Knowledge Base
Plain-English definitions for the terms, metrics, and jargon that define the venture capital world — from textbook fundamentals to internet-native VC culture.
A company built from the ground up with AI as a core product capability rather than an add-on feature.
A startup built primarily on top of an existing AI model or API rather than developing its own foundational model.
Annual Recurring Revenue — the annualized value of a company's subscription or contract revenue. The primary revenue metric for SaaS and subscription businesses, used to benchmark growth, valuation, and fundraising.
A valuation metric expressing a company's enterprise value as a multiple of its Annual Recurring Revenue — the primary valuation benchmark for high-growth SaaS businesses.
Assets Under Management — the total market value of investments a VC firm manages on behalf of its limited partners across all active funds.
A provision that triggers immediate repayment of outstanding debt upon certain events like default or change of control.
A fixed-term program that provides startups with mentorship, resources, and a small amount of capital in exchange for equity, culminating in a demo day.
An individual or entity that meets the SEC's financial thresholds to invest in private securities — typically a net worth over $1M or annual income over $200K.
The process of confirming that an investor meets SEC criteria for accredited status, required under Rule 506(c) through documentation review and optional under Rule 506(b) via self-certification.
An acquisition made primarily to hire the target company's team rather than to acquire its product or technology.
A transaction in which one company purchases another, either for its technology, team, customers, revenue, or strategic position — the most common exit path for venture-backed startups.
An investor who provides ongoing support, introductions, and strategic guidance beyond simply providing capital.
The practice of actively supporting and monitoring portfolio companies after investment to improve outcomes.
The pattern describing how new technologies are adopted over time by innovators, early adopters, early majority, late majority, and laggards.
The tendency for the worst deals to seek out less experienced or desperate investors, while the best deals go to top-tier funds.
A contractual obligation requiring a company to take specific actions, such as maintaining insurance, filing taxes, or providing regular financial reports.
The conflict of interest that arises when a GP's incentives diverge from those of their LPs or portfolio company founders.
The 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.
Excess returns generated above a benchmark, attributed to skill rather than market conditions.
Investment categories outside traditional stocks and bonds — including venture capital, private equity, hedge funds, real estate, and commodities.
A parallel tax system that can create unexpected tax liability when exercising incentive stock options.
A deal-by-deal distribution structure where the GP can receive carried interest on profitable exits before the fund as a whole has returned all capital to LPs.
The first or largest investor in a funding round who sets the terms and signals confidence to other investors.
The first and typically largest limited partner in a new fund, whose commitment signals credibility and helps attract subsequent investors.
An individual who invests personal capital in early-stage startups — typically at pre-seed or seed stage — in exchange for equity, often providing mentorship and connections alongside capital.
The earliest institutional funding round, typically $100K-$2M from individual angel investors.
A group of angel investors who pool capital to co-invest in deals together, typically organized through platforms like AngelList.
A supplemental fund raised alongside or after a main fund to invest exclusively in follow-on rounds of the main fund's portfolio companies, providing additional reserves.
The average annual revenue generated per customer contract, commonly used in SaaS businesses.
A contractual protection for investors that adjusts their ownership percentage (or conversion price) if the company later raises money at a lower valuation.
Investor rights that adjust their conversion price downward if the company later issues shares at a lower price.
The specific mechanism used to adjust conversion prices in a down round, with full ratchet and weighted average being the two main types.
The collection of successful companies a VC firm passed on investing in — a humbling record of missed opportunities.
When one party in a transaction has more or better information than the other, creating an imbalance.
The defining characteristic of venture investing: limited downside (lose the investment) with potentially unlimited upside (100x+ returns).
A for-profit company certified by B Lab for meeting rigorous social and environmental standards — relevant for impact-focused VC investments.
An informal reference check conducted through personal networks rather than through references provided by the founder.
An investment strategy combining high-risk startup bets with more stable investments to balance overall risk.
A conservative approach to deal structuring that layers multiple protective provisions to guard against downside risk.
A performance standard used to evaluate a fund's returns — typically the median or top-quartile IRR among peer funds of the same vintage year.
A product released to a limited audience for testing before full commercial launch.
A fund structure where LPs commit capital before knowing which specific investments will be made — the standard structure for most VC funds.
A strategy of prioritizing speed over efficiency to rapidly capture market share, accepting extreme capital burn and operational chaos in pursuit of winner-take-all scale.
A large, privately negotiated sale of shares, typically executed off the public exchange to minimize market impact.
A corporate entity interposed between a fund and certain investors (tax-exempt or foreign) to block the flow-through of unrelated business taxable income or U.S. tax filing obligations.
Creating uncontested market space rather than competing in existing, crowded markets.
The structure and makeup of a company's board of directors, including the balance between founder, investor, and independent seats.
A non-voting participant in board meetings, typically a smaller investor, who can attend and speak but has no voting rights.
A position on a company's board of directors, giving the holder voting rights on major corporate decisions. VC investors typically receive a board seat as part of a lead investment.
The governing body of a corporation, responsible for major strategic decisions, hiring/firing the CEO, and representing shareholders.
The carrying value of a portfolio investment on a fund's books — usually the last round valuation or a write-down if performance has deteriorated.
Building and growing a company using only personal funds and operating revenue, without external investment.
A company that grows using revenue and founder capital rather than external investment.
Building and growing a company using only personal savings, revenue, and operating cash flow — without raising outside equity capital.
A market sizing approach that builds estimates from actual customer data and unit economics rather than top-down market reports.
When a company grows quickly and hires too many mediocre employees, reducing organizational effectiveness.
A penalty paid when a party withdraws from a transaction after signing a binding agreement but before closing.
A startup that achieves exceptional growth and market traction relative to its peers.
Short-term financing that helps a startup survive until it closes its next equity round — typically structured as a convertible note that converts into the new round.
A small fundraise between larger priced rounds, typically done via SAFE or convertible note to extend runway to a key milestone.
The most common and founder-friendly anti-dilution formula that accounts for the size of the down round relative to total shares outstanding.
A founder or operator actively creating products or companies rather than purely investing or advising.
Net burn divided by net new ARR — a measure of how efficiently a company is converting cash spending into revenue growth. The lower the burn multiple, the more capital-efficient the growth.
