How venture capital funds are organized, governed, and managed — LPA, GP/LP relationships, fund terms, and entity formation.
107 terms
Assets Under Management — the total market value of investments a VC firm manages on behalf of its limited partners across all active funds.
The practice of actively supporting and monitoring portfolio companies after investment to improve outcomes.
The conflict of interest that arises when a GP's incentives diverge from those of their LPs or portfolio company founders.
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.
Investment categories outside traditional stocks and bonds — including venture capital, private equity, hedge funds, real estate, and commodities.
A deal-by-deal distribution structure where the GP can receive carried interest on profitable exits before the fund as a whole has returned all capital to LPs.
The first and typically largest limited partner in a new fund, whose commitment signals credibility and helps attract subsequent investors.
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.
A fund structure where LPs commit capital before knowing which specific investments will be made — the standard structure for most VC funds.
A corporate entity interposed between a fund and certain investors (tax-exempt or foreign) to block the flow-through of unrelated business taxable income or U.S. tax filing obligations.
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.
An individual LP's running balance in a fund, tracking contributions, distributions, allocated gains and losses, and fees.
A request from a VC fund’s general partner to limited partners to transfer a portion of their committed capital — triggered when the fund is ready to make investments.
The pattern and timing of capital call notices sent to LPs requesting they fund portions of their committed capital as the GP identifies and executes investments.
The practice of reinvesting early investment returns back into the fund to increase total deployable capital.
The share of a fund's profits (typically 20%) that goes to the general partners as performance compensation, paid after returning all LP capital.
Carried interest — the share of investment profits (typically 20%) that a VC fund's general partners keep as performance compensation, paid after LPs have received their invested capital back.
How a fund's carried interest is distributed among the investment team members.
A mechanism in the distribution waterfall that allows the GP to receive a larger share of profits after LPs hit their preferred return, until the GP reaches their target carried interest percentage.
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.
A provision requiring GPs to return previously distributed carry to LPs if the fund ultimately underperforms — protecting LPs from overpaying carry on early exits.
A fund structure with a fixed term and no ongoing ability for investors to add or withdraw capital after the initial fundraising period.
Direct investment by an LP alongside a VC fund in a specific portfolio company — often offered as a perk to large LPs.
An LP's strategy for timing capital commitments to VC funds across vintage years to achieve target allocation and diversification.
The window during which a fund's GP can make new investments, typically the first 3-5 years of a fund's life.
The total amount LPs have legally agreed to invest in a fund — distinct from called capital (money already transferred to the fund).
A fund restriction capping the maximum percentage of committed capital that can be invested in any single portfolio company, typically 10-15% of fund size.
The risk of having too large a portion of a fund's capital in a single investment or sector, increasing vulnerability to that investment's failure.
A new fund entity created by a GP to acquire select portfolio companies from a maturing fund, giving high-performing investments more time to grow while providing liquidity to existing LPs who want to exit.
A venture capital arm of a large corporation that invests in startups for strategic and financial returns — e.g., Google Ventures, Salesforce Ventures, Intel Capital.
The pipeline of investment opportunities a VC firm sees — more and better-quality deal flow is a key competitive advantage for top firms.
An internal document prepared by investors summarizing the rationale for an investment.
The speed at which a venture firm evaluates and closes investments.
The timeframe during which a VC fund actively makes new investments, typically the first 3-5 years of a fund's life.
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.
Committed but undeployed capital that VC and PE firms have available to invest, representing future buying power in the market.
The investment phase covering pre-seed through Series A, when companies are building their initial product and proving out their business model.
A portion of GP carried interest held in escrow to ensure the GP can satisfy clawback obligations if the fund underperforms on a whole-fund basis.
A whole-fund distribution structure where the GP receives carried interest only after LPs have received back all contributed capital plus their preferred return across the entire fund.
A fund with no fixed end date that continuously reinvests returns rather than distributing them and winding down.
A liquidity event that allows investors to realize returns on their investment — typically an IPO or acquisition.
A private wealth management organization serving ultra-high-net-worth families — many family offices allocate to VC funds or invest directly in startups.
A fund vehicle that pools investor capital and channels it into a master fund, used in master-feeder structures to accommodate different investor types and jurisdictions.
The 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.
An additional investment made by an existing investor in a later funding round of a portfolio company — to maintain ownership, signal conviction, or support growth.
The percentage of a fund's capital set aside for additional investments in existing portfolio companies versus initial investments in new companies.
Third-party services handling a fund's accounting, reporting, compliance, and investor communications.
The legal and operational process of establishing a new venture capital fund, from entity creation to closing LP commitments.
The planned duration of a VC fund, typically 10 years — with an investment period of 3-5 years and a harvest period of 5-7 years.
The economic logic determining what size exits a fund needs to generate strong returns.
The total capital committed by LPs to a venture fund, which determines the fund's investment capacity and check size range.
