VC Glossary

Learn about SAFE notes, a popular startup financing instrument that allows investors to buy equity in future priced rounds. Simple, founder-friendly alternative to convertible notes.

What is pre-seed funding? The earliest stage of startup financing, typically $100K-$500K for product development, market validation, and initial team building. Includes SAFE notes and equity rounds.

What is a convertible note? A short-term debt instrument that converts to equity at a discount in your next funding round. Traditional alternative to SAFE notes for early-stage startups.

Learn about equity rounds, the standard venture capital funding process where startups sell shares to investors at a specific valuation. Includes Series A, B, C, and beyond.

Learn about venture debt, a form of startup financing that doesn't dilute equity. Used alongside equity rounds to extend runway, fund growth, or bridge between funding rounds.

Understand term sheets, the non-binding agreements that outline the terms of venture capital funding. Includes valuation, liquidation preferences, voting rights, and board composition.

Learn how equity dilution works in startup fundraising. When you raise capital, your ownership percentage decreases. Here's how to calculate dilution and protect your stake.

Understand pro-rata rights, which give investors the option to maintain their ownership percentage in future funding rounds. Learn how pro-rata protects investor equity from dilution.

Learn how liquidation preferences work in VC deals. When a company is sold or liquidated, investors with liquidation preference get paid first before common shareholders.

What is dry powder? Committed capital that venture capital funds have raised but haven't invested yet. Represents available capital ready to deploy in startups.

What is a fund of funds? A venture capital fund that invests in other VC funds rather than directly in startups. Provides diversification and access to top-tier managers for institutional investors.

Understand carried interest (carry), the share of fund profits that goes to general partners. Typically 20%, calculated after returning LP capital and hurdle rate. The main VC compensation.

Learn about GPs (General Partners), the managing partners who run venture capital funds. They make investment decisions, sit on boards, manage portfolios, and earn carried interest on fund profits.

Learn about LPs (Limited Partners), the investors who provide capital to venture capital funds. Includes institutions, family offices, and high-net-worth individuals who fund the VC industry.

What is DPI? A venture capital metric measuring how much cash has been returned to LPs relative to their invested capital. DPI of 1.0x means investors got their money back.

Learn about IRR, the gold standard metric for measuring venture capital fund performance. The annualized rate of return on invested capital, accounting for timing of cash flows.

Learn about TVPI, a venture capital metric measuring total portfolio value (realized + unrealized) divided by invested capital. Shows both realized and paper gains.