The rate at which a company spends its cash reserves, typically expressed as a monthly figure. Gross burn is total monthly cash outflow; net burn subtracts revenue collected.
Customer Acquisition Cost — the total cost to acquire one new customer, including sales and marketing expenses. A core unit economics metric that determines whether a business model is economically viable at scale.
The number of months required to recover the cost of acquiring a customer from the gross profit that customer generates — a core measure of go-to-market efficiency.
The portion of an LP's committed capital that the GP has actually drawn down through capital calls — as opposed to committed but not yet transferred capital.
A spreadsheet or software record showing every equity holder in a company — founders, investors, employees — and their ownership percentages, share counts, and fully diluted stakes.
The process of maintaining accurate records of company ownership, including all shares, options, warrants, and convertible securities.
An individual LP's running balance in a fund, tracking contributions, distributions, allocated gains and losses, and fees.
A periodic report provided to each LP showing their individual fund position including contributions, distributions, share of gains/losses, management fees, and current NAV.
A request from a VC fund’s general partner to limited partners to transfer a portion of their committed capital — triggered when the fund is ready to make investments.
The pattern and timing of capital call notices sent to LPs requesting they fund portions of their committed capital as the GP identifies and executes investments.
The ratio of revenue or value generated per dollar of capital raised — a measure of how productively a company converts investment into growth.
The financial markets where long-term debt and equity securities are bought and sold, including the IPO market.
The practice of reinvesting early investment returns back into the fund to increase total deployable capital.
The full hierarchy of financing instruments in a company, including equity, preferred equity, debt, and convertible securities.
The 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.
A startup defining a new market segment rather than competing directly within an existing one.
The dominant company in a market category that captures most of the value.
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.
The rate at which customers cancel or fail to renew their subscriptions over a given period, expressed as a percentage of total customers or revenue.
The percentage of customers or revenue lost over a given period, a critical indicator of product-market fit.
A provision requiring GPs to return previously distributed carry to LPs if the fund ultimately underperforms — protecting LPs from overpaying carry on early exits.
A term sheet with minimal investor-protective provisions beyond the standard — no full ratchets, no excessive liquidation preferences, no onerous governance rights. A founder-friendly sign.
The minimum period an employee must work before any equity vests — typically one year, after which a lump sum of equity vests at once.
A fund structure with a fixed term and no ongoing ability for investors to add or withdraw capital after the initial fundraising period.
Requirements that must be satisfied before a funding round officially closes and money transfers.
The legal and administrative process of finalizing a funding round, including signing documents and wiring funds.
A funding round where multiple investors co-invest at the same terms without a clear lead investor.
Direct investment by an LP alongside a VC fund in a specific portfolio company — often offered as a perk to large LPs.
Tracking the behavior of a specific group of customers (cohort) acquired in the same period over time — the gold standard for measuring retention.
The difficulty of building a network-based product before enough users exist to make the product valuable.
An LP's strategy for timing capital commitments to VC funds across vintage years to achieve target allocation and diversification.
The window during which a fund's GP can make new investments, typically the first 3-5 years of a fund's life.
The total amount LPs have legally agreed to invest in a fund — distinct from called capital (money already transferred to the fund).
The standard share class held by founders and employees. Common stock has lower priority than preferred stock in liquidation events but participates fully in the company's upside above the preferred stock liquidation stack.
A valuation method that estimates a company's value based on the trading multiples of similar public or recently acquired companies.
The market environment of direct and indirect competitors a startup operates within.
A durable structural advantage that protects a company from competitors.
The cumulative cost and effort required for a fund to meet regulatory, reporting, and governance requirements.
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.
An investment approach that deliberately goes against prevailing market sentiment, betting that consensus views are wrong about a sector, company, or trend.
The right of preferred stockholders to convert their preferred shares into common stock, typically at a 1:1 ratio.
A short-term debt instrument that converts into equity at a future financing round. An early-stage fundraising tool that carries an interest rate and maturity date, unlike a SAFE.
A venture capital arm of a large corporation that invests in startups for strategic and financial returns — e.g., Google Ventures, Salesforce Ventures, Intel Capital.
Investment arms of large corporations that invest in startups for both strategic and financial returns.
A highly dilutive financing round where new investors receive favorable terms that significantly dilute existing shareholders who don't participate.
A digital economy built around individuals monetizing audiences through platforms, tools, and communities.
Investment firms that participate in both private and public markets, often investing in late-stage startups approaching IPO.
The total cost of acquiring a new customer, including all sales and marketing expenses.
The step-by-step journey a potential customer takes from awareness to purchase.
The risk created when a large percentage of revenue comes from a small number of customers.
The ratio between lifetime value (LTV) and customer acquisition cost (CAC), commonly used to evaluate SaaS business health.
Dividing customers into groups based on behavior, industry, size, or needs.
The degree to which customers continue using a product due to habit, switching costs, or embedded workflows.
A function focused on ensuring customers achieve value from a product and remain long-term subscribers.
Distributions to Paid-In Capital — the ratio of cash actually returned to LPs divided by the capital they invested. The only VC performance metric based on realized, distributed cash.
Distributions to Paid-In — the ratio of cash actually returned to LPs versus capital contributed, measuring realized (not paper) returns.
A secure online repository where startups share sensitive business documents with potential investors during due diligence.
The assignment of credit for sourcing, winning, and managing specific investments within a VC firm, which affects carry allocation and reputation.
Investor anxiety about missing a competitive deal that appears to be attracting strong demand.
The 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.
Raising capital through loans or credit rather than selling equity, preserving ownership but creating repayment obligations.
A private company valued at $10 billion or more — a step above unicorn status.
Startups built on significant scientific or engineering innovation that creates fundamental technological advantages.
A company that would reach profitability on its current trajectory before running out of cash — without needing to raise additional capital.
A company that will run out of cash before reaching profitability if it maintains its current trajectory — the opposite of default alive.
A company's ability to prevent competitors from replicating or overtaking its business.
Marketing and sales activities designed to create awareness and interest in a product, driving qualified leads into the sales pipeline.
The culminating event of an accelerator program where startups pitch their companies to a room of investors.
