD, technical resources beyond just capital.
Platform Model
A VC firm's organized approach to providing portfolio companies with operational support beyond capital, including talent, marketing, and business development resources.
Platform Risk
The risk of building a company dependent on another platform (e.g., Apple, Amazon, Google APIs).
Platform Team
The non-investment staff a venture firm employs to deliver services to portfolio companies, such as recruiting, marketing, go-to-market, technical help and policy work.
Portfolio Company
A startup that a VC fund has invested in and holds in its portfolio.
Portfolio Company Governance
The framework of board oversight, reporting requirements, and decision-making processes that VCs establish at their portfolio companies.
Portfolio Concentration
How much of a fund's capital sits in its largest positions, and therefore how much a single outcome can move the fund's result.
Portfolio Construction
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.
Portfolio Diversification
The practice of spreading investments across multiple companies or sectors.
Portfolio Marking
Updating the internal valuation of portfolio companies based on new information.
Portfolio Monitoring
The recurring collection and analysis of company-level data across a fund's holdings, used to set marks, place reserves, and report to investors.
Post-Money SAFE
A SAFE where the valuation cap is calculated on a post-money basis, giving investors more predictable ownership percentages.
Post-Money Valuation
Post-money valuation is the pre-money valuation plus the money raised: the company's agreed value once the new investment is in.
Power Law
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.
Power Law Distribution
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.
Power User
Highly engaged users who derive significant value from a product and often influence others to adopt it.
Pre-Money Valuation
Pre-money valuation is the agreed value of a company immediately before new investment arrives, and the number that sets the price per share.
Pre-Seed
The first outside money a company raises, taken before a seed round and usually on a convertible instrument rather than a priced sale of preferred stock.
Preemptive Investment
An investor offering to lead a round before the company formally begins fundraising.
Preemptive Round
A funding round initiated by an investor approaching a company before it was planning to fundraise, often at a premium valuation.
Preferred Return
The minimum annual return (typically 6-8%) LPs receive before the GP begins taking carried interest — also called a hurdle rate.
Preferred Stock
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.
Price Sensitivity
How strongly customer demand changes when pricing changes.
Priced Round
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.
Pricing Power
The ability to raise price without losing enough volume to offset the gain, measured by what happens to revenue per customer and retention afterwards.
Primary Capital
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.
Private Equity
A broad category of investment in private companies — encompassing venture capital, growth equity, leveraged buyouts, and distressed investing.
Pro Rata
Pro rata means in proportion. In venture capital it is an investor's right to buy enough of a new round to hold their ownership percentage steady.
Pro-Rata Rights
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.
Product Differentiation
Distinct product characteristics that set a company apart from competitors.
Product Stickiness
The likelihood that customers continue using a product due to habit or switching costs.
Product Velocity
How quickly a team gets a decision about the product into customers' hands, measured by delivery throughput rather than by activity.
Product-Led Growth
A go-to-market strategy where the product itself drives user acquisition, conversion, and expansion — reducing reliance on traditional sales and marketing.
Product-Market Fit
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.
Proforma Cap Table
A projected capitalization table showing post-round ownership percentages after a proposed financing — used to model the dilution impact of a new investment.
Protective Provisions
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.
Public Market Equivalent (PME)
A methodology for comparing VC fund returns against what the same capital would have earned in public markets.
Q
QSBS
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.
Qualified Purchaser
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.
R
REOC
A real estate operating company: a fund that holds at least half its assets at cost in real estate it has the right to help manage or develop, and actually does so.
RVPI
Residual value to paid-in capital: the share of a fund's reported performance that still sits in unsold assets rather than in cash already distributed.
Ramp-Up Period
The time it takes for a new sales rep, product, or market to reach full productivity.
Ratchet
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.
Re-Up Rate
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.
Realization
The conversion of portfolio investment value into actual cash through an exit event — IPO, acquisition, or secondary sale.
Recapitalization
A restructuring of a company's capital structure — changing the mix of equity and debt, or renegotiating existing equity terms.
Recycling
A fund structure provision allowing GPs to reinvest early capital returns back into new portfolio investments rather than distributing them immediately to LPs.
Reference Check
Conversations with former colleagues, investors, and customers of a founder to verify their character, skills, and track record before investing.
