How venture capital funds are organized, governed, and managed — LPA, GP/LP relationships, fund terms, and entity formation.
177 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 cumulative impact of management fees on net returns over a fund's lifecycle.
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.
Delegating fund administration, compliance, accounting, and reporting functions to specialized third-party service providers.
Custom or non-standard terms in a fund's LPA that are tailored to specific LP requirements or GP preferences.
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.
Costs incurred during due diligence and negotiation of investments that ultimately do not close, including legal fees, consultant fees, and travel expenses.
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 sequence and timing of requests for LPs to fund their committed capital, following the schedule and procedures set in the LPA.
The pattern and timing of capital call notices sent to LPs requesting they fund portions of their committed capital as the GP identifies and executes investments.
The practice of reinvesting early investment returns back into the fund to increase total deployable capital.
A venture fund backed primarily or entirely by a single institutional investor, such as a corporation, university, or family office.
The share of a fund's profits (typically 20%) that goes to the general partners as performance compensation, paid after returning all LP capital.
A provision requiring GPs to return previously received carry if the fund's final performance doesn't justify it.
The schedule by which individual GP team members earn their share of the fund's carried interest over time, typically tied to continued service at the firm.
Carried interest — the share of investment profits (typically 20%) that a VC fund's general partners keep as performance compensation, paid after LPs have received their invested capital back.
How a fund's carried interest is distributed among the investment team members.
The total carried interest allocation for a fund, typically 20% of profits, which is divided among the GP entity's partners and key investment professionals.
The sequential distribution structure that determines the order in which fund profits are allocated between LPs and the GP, including the return of capital, preferred return, and carried interest.
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.
Contractual rights allowing LPs to invest directly alongside a VC fund in specific portfolio companies.
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.
A venture fund that invests across multiple countries or regions, navigating different legal, regulatory, and tax frameworks.
Linking the economics of multiple funds so that losses in one fund offset gains in another for fee or carry calculation purposes.
When multiple funds managed by the same GP invest in the same portfolio company, creating potential conflicts between fund vintages.
Specialized back-office services for crypto investment funds, including NAV calculation, token custody reconciliation, tax reporting, and investor accounting across on-chain and off-chain assets.
The stage in fund distributions where GPs begin receiving carried interest after LPs have received back their full invested capital plus preferred return.
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 secure storage and management of cryptocurrency private keys and digital assets, typically provided by regulated custodians using cold storage, multi-signature, and institutional-grade security.
The contractual sequence governing how fund proceeds flow from exits to LPs and the GP, specifying the order of capital return, preferred return, catch-up, and profit sharing.
A distribution of actual securities (like stock in a public company) to LPs rather than converting to cash first.
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 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.
A private wealth management organization serving ultra-high-net-worth families — many family offices allocate to VC funds or invest directly in startups.
The practice of offsetting management fees against future carry distributions, reducing the total fees paid by LPs over the fund's life.
A provision that reduces management fees by the amount of fees or compensation the GP receives from portfolio companies, such as board fees, monitoring fees, or transaction fees.
A fund vehicle that pools investor capital and channels it into a master fund, used in master-feeder structures to accommodate different investor types and jurisdictions.
The initial closing of a venture fund where the GP receives commitments from enough LPs to begin deploying capital — typically 30–50% of the fund's target size.
Capital that bears the initial losses in a fund structure, protecting other investors from downside risk in exchange for enhanced returns on the upside.
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.
A formal extension of a fund's term beyond its original 10-year life, requiring LP or LPAC approval, to allow more time for remaining portfolio companies to reach exits.
The legal and operational process of establishing a new venture capital fund, from entity creation to closing LP commitments.
The planned duration of a VC fund, typically 10 years — with an investment period of 3-5 years and a harvest period of 5-7 years.
The economic logic determining what size exits a fund needs to generate strong returns.
The practice of reinvesting early exit proceeds back into the fund rather than distributing them to LPs, effectively increasing the fund's investable capital.
The total capital committed by LPs to a venture fund, which determines the fund's investment capacity and check size range.
An investment vehicle that allocates capital across multiple venture funds rather than investing directly in startups, providing LPs with diversified venture exposure and manager selection expertise.
A contractual obligation requiring the GP to return previously distributed carried interest if the fund's final performance does not justify the carry already received.
The personal capital that general partners invest in their own fund, typically 1-5% of total fund size.
The 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 contractual mechanism allowing a supermajority of LPs to remove the general partner and replace them with a new manager, typically requiring 66-80% of LP interests.
A 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 phase of a fund's life after the investment period ends, focused on managing existing portfolio companies toward exits and distributing proceeds to LPs.
The length of time an investor holds an investment before exiting, typically 5-10 years in venture capital.
The minimum return LPs must receive before the GP starts collecting carried interest — typically 7-8% annually.
The specific methodology used to compute whether a fund's preferred return threshold has been met, which determines when the GP begins receiving carried interest.
An investment that cannot be quickly converted to cash without potentially significant loss in value.
The additional return investors expect for holding assets that cannot be easily sold, like venture capital fund interests.
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 rate at which a GP deploys fund capital into new investments over the investment period, measured as deals per quarter or capital per year.
The defined window, typically 3-5 years from final close, during which a fund actively makes new investments from committed capital.
The practice of managing communication and relationships between a fund or company and its investors.