The timeframe during which a VC fund actively makes new investments, typically the first 3-5 years of a fund's life.
An early customer that works closely with a startup to shape product development before broad launch.
The reduction in an existing shareholder's ownership percentage that occurs when a company issues new shares — through equity rounds, option grants, or convertible instrument conversions.
Future dilution risk created by options, convertibles, or other securities that may convert into equity.
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.
In SAFE/convertible note context: the percentage reduction applied to the next round's price to reward early investors. Typically 15-20%.
A structural advantage in acquiring customers more efficiently than competitors.
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.
The practice of using your own product internally to test and improve it.
Full or partial vesting acceleration that requires two events to trigger, typically a change of control plus termination of the employee.
A financing round completed at a lower valuation than the previous round. Down rounds trigger anti-dilution protections for existing investors and can be highly dilutive for founders and employees.
Contractual mechanisms designed to reduce investor losses if a company underperforms.
A provision allowing majority shareholders to force minority shareholders to vote in favor of an acquisition or other liquidity event.
The total amount of committed but undeployed capital available to venture capital funds, indicating the industry's capacity for future investment activity.
Committed but undeployed capital that VC and PE firms have available to invest, representing future buying power in the market.
A share structure with two classes of common stock carrying different voting rights, typically giving founders disproportionate control relative to their economic ownership.
The investigative process a VC conducts before investing — reviewing financials, references, technology, legal documents, and market assumptions.
A comprehensive list of items a VC reviews before making an investment, covering financials, legal, technology, market, and team aspects.
Earnings Before Interest, Taxes, Depreciation, and Amortization — a proxy for operating cash flow and profitability, especially relevant for growth equity and PE deals.
A valuation metric expressing a company's value as a multiple of its EBITDA — commonly used in growth equity and private equity but less in early-stage VC.
Entrepreneur in Residence — an experienced operator or founder who joins a VC firm temporarily to explore new startup ideas, evaluate investments, or eventually spin out a new company.
Environmental, Social, and Governance — criteria used by impact investors to evaluate companies beyond purely financial metrics.
The first customers who embrace a new product before it's proven, often willing to tolerate bugs in exchange for innovation.
The investment phase covering pre-seed through Series A, when companies are building their initial product and proving out their business model.
A post-acquisition payment structure where the seller receives additional consideration if the acquired company hits agreed performance milestones after closing.
A contingent payment in an acquisition where the seller receives additional compensation if the acquired company meets specified performance targets after closing.
A concise, compelling summary of a business that can be delivered in 30-60 seconds.
A first-time or early-vintage fund manager, typically raising Fund I or Fund II, often with differentiated strategy, diverse backgrounds, or access to underserved markets.
A dedicated portion of an LP's venture capital budget specifically reserved for investing in first-time or early-vintage fund managers who lack established track records.
A sales strategy focused on large organizations with complex procurement processes.
The longer, more complex sales process typically required to close deals with large organizations.
The total value of a company including equity and net debt — a more complete measure of company value than market cap alone.
A company's total value including equity, debt, and cash — a more comprehensive measure than market capitalization alone.
Ownership in a company, represented as shares. In venture capital, equity is the primary mechanism through which investors participate in a company's upside.
A projection of how ownership percentages decline across future funding rounds.
Raising capital by selling ownership shares in the company.
Funds held by a neutral third party in an acquisition to cover potential post-closing liabilities — sellers receive escrowed funds after a holdback period.
A portion of GP carried interest held in escrow to ensure the GP can satisfy clawback obligations if the fund underperforms on a whole-fund basis.
A whole-fund distribution structure where the GP receives carried interest only after LPs have received back all contributed capital plus their preferred return across the entire fund.
A fund with no fixed end date that continuously reinvests returns rather than distributing them and winding down.
A negotiated window, typically 30-60 days, during which a startup agrees not to solicit or engage with other potential investors while the lead investor completes due diligence.
The possibility that a startup fails not because of market conditions but because the team cannot execute effectively.
The price per share at which an option holder can purchase shares — same as strike price, set at fair market value on the grant date.
A liquidity event that allows investors to realize returns on their investment — typically an IPO or acquisition.
The ratio of exit value relative to the invested capital.
The planned path for investors and founders to realize returns on their investment — typically through IPO, acquisition, or secondary sale.
Additional recurring revenue generated from existing customers through upsells, cross-sells, seat additions, or usage growth — a key driver of net revenue retention above 100%.
The growth phase after product-market fit where a startup scales operations, team, and revenue aggressively.
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.
The estimated market value of an investment, used by VC funds to mark portfolio companies on their books between financing events.
A private wealth management organization serving ultra-high-net-worth families — many family offices allocate to VC funds or invest directly in startups.
The gradual addition of excessive product features that can complicate the product and dilute its value.
A fund vehicle that pools investor capital and channels it into a master fund, used in master-feeder structures to accommodate different investor types and jurisdictions.
The legal obligation to act in the best interest of another party, such as a GP's duty to their LPs or a board member's duty to shareholders.
A clause allowing a board to withdraw from a previously agreed deal if doing so is required by their fiduciary duties to shareholders.
The last date on which a venture fund accepts new LP commitments, marking the end of the fundraising period and establishing the fund's total committed capital.
An acquirer — typically private equity — focused purely on investment returns rather than operational or strategic synergies with the acquired company.
Using complex financial structures or instruments to improve returns, often at the expense of transparency or alignment.
The initial closing of a venture fund where the GP receives commitments from enough LPs to begin deploying capital — typically 30–50% of the fund's target size.
The competitive benefit gained by being the first company to enter a market, though this advantage is often overstated.
A funding round where the company raises capital at approximately the same valuation as the previous round, indicating stagnant growth or a challenging fundraising environment.
A self-reinforcing growth loop where each element of the business drives the next — the more the flywheel spins, the harder it becomes to stop.
An additional investment made by an existing investor in a later funding round of a portfolio company — to maintain ownership, signal conviction, or support growth.
The percentage of a fund's capital set aside for additional investments in existing portfolio companies versus initial investments in new companies.
Governance structures that allow founders to maintain decision-making power despite outside investment.
The reduction in a founder's ownership percentage as new shares are issued through funding rounds and option grants.