Regulation D
The SEC safe harbor allowing companies to raise capital from accredited investors without registering the securities offering — the legal basis for most private financings.
Representations and Warranties
Statements of fact made by a seller in an M&A transaction that the buyer relies on — breaches can result in indemnification obligations.
Reserve Capital
Funds set aside by a VC fund for follow-on investments in existing portfolio companies rather than new investments.
Reserve Strategy
A fund's plan for allocating capital between initial investments and follow-on investments in existing portfolio companies.
Retention Rate
The percentage of customers who continue using a product over time.
Revenue Bridge
A waterfall that decomposes the change in revenue between two periods into named components that sum exactly to the difference.
Revenue Concentration
When a large share of revenue comes from a few customers.
Revenue Multiple
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.
Revenue Predictability
The reliability of future revenue projections.
Revenue Visibility
The predictability of future revenue based on contracts or subscription models.
Revenue-Based Financing
A non-dilutive funding model where startups repay investors through a fixed percentage of monthly revenue until a predetermined total return cap is reached.
Reverse Breakup Fee
Cash the buyer owes the target if the buyer cannot close a signed acquisition, most often because antitrust regulators block it.
Reverse Merger
A private company going public by merging with an existing public shell company, bypassing the traditional IPO process.
Reverse Vesting
A structure where a founder receives all shares upfront but the company has the right to repurchase unvested shares if the founder leaves.
Right of First Refusal
A contractual right giving a party the first opportunity to match any offer before shares can be sold to a third party.
Risk-Adjusted Return
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.
Rolling Fund
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.
Rollup Startup
A startup strategy focused on acquiring and consolidating many smaller companies in a fragmented market.
Round
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.).
Rule of 40
A SaaS health metric: a company's revenue growth rate plus profit margin should equal or exceed 40%, balancing growth and profitability.
Rule of 40
The Rule of 40 says a healthy software company's growth rate plus its profit margin should add up to at least 40 percent.
Run Rate
Projected annual revenue based on current monthly or quarterly performance.
Runway
Runway is how many months a company can keep operating before its cash reaches zero: cash divided by monthly net burn.
Runway Extension
Actions taken to extend the time before a company runs out of cash.
S
S-1 Filing
The registration statement a company files with the SEC to go public, containing comprehensive financial and business disclosures.
SAFE
A SAFE is a contract to issue equity later for money now: no interest, no maturity, converting at the next priced round on a valuation cap or discount.
SAFE + Token Side Letter
A dual investment structure pairing a standard SAFE for equity with a separate side letter granting rights to future token allocations from the project.
SAFT Agreement
A Simple Agreement for Future Tokens—a pre-functional token investment contract where investors fund development in exchange for tokens delivered at network launch.
SAM
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.
SDG Alignment
Tying a fund's or company's stated impact to named Sustainable Development Goal targets, and then measuring against them rather than against the goal logo.
SOM
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.
SPAC
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.
SPV
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.
SPV Reporting Packet
The update an SPV lead sends its investors: the vehicle's position, the basis for the current valuation, fees and carry, cash status, and K-1 timing.
SaaS
Software as a Service — cloud-delivered software accessed via subscription, generating recurring revenue. The dominant business model in modern enterprise software.
SaaS Metrics
The standard set of KPIs used to evaluate software-as-a-service business performance.
Sales Efficiency
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.
Sales Funnel
The stages customers pass through from awareness to purchase.
Sales-Led Growth
A growth model driven primarily by outbound sales teams rather than product-led adoption.
Scalable Business Model
A model whose cost of serving the next customer is small relative to what that customer pays, so revenue can multiply while costs rise slowly.
Scale Advantage
Competitive advantage gained through larger operational scale.
Scale-Up
A company that has found product-market fit and is focused on rapidly expanding its customer base, team, and revenue.
Scale-Up Financing
Growth capital provided to companies that have achieved product-market fit and need funding to rapidly scale operations, sales, and market presence.
Scaling Phase
The stage where startups focus on rapid growth after validating product-market fit.
Scout Program
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.
Second-Time Founder
An entrepreneur starting another company after previously founding one.
Secondary Market
The market for buying and selling existing private company shares or LP interests in VC funds — providing liquidity before traditional exit events.
Secondary Sale
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.
Section 754 Election
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.