The typical return pattern of a VC fund: negative returns early (fees, early losses) followed by positive returns as successful companies mature and exit.
The tax document LPs receive from funds showing their share of income, losses, deductions, and credits for the tax year.
The loss of unvested or sometimes vested carried interest when a designated key person departs the fund before the end of the vesting period or fund life.
A fund provision allowing LPs to suspend further capital contributions or terminate the fund if a named key GP leaves the fund.
A triggering event that occurs when designated key persons are unable to devote sufficient time to the fund, typically suspending the investment period.
A committee of selected LPs that reviews and approves potential conflicts of interest and other sensitive fund decisions.
A governance role on a fund's advisory committee, typically granted to the largest LPs, providing input on conflicts of interest, valuation matters, and fund extensions.
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 legal document governing the relationship between GPs and LPs in a venture fund, including economics, governance, and operations.
A crypto investment fund structured to hold and trade liquid, publicly available tokens with regular liquidity windows, as opposed to traditional closed-end VC fund structures.
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.
The financial structure of the GP's management company, which collects management fees and covers the operating expenses of running the venture fund.
An annual fee paid by LPs to the GP to cover fund operating expenses — typically 2% of committed capital per year. It funds salaries, rent, due diligence, and operations throughout the fund's life.
The capital amount on which management fees are calculated, which shifts from committed capital during the investment period to invested capital or NAV during the harvest period.
A period during which the GP waives or reduces management fees, typically offered to early-closing LPs or during the fund's wind-down phase.
A provision that reduces management fees by a percentage of other income the GP receives, such as deal fees, monitoring fees, or consulting fees from portfolio companies.
A mechanism allowing GPs to convert their management fee income into a profits interest in the fund, potentially converting ordinary income into lower-taxed capital gains.
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.
Late-stage private financing that bridges a company toward an IPO, combining debt and equity characteristics with significant downside protection.
A venture fund typically under $100M focused on early-stage seed and pre-seed investments — often run by a solo GP or small team.
A fund that invests across multiple asset classes, stages, or strategies within a single vehicle rather than focusing on one approach.
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.
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.
A provision allowing LPs to terminate the GP's management without proving cause, typically requiring a supermajority vote.
A fund provision allowing LPs to remove the GP or suspend the investment period without proving cause, typically requiring a supermajority vote.
A separate, dedicated pool of capital raised by a VC firm specifically to make larger follow-on investments in its best-performing portfolio companies.
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.
A separate fund vehicle that invests alongside the main fund on identical terms, created to accommodate investors with specific legal, tax, or regulatory requirements.
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 degree to which a fund's value is concentrated in a small number of portfolio companies, which increases both upside potential and downside risk.
The deliberate strategy a venture fund uses to allocate capital across investments — including check size, number of investments, reserve ratios, stage focus, and diversification approach.
The practice of spreading investments across multiple companies or sectors.
Updating the internal valuation of portfolio companies based on new information.
Adjusting investment allocations within a fund to optimize risk-return profile, often through secondary sales or follow-on decisions.
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 pool of tokens and assets controlled by a decentralized protocol's governance, used to fund development, incentives, grants, and ecosystem growth.
The conversion of portfolio investment value into actual cash through an exit event — IPO, acquisition, or secondary sale.
When a fund returns enough capital to LPs to cover their original investment, making all subsequent distributions pure profit.
A fund structure provision allowing GPs to reinvest early capital returns back into new portfolio investments rather than distributing them immediately to LPs.
A fund term allowing the GP to reinvest proceeds from early exits back into new investments rather than distributing them to LPs, effectively increasing the fund's total investment capacity.
Funds set aside by a VC fund for follow-on investments in existing portfolio companies rather than new investments.
The ongoing discipline of managing a fund's follow-on capital reserves, deciding which portfolio companies merit additional investment and how much to allocate.
A fund's plan for allocating capital between initial investments and follow-on investments in existing portfolio companies.
Capital invested with the understanding that it may be completely lost, accepted in exchange for the potential of outsized returns.
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.
Small Business Investment Company — an SBIC license allows VC funds to borrow government money (3:1 leverage) to invest in qualifying small businesses.
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.
A venture fund that specializes in very early-stage investments, typically writing first checks of $500K-$3M.
A special purpose vehicle created alongside the main fund to accommodate additional capital for a specific deal, typically for LP co-investments or oversized opportunities.
A venture fund managed by a single general partner without co-managing partners, increasingly common among emerging managers.
An organization that builds multiple startups internally rather than investing in external founders.
A reduction in the management fee rate after the investment period ends, typically calculated on invested capital or NAV rather than committed capital.
A corporate or institutional investor that invests for strategic reasons (partnerships, market intelligence, acquisition pipeline) in addition to financial returns.
A line of credit secured by LP capital commitments that lets funds make investments before calling capital from LPs.
A credit facility secured by LP commitments that allows a GP to fund investments quickly without issuing capital calls, later repaid when LPs are called.
A GP's next fund in sequence (e.g., Fund III after Fund II), continuing the same strategy with updates based on lessons learned from prior vintages.
A fund nearing the end of its life that still holds a few remaining portfolio companies.
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.
When a venture fund begins investing outside of its stated strategy.
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.
The final phase of a fund's life focused on liquidating remaining portfolio positions, resolving outstanding obligations, and making final distributions to LPs.
Strategies used to increase the current income generated from a venture portfolio beyond capital appreciation.
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.