Cash received by founders through selling a portion of their shares before an exit.
The degree to which a founder's background, expertise, and passion align with the market they're pursuing, often considered the strongest predictor of startup success.
A management philosophy where founders stay deeply involved in operational decisions rather than delegating to professional managers — popularized by Paul Graham's 2024 essay.
A situation where founders have multiple strategic paths available (raise more capital, sell, remain independent).
A requirement that founders earn their equity over time rather than owning it outright from day one.
A restructuring of founder vesting schedules during later funding rounds.
The degree to which a founder's background, expertise, and personal connection to a problem uniquely position them to solve it.
Cash generated by a business after accounting for capital expenditures — a measure of true financial health and the basis for many valuation models.
A business model offering a free basic product to drive adoption, with premium features available for a fee.
The most aggressive anti-dilution provision — resets an investor's conversion price to match any lower future round price, regardless of how many shares are issued.
The total number of shares outstanding assuming all options, warrants, and convertible securities have been exercised — representing true economic ownership.
The total number of shares that would be outstanding if all convertible securities, options, and warrants were exercised.
Third-party services handling a fund's accounting, reporting, compliance, and investor communications.
A third-party service provider that handles a fund's accounting, reporting, capital calls, and LP communications.
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.
A portfolio investment that by itself returns the fund's entire invested capital — typically requiring a 10-30x return depending on fund size and ownership.
The total capital committed by LPs to a venture fund, which determines the fund's investment capacity and check size range.
An investment vehicle that allocates capital across multiple venture funds rather than investing directly in startups, providing LPs with diversified venture exposure and manager selection expertise.
A measurable goal achieved by a company that enables raising the next funding round.
Generally Accepted Accounting Principles — the standard accounting framework required for audited financial statements in the US.
Revenue recognized according to Generally Accepted Accounting Principles, which may differ significantly from bookings or cash received.
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.
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.
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%.
The managing partner(s) of a venture capital fund who make investment decisions, manage fund operations, and are legally responsible for the fund's obligations.
The managing partner(s) of a venture fund — responsible for investment decisions, fund management, and bearing unlimited liability for fund obligations.
Publicly advertising a fundraise to non-preexisting relationships — allowed under Rule 506(c) for funds raising from accredited investors only.
A venture fund investing across multiple sectors rather than specializing in a specific industry.
A company's strategy for reaching customers and generating revenue — including sales motion, pricing, channel selection, and marketing approach.
The specific distribution channel used to acquire customers (direct sales, marketplaces, partnerships).
Alignment between a company's product and the channels used to sell it effectively.
The repeatable system through which a company acquires customers and grows revenue.
The plan for how a company will reach and acquire customers, including pricing, channels, and sales approach.
The percentage of a fund's portfolio companies that successfully raise the next round of financing, indicating deal quality and portfolio momentum.
The total amount of cash a company spends each month across all operating expenses, before any revenue is subtracted.
Revenue minus cost of goods sold (COGS), expressed as a percentage — a fundamental measure of how much value a business retains from each dollar of revenue after direct costs.
The percentage of recurring revenue retained from existing customers over a period, excluding any expansion revenue from upsells — measures pure churn.
A type of private equity investment targeting established, profitable or near-profitable companies looking for capital to accelerate growth without full ownership change.
Rapid, data-driven experimentation to find scalable, low-cost user acquisition strategies — associated with early-stage consumer tech companies.
The point where revenue or user growth accelerates significantly.
An investor specializing in later-stage companies scaling revenue.
A self-reinforcing growth mechanism where existing users or actions generate additional users.
A late-stage funding round focused on scaling a proven business model, typically Series C and beyond.
The phase where companies scale revenue and market share after product-market fit.
The maximum amount a fund will raise — once the hard cap is reached, no additional LP commitments are accepted.
The tendency for VCs to follow each other into the same sectors, stages, or deals, creating bubbles and crowded investment categories.
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.
Software products designed to serve multiple industries rather than a specific vertical.
A fundraise with multiple competing investors, often closing above target amount and at better-than-expected valuations for the startup.
The minimum return LPs must receive before the GP starts collecting carried interest — typically 7-8% annually.
Extremely rapid startup growth, often defined as 100%+ annual revenue expansion.
Initial Public Offering — the process by which a private company sells shares to the public on a stock exchange for the first time, enabling liquidity for founders, employees, and investors.
Periods when public market conditions are favorable for technology IPOs — characterized by investor appetite, high valuations, and strong aftermarket performance.
Internal Rate of Return — the annualized rate of return on a portfolio or investment, accounting for the timing of cash flows. The primary time-weighted performance metric used by VC funds.
Incentive Stock Option — a type of employee stock option with favorable tax treatment if holding period requirements are met, available only to employees of the granting company.
The complex set of decisions and strategic pathways a founder must navigate to build a successful company.
The additional return investors expect for holding assets that cannot be easily sold, like venture capital fund interests.
Investing with the explicit intention of generating positive social or environmental impact alongside financial returns.
A company's inferred value based on the price paid for a portion of its equity, which may differ from its actual enterprise or intrinsic value.
Interest income the IRS assumes exists on below-market loans, even if no interest is actually charged.
Distribution of actual portfolio company shares to LPs (rather than cash) when a portfolio company goes public.
An organization that supports very early-stage startups with resources, mentorship, and sometimes space — typically without a defined program end date, unlike accelerators.
A board member who is not affiliated with the company's investors or management, providing neutral perspective on governance decisions.
A deal-by-deal investor who sources and manages transactions without a committed fund, raising capital from LPs on a per-deal basis.
An investment strategy focused on identifying companies at the point where growth is about to accelerate dramatically.
A moment when a company's growth trajectory accelerates significantly due to product-market fit or scaling.
Contractual obligations requiring a startup to share financial statements and other operational data with investors on a regular basis.
Building new companies by applying existing technology or business models to underdeveloped markets.
A funding round primarily led by existing investors rather than new external capital.
Meeting the governance, reporting, compliance, and operational standards required by institutional LPs like pension funds, endowments, and insurance companies.
The annualized return rate that makes the net present value of all cash flows equal to zero — the standard VC performance metric.