Sector Specialist Fund
A venture fund focused on a specific industry such as fintech or healthcare.
Seed Extension
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.
Seed Investor
An investor who writes the first institutional check into a company, usually before there is enough revenue to underwrite and usually on a safe or a small priced round.
Seed Round
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.
Selection Bias
A distortion in data or conclusions caused by non-random sampling, common in VC when analyzing success patterns.
Series A
Series A is the first priced round of preferred stock a startup sells to institutional investors, and the round that installs formal venture governance.
Series B
The third major institutional funding round, typically raised after demonstrating product-market fit and early revenue traction, used to scale sales, marketing, and operations.
Series B Funding
Series B is the priced preferred stock round after Series A, raised once a company has a repeatable sales motion, to fund scale rather than to find it.
Series C
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.
Series D Funding
The fourth priced equity round after Series A, B and C, usually a large late-stage financing bought by growth, crossover and sovereign investors.
Series E Funding
The fifth priced round of preferred stock a venture-backed company sells; the letter records sequence, not size, stage or quality.
Shareholder Agreement
A contract among shareholders governing their rights, obligations, and the company's governance structure.
Shipping
Releasing product updates, features, or fixes to users — used in startup culture to signal execution velocity and bias toward action over planning.
Side Car Vehicle
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.
Side Letter
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.
Signal
An investor's reputation or prior success influencing other investors to participate in a round.
Signaling
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.
Signaling Risk
The danger that an investor's decision (to invest or not) sends a negative signal to the market about a company.
Single Trigger Acceleration
An equity provision that fully accelerates vesting upon a single event, typically a change of control (acquisition).
Smart Money
Capital from investors who bring significant value beyond the investment itself: expertise, connections, brand, and operational support.
Solo GP
A venture capital firm run by a single general partner rather than a partnership of multiple GPs — increasingly common at the seed stage.
Solo GP Fund
A venture fund managed by a single general partner without co-managing partners, increasingly common among emerging managers.
Sovereign Wealth Fund
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.
Speed of Execution
The rate at which a startup builds product, hires, and enters markets.
Staged Financing
The practice of funding startups through sequential rounds, each with increasing amounts and valuations as the company de-risks.
Stale Pricing
When a portfolio company's valuation is based on an outdated funding round that no longer reflects current fair value.
Startup Burnout
Founder or team exhaustion resulting from prolonged high-intensity startup work.
Startup Ecosystem
The network of investors, founders, accelerators, universities, and service providers supporting startups.
Startup Studio
An organization that builds multiple startups internally rather than investing in external founders.
Step-Down Fee
A reduction in the management fee rate after the investment period ends, typically calculated on invested capital or NAV rather than committed capital.
Stock Option
The right to purchase company stock at a fixed price (strike price) in the future — the primary equity compensation tool for startup employees.
Stock Options
The right to purchase company shares at a fixed price (the strike price) granted to employees and service providers as part of equity compensation.
Strategic Acquirer
A company that acquires another business for strategic value like technology, talent, or market access rather than purely financial returns.
Strategic Acquisition
An acquisition by a company seeking operational synergy, market access, technology, or talent — as opposed to a financial buyer seeking pure investment returns.
Strategic Investor
A corporate or institutional investor that invests for strategic reasons (partnerships, market intelligence, acquisition pipeline) in addition to financial returns.
Strategic Partnership
A collaboration between companies designed to accelerate growth.
Strategic Premium
The additional price a strategic acquirer pays above financial value, reflecting synergies, competitive defense, or strategic benefits unique to that buyer.
Strike Price
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.
Strip Sale
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.
Structural Alpha
Excess returns generated through unique structural advantages in how a fund operates rather than just better stock picking.
Subscription Line of Credit
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.
Successor Fund
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.
Sunset Provision
A clause that causes a right or obligation to expire automatically after a specified period or triggering event.
Super Angel
A prolific individual angel investor who writes many checks across numerous startups, often at institutional scale — blurring the line between angels and micro-VCs.
Super Pro Rata
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.
Survivorship Bias
The logical error of focusing only on successful outcomes while ignoring the many failures, distorting perceived probabilities.
Sweat Equity
Ownership stake earned through labor and effort rather than financial investment.
