Fund Structure
How venture capital funds are organized, governed, and managed — LPA, GP/LP relationships, fund terms, and entity formation.
140 terms
AUM
Assets Under Management — the total market value of investments a VC firm manages on behalf of its limited partners across all active funds.
Active Portfolio Management
The practice of actively supporting and monitoring portfolio companies after investment to improve outcomes.
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.
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.
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 LP
An anchor LP is the first and usually largest limited partner to commit to a new fund, often in exchange for lower management fees or co-investment rights. A $25M anchor commitment to a $100M debut fund, for example, can bring in the remaining $75M from other LPs.
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.
Back-Office Outsourcing
Delegating fund administration, compliance, accounting, and reporting functions to specialized third-party service providers.
Blind Pool
A fund structure where LPs commit capital before knowing which specific investments will be made — the standard structure for most VC funds.
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.
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.
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.
Capital Account
An individual LP's running balance in a fund, tracking contributions, distributions, allocated gains and losses, and fees.
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 Recycling
The practice of reinvesting early investment returns back into the fund to increase total deployable capital.
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.
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.
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.
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.
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.
Co-Investment
Direct investment by an LP alongside a VC fund in a specific portfolio company — often offered as a perk to large LPs.
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.
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.
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.
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.
Cross-Fund Investment
When multiple funds managed by the same GP invest in the same portfolio company, creating potential conflicts between fund vintages.
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 Memo
An internal document prepared by investors summarizing the rationale for an investment.
Deal Velocity
The speed at which a venture firm evaluates and closes investments.
Deployment Period
The timeframe during which a VC fund actively makes new investments, typically the first 3-5 years of a fund's life.
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.
Dry Powder
Dry powder is capital that investors have committed to a fund but the manager has not yet called or deployed.
Early Stage
The investment phase covering pre-seed through Series A, when companies are building their initial product and proving out their business model.
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.
Exit
A liquidity event that allows investors to realize returns on their investment — typically an IPO or acquisition.
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.
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.
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.
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.
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.
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 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.
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.
Generalist Fund
A venture fund investing across multiple sectors rather than specializing in a specific industry.
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 Stage
The phase where companies scale revenue and market share after product-market fit.
Hard Cap
The maximum amount a fund will raise — once the hard cap is reached, no additional LP commitments are accepted.
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.
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.
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.
In-Kind Distribution
Distribution of actual portfolio company shares to LPs (rather than cash) when a portfolio company goes public.
Institutional Quality
Meeting the governance, reporting, compliance, and operational standards required by institutional LPs like pension funds, endowments, and insurance companies.
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 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.
J-Curve
The J-curve is the shape of a private fund's reported return over time: negative for the first few years, then rising as investments mature and exit.
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.
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.
LPAC
Limited partner advisory committee: a small committee of a fund's investors that advises the GP and clears conflicts, without making investment decisions.
Late Stage
Venture investments in mature, scaled companies — typically Series C and beyond — that have proven business models and are approaching IPO or acquisition.
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.
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.
Lock-Up Period
The post-IPO period (typically 180 days) during which insiders and pre-IPO investors are prohibited from selling their shares.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
Portfolio Company
A startup that a VC fund has invested in and holds in its portfolio.
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.
Preferred Return
The minimum annual return (typically 6-8%) LPs receive before the GP begins taking carried interest — also called a hurdle rate.
Private Equity
A broad category of investment in private companies — encompassing venture capital, growth equity, leveraged buyouts, and distressed investing.
Realization
The conversion of portfolio investment value into actual cash through an exit event — IPO, acquisition, or secondary sale.
Recycling
A fund structure provision allowing GPs to reinvest early capital returns back into new portfolio investments rather than distributing them immediately to LPs.
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.
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.
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.
Secondary Market
The market for buying and selling existing private company shares or LP interests in VC funds — providing liquidity before traditional exit events.
Sector Specialist Fund
A venture fund focused on a specific industry such as fintech or healthcare.
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.
Solo GP Fund
A venture fund managed by a single general partner without co-managing partners, increasingly common among emerging managers.
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.
Strategic Investor
A corporate or institutional investor that invests for strategic reasons (partnerships, market intelligence, acquisition pipeline) in addition to financial returns.
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.
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.
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.
Throwback Provision
An LP protection that requires the GP to return previously distributed carry if the fund ultimately underperforms.
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.
Unrealized Value
The current estimated value of portfolio investments that have not yet been exited — also called paper gains or unrealized gains.
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 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 Studio
An organization that conceives, builds, and launches startup companies internally — co-founding startups with the studio team rather than backing external founders.
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.
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.
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.
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.