The decision-making body within a VC firm that evaluates and approves investment decisions — typically composed of the firm's general partners.
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 process of multiple investors participating together in a financing round.
A periodic report sent by founders to investors summarizing company performance and needs.
A reporting tool summarizing the most important performance indicators for a company.
A measurable metric that tracks progress toward a critical business objective.
A fund provision allowing LPs to suspend further capital contributions or terminate the fund if a named key GP leaves the fund.
Building companies by applying knowledge from one industry to another.
Limited Partner — an investor in a venture capital fund who provides capital but has no role in investment decisions and whose liability is limited to their committed amount.
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.
Limited Partner Advisory Committee — a formal group of select LPs within a fund that advises the GP on conflicts of interest, valuation disputes, and other sensitive fund governance matters.
Lifetime Value — the total revenue a business expects to earn from a single customer over the entire duration of their relationship.
A SaaS growth strategy where companies start with a small initial contract and expand revenue over time.
Venture investments in mature, scaled companies — typically Series C and beyond — that have proven business models and are approaching IPO or acquisition.
The investor that sets the terms for a funding round, invests the largest check, and often takes a board seat.
The process of determining whether potential customers are a good fit before investing time in the sales process.
The stages through which potential customers move before becoming paying customers.
A methodology for building startups through rapid experimentation, validated learning, and iterative product development.
The market failure where information asymmetry causes high-quality deals to leave the market, leaving mostly poor-quality opportunities for less-informed investors.
A non-binding document outlining the preliminary terms of a deal, commonly used in M&A and some venture transactions.
An extremely fast financing round where investors commit capital quickly with minimal process.
An investor in a venture capital fund who provides capital but has limited liability and no role in fund management — the LPs are the fund's underlying investors.
An investor in a venture fund who provides capital but has limited liability and no role in investment decisions.
A calculation showing how exit proceeds would be distributed among shareholders based on their liquidation preferences and rights.
Any transaction that triggers distribution of proceeds to shareholders — including company sale, merger, or dissolution.
A contractual right giving preferred shareholders the right to receive their investment back (often with a multiplier) before common shareholders receive anything in a liquidation event.
Any transaction that allows shareholders — founders, employees, and investors — to convert equity in a private company into cash.
Stacking multiple liquidation preferences across funding rounds.
The hierarchy of investor claims on proceeds during an exit.
The post-IPO period (typically 180 days) during which insiders and pre-IPO investors are prohibited from selling their shares.
A market composed of many small customer segments that collectively represent significant demand.
Maintaining strategic flexibility for future opportunities.
Mergers and Acquisitions — the consolidation of companies through purchase, merger, or other corporate transactions. A primary exit path for VC-backed companies.
Multiple on Invested Capital — the total return on an investment expressed as a multiple of the original capital deployed. A 3x MOIC means you received $3 for every $1 invested.
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).
Monthly Recurring Revenue — the total predictable subscription revenue a company earns each month. The month-by-month building block of ARR and the most closely tracked revenue metric for early-stage SaaS.
Minimum Viable Product — the simplest version of a product that allows a team to collect validated learning about customers with the least effort.
A SaaS efficiency metric measuring how much ARR growth is generated per dollar of sales and marketing spend — above 0.75 is generally considered efficient.
The legal entity that employs the GP team and receives management fees for operating the fund.
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.
Adjusting the carrying value of portfolio investments to reflect current market prices or estimated fair values.
Entering new geographic or industry markets to grow revenue.
A visual overview of a startup ecosystem or market segment — mapping companies by category, stage, geography, or other characteristics.
The percentage of a total market currently captured by a company.
A state where most potential customers already use competing products.
The alignment between a startup's launch and the broader readiness of the market.
The risk that a fund's vintage year coincides with a market peak, leading to elevated entry prices and compressed returns.
A significant negative event that fundamentally alters the value or prospects of a company, potentially voiding agreements.
Small, niche SaaS businesses often built by solo founders.
A venture fund typically under $100M focused on early-stage seed and pre-seed investments — often run by a solo GP or small team.
A specific, measurable achievement that a startup must reach to unlock additional funding, demonstrate progress, or meet investor expectations.
A financing structure where capital is released in tranches contingent on the company achieving predefined performance milestones.
The early signals that indicate product-market fit may be emerging.
A founder motivated primarily by solving a specific problem rather than financial gain — considered more credible and resilient by many investors.
A sustainable competitive advantage protecting a company from competitors.
The number of paying or engaged customers in a given month.
The risk that someone will take greater risks because they don't bear the full consequences of their actions.
A clause ensuring an investor receives terms at least as favorable as those given to any other investor in the same or subsequent round.
A startup expanding beyond a single core product into multiple product lines to increase revenue and defensibility.
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.
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.
Net Revenue Retention — the percentage of recurring revenue retained from existing customers over a period, including expansions and contractions. Same concept as NDR (Net Dollar Retention).
Non-Qualified Stock Option — a stock option that does not receive the favorable ISO tax treatment, taxed as ordinary income upon exercise. Can be granted to employees, contractors, and advisors.
Investing decisions influenced by compelling stories about future market outcomes rather than current metrics.
A less founder-friendly anti-dilution formula that only counts preferred shares in the denominator, resulting in greater conversion price adjustments in down rounds.
A contractual restriction that prohibits a company from taking certain actions without investor consent, such as issuing new equity or taking on debt.
Information or events that cause investors to question a company's prospects, making fundraising more difficult.
When an existing investor's decision not to participate in a follow-on round sends a bearish signal to potential new investors.
The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.
The percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn. Above 100% means existing customers are growing.
The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction.
The strength of connections between users within a network product.
A strengthening of network effects as interactions between users increase.
User acquisition driven by network interactions between customers.
A growth advantage created through strong partnerships, integrations, or user networks.
The phenomenon where a product or service becomes more valuable as more people use it — one of the most powerful competitive moats in technology.
A provision in a term sheet that prevents a startup from soliciting competing offers from other investors for a defined period — typically 30-60 days.
Capital sources that don't require giving up equity — including grants, loans, revenue-based financing, and government programs.
A legal agreement preventing parties from sharing confidential information shared during discussions — less common in early-stage VC, more common in later-stage and M&A.