An investment vehicle that allocates capital across multiple venture funds rather than investing directly in startups, providing LPs with diversified venture exposure and manager selection expertise.
The personal capital that general partners invest in their own fund, typically 1-5% of total fund size.
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.
A venture fund investing across multiple sectors rather than specializing in a specific industry.
A type of private equity investment targeting established, profitable or near-profitable companies looking for capital to accelerate growth without full ownership change.
The phase where companies scale revenue and market share after product-market fit.
The maximum amount a fund will raise — once the hard cap is reached, no additional LP commitments are accepted.
The minimum return LPs must receive before the GP starts collecting carried interest — typically 7-8% annually.
The additional return investors expect for holding assets that cannot be easily sold, like venture capital fund interests.
Distribution of actual portfolio company shares to LPs (rather than cash) when a portfolio company goes public.
Meeting the governance, reporting, compliance, and operational standards required by institutional LPs like pension funds, endowments, and insurance companies.
The decision-making body within a VC firm that evaluates and approves investment decisions — typically composed of the firm's general partners.
A formal internal document written by a VC analyst or associate summarizing an investment thesis and recommendation for a potential portfolio company.
The rate at which a venture fund deploys capital over time.
The defined window, typically 3-5 years from final close, during which a fund actively makes new investments from committed capital.
The typical return pattern of a VC fund: negative returns early (fees, early losses) followed by positive returns as successful companies mature and exit.
A fund provision allowing LPs to suspend further capital contributions or terminate the fund if a named key GP leaves the fund.
Limited Partner Advisory Committee — a formal group of select LPs within a fund that advises the GP on conflicts of interest, valuation disputes, and other sensitive fund governance matters.
Venture investments in mature, scaled companies — typically Series C and beyond — that have proven business models and are approaching IPO or acquisition.
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.
The post-IPO period (typically 180 days) during which insiders and pre-IPO investors are prohibited from selling their shares.
The legal entity that employs the GP team and receives management fees for operating the fund.
An annual fee paid by LPs to the GP to cover fund operating expenses — typically 2% of committed capital per year. It funds salaries, rent, due diligence, and operations throughout the fund's life.
A period during which the GP waives or reduces management fees, typically offered to early-closing LPs or during the fund's wind-down phase.
A provision that reduces management fees by a percentage of other income the GP receives, such as deal fees, monitoring fees, or consulting fees from portfolio companies.
A venture fund typically under $100M focused on early-stage seed and pre-seed investments — often run by a solo GP or small team.
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.
A separate, dedicated pool of capital raised by a VC firm specifically to make larger follow-on investments in its best-performing portfolio companies.
In VC: a team or set of services provided by a fund to its portfolio companies — talent, marketing, BD, technical resources beyond just capital.
A startup that a VC fund has invested in and holds in its portfolio.
The deliberate strategy a venture fund uses to allocate capital across investments — including check size, number of investments, reserve ratios, stage focus, and diversification approach.
The practice of spreading investments across multiple companies or sectors.
Updating the internal valuation of portfolio companies based on new information.
The minimum annual return (typically 6-8%) LPs receive before the GP begins taking carried interest — also called a hurdle rate.
A broad category of investment in private companies — encompassing venture capital, growth equity, leveraged buyouts, and distressed investing.
A fund structure provision allowing GPs to reinvest early capital returns back into new portfolio investments rather than distributing them immediately to LPs.
Funds set aside by a VC fund for follow-on investments in existing portfolio companies rather than new investments.
A fund's plan for allocating capital between initial investments and follow-on investments in existing portfolio companies.
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.
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.
The market for buying and selling existing private company shares or LP interests in VC funds — providing liquidity before traditional exit events.
A venture fund focused on a specific industry such as fintech or healthcare.
An organization that builds multiple startups internally rather than investing in external founders.
A corporate or institutional investor that invests for strategic reasons (partnerships, market intelligence, acquisition pipeline) in addition to financial returns.
A distribution from a fund specifically to help partners cover tax liabilities arising from fund income allocated to them on K-1 statements.
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.
An LP protection that requires the GP to return previously distributed carry if the fund ultimately underperforms.
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.
The current estimated value of portfolio investments that have not yet been exited — also called paper gains or unrealized gains.
A form of private equity financing provided to early-stage, high-growth companies in exchange for equity, with the expectation of outsized returns from a few breakout investments.
The operational team inside a VC fund that provides non-capital support to portfolio companies — including recruiting, marketing, business development, and community programs.
An organization that conceives, builds, and launches startup companies internally — co-founding startups with the studio team rather than backing external founders.
The year a VC fund made its first investment — used to benchmark fund performance against peer funds of the same vintage.
The distribution order determining how sale or liquidation proceeds flow to different shareholder classes — senior preferred shareholders are paid before junior preferred, who are paid before common.
A detailed calculation showing how exit proceeds are distributed among all shareholders based on their specific rights, preferences, and terms.
A 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.