Syndicate
A group of investors funding one round behind a lead, today usually pooled into a single per-deal vehicle rather than joining the cap table individually.
T
TAM
Total Addressable Market — the total revenue opportunity available if a company captured 100% of its target market.
TAM Expansion
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.
TVPI
TVPI is total value to paid-in capital: distributions plus remaining net asset value, divided by capital contributed. It equals DPI plus RVPI.
TVPI
Total Value to Paid-In — the sum of distributions plus remaining portfolio value, divided by capital contributed. Includes both realized and unrealized returns.
Tag-Along Rights
Rights allowing minority shareholders to join a sale when majority shareholders sell their shares, ensuring equal treatment in a transaction.
Take Rate
The share of the money flowing across a platform that the platform keeps as revenue, expressed as a percentage of transaction volume.
Tax Distribution
A distribution from a fund specifically to help partners cover tax liabilities arising from fund income allocated to them on K-1 statements.
Tech Moat
A competitive advantage created through proprietary technology, infrastructure, or intellectual property.
Tech Winter
A prolonged downturn in venture funding, startup valuations, and tech hiring — characterized by layoffs, down rounds, and reduced VC activity.
Technology Adoption Curve
The timeline of how new technologies spread through markets.
Technology Risk
The possibility that a company's core technology will fail or be overtaken.
Tender Offer
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.
Term Sheet
A term sheet is the mostly non-binding summary of a proposed investment's economics and governance, signed before the definitive documents are drafted.
Term Sheet Negotiation
The process of negotiating the key business and governance terms of an investment before detailed legal documentation.
Terminal Value
The estimated value of a business beyond the explicit forecast period, often the largest component of a DCF valuation.
Thesis
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.
Thesis Drift
When a venture fund begins investing outside of its stated strategy.
Thesis-Driven Investing
Investing from a written view about a specific change in the world, then sourcing against the companies that view predicts, rather than reacting to inbound deals.
Three-Statement Model
An integrated financial model linking the income statement, balance sheet, and cash flow statement.
Throwback Provision
An LP protection that requires the GP to return previously distributed carry if the fund ultimately underperforms.
Tiger Global Effect
The market disruption caused when crossover hedge funds deploy massive capital into venture at unprecedented speed and scale.
Token Vesting Schedule
A predetermined timeline governing when tokens allocated to investors, team members, or advisors become transferable, often enforced via smart contracts.
Token Warrant
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.
Top Quartile
Funds whose returns rank in the top 25% of all funds from the same vintage year.
Top-Down Investing
An investment approach starting with macro themes, sectors, or trends and then identifying companies positioned to benefit — opposite of bottom-up (company-first).
Total Addressable Market
The total revenue opportunity available if a product achieved 100% market share.
Total Addressable Value (TAV)
An expanded concept of TAM that includes additional value created through ecosystem effects.
Total Contract Value (TCV)
The total revenue value of a customer contract including recurring and one-time charges.
Total Market Opportunity
The total potential economic value a company could capture in a market.
Traction
Measurable evidence that a startup's product is gaining market adoption — revenue growth, user growth, retention, and engagement are common traction metrics.
Tranche
A portion of a larger investment, released upon meeting specific milestones — used in milestone-based financing to reduce investor risk.
Transfer Restrictions
Contractual limitations on an investor's ability to sell, transfer, or assign their fund interest or shares.
True Up
A catch-up payment that puts a party where it would have been if it had participated from the start, most often paid by an investor admitted at a later fund closing.
U
UBTI Blocker
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.
Unbundling
A startup strategy where a company breaks apart an existing platform or industry and focuses on a single component.
Underwater Options
Stock options with an exercise price higher than the current fair market value of the underlying shares, making them worthless if exercised.
Unicorn
A unicorn is a privately held company valued at 1 billion dollars or more, based on the post-money valuation of its most recent priced round.
Unit Economics
The direct revenues and costs associated with a single customer or unit — used to assess whether a business can be profitable at scale.
Unprofitable Growth
Growth achieved through subsidized unit economics — where each new customer or transaction loses money — justified by the expectation of future scale or market dominance.
Unrealized Gains
The paper profit on investments that haven't been sold or exited yet.
Unrealized Value
The current estimated value of portfolio investments that have not yet been exited — also called paper gains or unrealized gains.