The governing document for an LLC-structured fund entity (typically the management company or GP entity), defining member rights, profit sharing, and operational procedures.
The consistent execution of processes and cost controls within a company.
The degree to which a company can increase revenue without proportionally increasing costs, driving margin expansion at scale.
Revenue minus operating expenses expressed as a percentage of revenue.
An experienced executive embedded within a VC firm who provides hands-on operational support to portfolio companies.
Consistently strong execution across hiring, product, sales, and operations.
An experienced executive or founder who has run operations inside a company — often contrasted with pure investors, and increasingly sought after as VC partners.
A startup operator who invests personal capital into startups while still actively working in the industry.
An investor who previously built or ran companies in the same industry.
A separate, dedicated pool of capital raised by a VC firm specifically to make larger follow-on investments in its best-performing portfolio companies.
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.
Revenue or user growth achieved without acquisitions or paid marketing.
A fundraising round that receives more investor commitments than the company (or fund) is seeking to raise — creating scarcity and competitive pressure.
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.
Latin for 'equal step' — describes securities or investors treated equally, with no one having priority over others in the same class.
Preferred shares that get their liquidation preference AND participate pro-rata in remaining proceeds — double-dipping.
A limit on how much participating preferred investors can receive before their participation rights terminate and they must convert to common stock.
A funding round with many small investors and no clear lead investor — often assembled quickly during hot markets, with minimal due diligence.
A VC's ability to identify success signals in startups based on experience with similar companies, teams, and markets.
A provision requiring existing investors to participate in future down rounds or lose certain rights — typically conversion rights on preferred stock.
The time required for a company to recover its Customer Acquisition Cost (CAC) from the gross margin generated by that customer.
A measure of how efficiently a company recovers sales and marketing spend.
In sales: the total value of potential deals in progress. In VC fundraising: the pool of potential investors a startup is engaging.
The percentage of potential deals that convert into paying customers.
A slide presentation used by founders to communicate their business to potential investors, typically 10-15 slides covering problem, solution, market, traction, and team.
A deliberate, strategic shift in a startup's product, market, business model, or core technology in response to evidence that the current direction isn't working.
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 VC firm's organized approach to providing portfolio companies with operational support beyond capital, including talent, marketing, and business development resources.
The risk of building a company dependent on another platform (e.g., Apple, Amazon, Google APIs).
A 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.
A SAFE where the valuation cap is calculated on a post-money basis, giving investors more predictable ownership percentages.
A company's valuation immediately after a funding round closes, including the new capital raised.
The mathematical principle underlying VC returns: a small number of exceptional investments generate most of a fund's returns, while most investments return little or nothing.
Highly engaged users who derive significant value from a product and often influence others to adopt it.
A company's valuation before a funding round closes — the negotiated price of the company excluding the new capital being raised.
The earliest stage of startup funding — typically $250K-$2M raised before having a product or significant traction, often from angels and pre-seed funds.
An investor offering to lead a round before the company formally begins fundraising.
The minimum annual return (typically 6-8%) LPs receive before the GP begins taking carried interest — also called a hurdle rate.
A class of equity that gives investors priority over common shareholders in liquidation events and often includes additional rights — like anti-dilution protection and voting provisions. The standard share class for VC investors.
How strongly customer demand changes when pricing changes.
A financing round that establishes a specific per-share price and valuation — as opposed to a convertible note or SAFE which convert at a future price.
The ability of a company to raise prices without losing customers.
New equity capital raised directly by a company and added to its balance sheet — as opposed to secondary capital, where existing shareholders sell their shares.
A broad category of investment in private companies — encompassing venture capital, growth equity, leveraged buyouts, and distressed investing.
The right of an existing investor to participate in future financing rounds to maintain their ownership percentage. A key investor protection that allows early backers to avoid dilution as the company grows.
Distinct product characteristics that set a company apart from competitors.
The likelihood that customers continue using a product due to habit or switching costs.
The speed at which a product team ships features, improvements, and iterations.
A go-to-market strategy where the product itself drives user acquisition, conversion, and expansion — reducing reliance on traditional sales and marketing.
The degree to which a product satisfies strong market demand — typically evidenced by rapid organic growth, high retention, and users who would be very disappointed if the product disappeared.
A projected capitalization table showing post-round ownership percentages after a proposed financing — used to model the dilution impact of a new investment.
Contractual rights giving preferred stockholders veto power over certain major company decisions — such as raising new funding, selling the company, or changing the capital structure.
A methodology for comparing VC fund returns against what the same capital would have earned in public markets.
Qualified Small Business Stock — a tax exclusion allowing founders and investors to exclude up to $10M (or 10x basis) of capital gains on qualifying startup investments.
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.
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.
A restructuring of a company's capital structure — changing the mix of equity and debt, or renegotiating existing equity terms.
A fund structure provision allowing GPs to reinvest early capital returns back into new portfolio investments rather than distributing them immediately to LPs.
Conversations with former colleagues, investors, and customers of a founder to verify their character, skills, and track record before investing.
The SEC safe harbor allowing companies to raise capital from accredited investors without registering the securities offering — the legal basis for most private financings.
Statements of fact made by a seller in an M&A transaction that the buyer relies on — breaches can result in indemnification obligations.
Funds set aside by a VC fund for follow-on investments in existing portfolio companies rather than new investments.
A fund's plan for allocating capital between initial investments and follow-on investments in existing portfolio companies.
The percentage of customers who continue using a product over time.
When a large share of revenue comes from a few customers.
A valuation metric expressing company value as a multiple of revenue — used when EBITDA multiples aren't applicable because the company is pre-profit or early-stage.
The reliability of future revenue projections.
The predictability of future revenue based on contracts or subscription models.
A non-dilutive funding model where startups repay investors through a fixed percentage of monthly revenue until a predetermined total return cap is reached.
A private company going public by merging with an existing public shell company, bypassing the traditional IPO process.
A structure where a founder receives all shares upfront but the company has the right to repurchase unvested shares if the founder leaves.
A contractual right giving a party the first opportunity to match any offer before shares can be sold to a third party.