Up Round
A financing round where a startup raises at a higher valuation than its previous round — the normal, positive progression of a healthy startup.
User Acquisition Cost
The cost required to acquire a new user, commonly used in consumer tech.
User Engagement Rate
A measurement of how frequently and deeply users interact with a product.
User Retention Rate
The percentage of users who continue using a product over time.
V
VCOC
A fund that keeps at least half its assets at cost in investments carrying management rights, so its holdings are not treated as ERISA plan assets.
Valuation
The estimated worth of a company, used to determine investor ownership percentages and share pricing in a funding round.
Valuation Cap
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.
Valuation Compression
A decrease in startup valuations during market downturns.
Value Capture
The ability of a company to convert market demand into revenue and profit.
Value Creation
The process of increasing a company's worth through revenue growth, margin improvement, or strategic positioning.
Value Creation Plan
A structured roadmap outlining specific initiatives to increase a portfolio company's value during the investment holding period.
Value Inflection Point
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.
Value Proposition
The core benefit or problem a product solves for its customers.
Value-Add Investing
An investment approach where the VC provides strategic support beyond capital to help portfolio companies succeed.
Value-Based Pricing
Pricing based on the value delivered to customers rather than the cost of production.
Velocity
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.
Venture Builder
An organization that creates startups from scratch using internal ideas, resources, and teams rather than investing in external founders.
Venture Capital
Money pooled from institutional investors into a fund that buys minority equity in private, high-growth companies and waits years for an exit.
Venture Capital vs Private Equity
Venture funds buy minority stakes in young companies with no debt; buyout funds buy control of mature, cash-generating companies using borrowed money.
Venture Capitalist
A professional who invests a fund's money, raised from limited partners, into private companies, paid a management fee plus a share of the profits.
Venture Debt
Debt financing for venture-backed startups that supplements equity rounds, typically structured as term loans with warrants from specialized lenders like SVB and WTI.
Venture Debt Covenant
A promise in a venture loan agreement that constrains what the borrower may do, most often a liquidity test plus limits on new debt, liens and asset sales.
Venture Partner
A senior person a venture firm engages part-time or deal-by-deal to source and evaluate investments or support portfolio companies, usually not as an employee.
Venture Partner Agreement
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.
Venture Platform
The operational team inside a VC fund that provides non-capital support to portfolio companies — including recruiting, marketing, business development, and community programs.
Venture Scale
A business capable of reaching very large outcomes (often $1B+ valuations).
Venture Studio
An organization that conceives, builds, and launches startup companies internally — co-founding startups with the studio team rather than backing external founders.
Vertical SaaS
Software designed for a specific industry such as healthcare, construction, or finance.
Vesting
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.
Vintage Year
A fund's vintage year is its legal inception year, used to compare it only against funds that began investing in the same market environment.
Vintage Year Diversification
The practice of spreading LP commitments across multiple fund vintage years to smooth returns and reduce market timing risk.
Vintage Year Effect
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.
Voting Rights
Who gets to decide what, and with how many votes per share, across a company's charter, its voting agreement and its boardroom.
W
Warrant
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.
Waterfall
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.
Waterfall Analysis
A detailed calculation showing how exit proceeds are distributed among all shareholders based on their specific rights, preferences, and terms.
Weighted Average Anti-Dilution
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.
Whale Customer
A large customer that contributes a disproportionately large share of revenue.
White Space Opportunity
An underserved market opportunity with limited existing competition.
Why Now
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.
Wind-Down Period
The final phase of a fund's life focused on liquidating remaining portfolio positions, resolving outstanding obligations, and making final distributions to LPs.
Working Capital
The difference between a company's current assets and current liabilities.
Working Capital Financing
Short-term financing used to cover operational expenses.
Write-Down
A reduction in the carrying value of a portfolio investment — typically reflecting poor company performance or a down round financing.
Write-Off
A total write-down of a portfolio investment to zero — when a company has failed and the investment is a complete loss.
Y
Z
Zero Customer Acquisition Cost (ZCAC)
Growth driven entirely by organic or viral adoption rather than paid marketing.
Zero-Interest Rate Phenomenon (ZIRP)
A macroeconomic environment of near-zero interest rates that historically fueled aggressive venture investing.
Zombie Fund
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.