Return on investment measured relative to the risk taken — a 3x return in venture capital represents a different risk-adjusted return than a 3x return in bonds.
A continuously open venture fund structure where investors subscribe quarterly rather than committing the full amount upfront to a traditional 10-year closed-end fund.
A startup strategy focused on acquiring and consolidating many smaller companies in a fragmented market.
A discrete fundraising event where a company raises a specific amount of capital at a set valuation — named sequentially (Seed, Series A, B, C, etc.).
A SaaS health metric: a company's revenue growth rate plus profit margin should equal or exceed 40%, balancing growth and profitability.
A SaaS benchmark where a company's revenue growth rate plus profit margin should exceed 40%. Companies above 40% are considered well-balanced between growth and profitability.
Projected annual revenue based on current monthly or quarterly performance.
The number of months a company can continue operating at its current burn rate before running out of cash. One of the most critical metrics for managing fundraising timing and operational survival.
Actions taken to extend the time before a company runs out of cash.
The registration statement a company files with the SEC to go public, containing comprehensive financial and business disclosures.
A Simple Agreement for Future Equity — a financing instrument that converts into equity at a future priced round. The dominant early-stage fundraising tool, replacing convertible notes for most pre-seed and seed raises.
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.
Serviceable Obtainable Market — the realistic portion of SAM a company can capture in the near term given its current resources, competitive position, and go-to-market capacity.
Special Purpose Acquisition Company — a shell company that raises public market capital via IPO with the sole purpose of merging with a private company to take it public.
Special Purpose Vehicle — a single-purpose investment entity that allows a group of investors to co-invest in a specific deal through a unified cap table entry.
Software as a Service — cloud-delivered software accessed via subscription, generating recurring revenue. The dominant business model in modern enterprise software.
The standard set of KPIs used to evaluate software-as-a-service business performance.
A measure of how much revenue a company generates relative to its sales and marketing spend — often tracked as the Magic Number or CAC Payback Period.
The stages customers pass through from awareness to purchase.
A growth model driven primarily by outbound sales teams rather than product-led adoption.
A business model capable of growing revenue much faster than costs.
Competitive advantage gained through larger operational scale.
A company that has found product-market fit and is focused on rapidly expanding its customer base, team, and revenue.
Growth capital provided to companies that have achieved product-market fit and need funding to rapidly scale operations, sales, and market presence.
The stage where startups focus on rapid growth after validating product-market fit.
An entrepreneur starting another company after previously founding one.
The market for buying and selling existing private company shares or LP interests in VC funds — providing liquidity before traditional exit events.
The sale of existing shares in a private company by current shareholders (founders, employees, early investors) to new investors, without the company raising new capital.
A venture fund focused on a specific industry such as fintech or healthcare.
An additional fundraise at the same terms as a previous seed round — used when a company needs more capital before being ready for a Series A.
An investor specializing in early-stage startup funding.
The first institutional financing round for a startup, typically ranging from $500K to $5M. Used to fund initial product development, early hiring, and customer validation.
A distortion in data or conclusions caused by non-random sampling, common in VC when analyzing success patterns.
The first major institutional venture round, typically ranging from $5M to $20M. Raised after demonstrating product-market fit and initial revenue traction, used to scale go-to-market and team.
The third major institutional funding round, typically raised after demonstrating product-market fit and early revenue traction, used to scale sales, marketing, and operations.
A later-stage venture round typically raised by companies with proven growth, used to scale aggressively, enter new markets, or position for an eventual IPO or large acquisition.
A very late-stage funding round ($200M-$1B+) for mature private companies, typically raised to fund major acquisitions, delay IPO, or support continued growth at massive scale.
A contract among shareholders governing their rights, obligations, and the company's governance structure.
Releasing product updates, features, or fixes to users — used in startup culture to signal execution velocity and bias toward action over planning.
A supplemental agreement between a GP and specific LP granting customized terms beyond the standard LPA, such as fee discounts, enhanced reporting, or co-investment rights.
An investor's reputation or prior success influencing other investors to participate in a round.
The market signal sent by a VC's actions — most importantly, whether an existing investor participates (positive) or declines (negative) in a follow-on round.
The danger that an investor's decision (to invest or not) sends a negative signal to the market about a company.
An equity provision that fully accelerates vesting upon a single event, typically a change of control (acquisition).
A venture capital firm run by a single general partner rather than a partnership of multiple GPs — increasingly common at the seed stage.
A state-owned investment fund that deploys national wealth into venture capital and other asset classes, often with very long time horizons and strategic national objectives.
The rate at which a startup builds product, hires, and enters markets.
The practice of funding startups through sequential rounds, each with increasing amounts and valuations as the company de-risks.
Founder or team exhaustion resulting from prolonged high-intensity startup work.
The network of investors, founders, accelerators, universities, and service providers supporting startups.
An organization that builds multiple startups internally rather than investing in external founders.
The right to purchase company stock at a fixed price (strike price) in the future — the primary equity compensation tool for startup employees.
The right to purchase company shares at a fixed price (the strike price) granted to employees and service providers as part of equity compensation.
A company that acquires another business for strategic value like technology, talent, or market access rather than purely financial returns.
An acquisition by a company seeking operational synergy, market access, technology, or talent — as opposed to a financial buyer seeking pure investment returns.
A corporate or institutional investor that invests for strategic reasons (partnerships, market intelligence, acquisition pipeline) in addition to financial returns.
A collaboration between companies designed to accelerate growth.
The 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.
Excess returns generated through unique structural advantages in how a fund operates rather than just better stock picking.
A prolific individual angel investor who writes many checks across numerous startups, often at institutional scale — blurring the line between angels and micro-VCs.
The logical error of focusing only on successful outcomes while ignoring the many failures, distorting perceived probabilities.
Ownership stake earned through labor and effort rather than financial investment.
A group of investors co-investing in a deal together, often organized by a lead investor who does diligence and brings in other investors at the same terms.
Total Addressable Market — the total revenue opportunity available if a company captured 100% of its target market.
A narrative used by startups to argue that their addressable market is larger than it appears today — either because they will expand into adjacent markets or because they will grow the market itself.
Total Value to Paid-In Capital — the sum of all distributions made and remaining portfolio value, divided by invested capital. The all-in performance multiple combining realized and unrealized returns.
Total Value to Paid-In — the sum of distributions plus remaining portfolio value, divided by capital contributed. Includes both realized and unrealized returns.
Rights allowing minority shareholders to join a sale when majority shareholders sell their shares, ensuring equal treatment in a transaction.
The percentage of each transaction a marketplace or platform retains as revenue — the fundamental monetization lever for two-sided marketplace businesses.
A distribution from a fund specifically to help partners cover tax liabilities arising from fund income allocated to them on K-1 statements.
A competitive advantage created through proprietary technology, infrastructure, or intellectual property.
A prolonged downturn in venture funding, startup valuations, and tech hiring — characterized by layoffs, down rounds, and reduced VC activity.
The possibility that a company's core technology will fail or be overtaken.
A structured offer to purchase shares from existing shareholders at a specified price, used in private companies to provide liquidity to employees and early investors.
A non-binding document outlining the key terms of a proposed investment, including valuation, investment amount, and investor rights. The starting point for negotiating a financing round.
The process of negotiating the key business and governance terms of an investment before detailed legal documentation.
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 investment approach where the fund develops a specific thesis about market trends and proactively seeks companies that fit.
An integrated financial model linking the income statement, balance sheet, and cash flow statement.
An LP protection that requires the GP to return previously distributed carry if the fund ultimately underperforms.
The market disruption caused when crossover hedge funds deploy massive capital into venture at unprecedented speed and scale.
Funds whose returns rank in the top 25% of all funds from the same vintage year.
An investment approach starting with macro themes, sectors, or trends and then identifying companies positioned to benefit — opposite of bottom-up (company-first).
The total revenue opportunity available if a product achieved 100% market share.
An expanded concept of TAM that includes additional value created through ecosystem effects.
The total potential economic value a company could capture in a market.
Measurable evidence that a startup's product is gaining market adoption — revenue growth, user growth, retention, and engagement are common traction metrics.
A portion of a larger investment, released upon meeting specific milestones — used in milestone-based financing to reduce investor risk.
Contractual limitations on an investor's ability to sell, transfer, or assign their fund interest or shares.
A corporate entity specifically designed to shield tax-exempt investors from Unrelated Business Taxable Income generated by fund investments that use debt or operate businesses.
A startup strategy where a company breaks apart an existing platform or industry and focuses on a single component.
A private startup valued at $1 billion or more. The term was coined by Aileen Lee in 2013 to describe the rarity of such companies.
The direct revenues and costs associated with a single customer or unit — used to assess whether a business can be profitable at scale.
Growth achieved through subsidized unit economics — where each new customer or transaction loses money — justified by the expectation of future scale or market dominance.
The paper profit on investments that haven't been sold or exited yet.
The current estimated value of portfolio investments that have not yet been exited — also called paper gains or unrealized gains.
A financing round where a startup raises at a higher valuation than its previous round — the normal, positive progression of a healthy startup.
The cost required to acquire a new user, commonly used in consumer tech.
A measurement of how frequently and deeply users interact with a product.
The percentage of users who continue using a product over time.
The estimated worth of a company, used to determine investor ownership percentages and share pricing in a funding round.
The maximum company valuation used to calculate conversion price for SAFEs and convertible notes, setting a ceiling on the effective price per share for early investors.
A decrease in startup valuations during market downturns.
The ability of a company to convert market demand into revenue and profit.
The process of increasing a company's worth through revenue growth, margin improvement, or strategic positioning.
A structured roadmap outlining specific initiatives to increase a portfolio company's value during the investment holding period.
A specific milestone or achievement that causes a step-change increase in a company's valuation, such as product launch, regulatory approval, or key customer win.
The core benefit or problem a product solves for its customers.
An investment approach where the VC provides strategic support beyond capital to help portfolio companies succeed.
Pricing based on the value delivered to customers rather than the cost of production.
The speed of execution across product development, hiring, and fundraising — used as a qualitative signal of a startup team's operating rhythm and competitive edge.
An organization that creates startups from scratch using internal ideas, resources, and teams rather than investing in external founders.
A form of private equity financing provided to early-stage, high-growth companies in exchange for equity, with the expectation of outsized returns from a few breakout investments.
A professional investor who deploys capital from a managed fund into high-growth private companies in exchange for equity, targeting outsized financial returns.
Debt financing for venture-backed startups that supplements equity rounds, typically structured as term loans with warrants from specialized lenders like SVB and WTI.
A part-time or deal-by-deal contributor to a VC firm who sources investments, provides expertise, or supports portfolio companies — without being a full general partner.
A contractual arrangement defining a part-time partner's role at a VC firm, including deal sourcing expectations, board responsibilities, carry allocation, and time commitment.
The operational team inside a VC fund that provides non-capital support to portfolio companies — including recruiting, marketing, business development, and community programs.
A business capable of reaching very large outcomes (often $1B+ valuations).
An organization that conceives, builds, and launches startup companies internally — co-founding startups with the studio team rather than backing external founders.
Software designed for a specific industry such as healthcare, construction, or finance.
The schedule by which a founder or employee earns their equity over time. Standard startup vesting is 4 years with a 1-year cliff, ensuring team members are incentivized to stay and contribute over the long term.
The year a VC fund made its first investment — used to benchmark fund performance against peer funds of the same vintage.
The practice of spreading LP commitments across multiple fund vintage years to smooth returns and reduce market timing risk.
The rights of shareholders to vote on major company decisions — common shareholders typically vote on general matters, while preferred shareholders have special protective votes.
A right to purchase company shares at a fixed price (the exercise price) before an expiration date, typically issued alongside debt or as a sweetener in deals.
The 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 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.
The key question a startup must answer: what has changed recently that makes this opportunity possible or necessary right now — as opposed to 5 years ago or 5 years from now.
The difference between a company's current assets and current liabilities.
Short-term financing used to cover operational expenses.
A reduction in the carrying value of a portfolio investment — typically reflecting poor company performance or a down round financing.
A total write-down of a portfolio investment to zero — when a company has failed and the investment is a complete loss.
A macroeconomic environment of near-zero interest rates that historically fueled aggressive venture investing.
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.