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Your VC Lingo Cheatsheet.

May 28, 2024

Founders - If you're planning on raising VC, you need to learn the LINGO 💰

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𝐂𝐚𝐩 𝐓𝐚𝐛𝐥𝐞: Ownership structure of a company with investor stakes.

𝐃𝐢𝐥𝐮𝐭𝐢𝐨𝐧: Reduction in existing investor ownership due to new equity issuance.

𝐄𝐒𝐎𝐏: Reserved shares for future employee compensation.

𝐕𝐞𝐬𝐭𝐢𝐧𝐠 𝐏𝐞𝐫𝐢𝐨𝐝: Typically four years with a one-year cliff for stock options.

𝐏𝐫𝐞-𝐌𝐨𝐧𝐞𝐲 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧: Company value before new investments.

𝐏𝐨𝐬𝐭-𝐌𝐨𝐧𝐞𝐲 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧: Company value after new investments.

𝐆𝐏𝐬 (𝐆𝐞𝐧𝐞𝐫𝐚𝐥 𝐏𝐚𝐫𝐭𝐧𝐞𝐫𝐬): Fund managers; LPs provide capital.

𝐋𝐏𝐬 (𝐋𝐢𝐦𝐢𝐭𝐞𝐝 𝐏𝐚𝐫𝐭𝐧𝐞𝐫𝐬): Investors in VC funds.

𝐅𝐮𝐧𝐝 𝐨𝐟 𝐅𝐮𝐧𝐝𝐬: Invest in VC/PE funds, not startups.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐂𝐚𝐥𝐥: Schedule for LPs to contribute committed capital.

𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐩𝐭𝐢𝐨𝐧: Investor commitment to a startup/fund.

𝐅𝐨𝐥𝐥𝐨𝐰-𝐎𝐧: Existing investors join subsequent funding rounds.

𝐂𝐚𝐫𝐫𝐲 (𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭): GP's share of fund profits.

𝐃𝐏𝐈 (𝐃𝐢𝐬𝐭𝐫𝐢𝐛𝐮𝐭𝐢𝐨𝐧𝐬 𝐭𝐨 𝐏𝐚𝐢𝐝-𝐈𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥): Capital repaid to LPs vs. initial investment.

𝐌𝐎𝐈𝐂 (𝐌𝐮𝐥𝐭𝐢𝐩𝐥𝐞 𝐨𝐧 𝐈𝐧𝐯𝐞𝐬𝐭𝐞𝐝 𝐂𝐚𝐩𝐢𝐭𝐚𝐥): Total invested vs. LPs' investment.

𝐓𝐕𝐏𝐈 (𝐓𝐨𝐭𝐚𝐥 𝐕𝐚𝐥𝐮𝐞 𝐭𝐨 𝐏𝐚𝐢𝐝-𝐈𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥): Total fund value vs. paid-in capital.

𝐈𝐑𝐑 (𝐈𝐧𝐭𝐞𝐫𝐧𝐚𝐥 𝐑𝐚𝐭𝐞 𝐨𝐟 𝐑𝐞𝐭𝐮𝐫𝐧): Anticipated annual investment growth rate.

𝐒𝐀𝐅𝐄 (𝐒𝐢𝐦𝐩𝐥𝐞 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭 𝐟𝐨𝐫 𝐅𝐮𝐭𝐮𝐫𝐞 𝐄𝐪𝐮𝐢𝐭𝐲): Right to buy stock in future rounds.

𝐂𝐨𝐧𝐯𝐞𝐫𝐭𝐢𝐛𝐥𝐞 𝐍𝐨𝐭𝐞: Loan convertible to shares at an agreed valuation.

𝐋𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐢𝐨𝐧 𝐏𝐫𝐞𝐟𝐞𝐫𝐞𝐧𝐜𝐞: Payment order in liquidation events.

𝐀𝐧𝐭𝐢-𝐃𝐢𝐥𝐮𝐭𝐢𝐨𝐧/𝐑𝐚𝐭𝐜𝐡𝐞𝐭: Adjusts earlier investors' share price.

𝐏𝐚𝐲-𝐭𝐨-𝐏𝐥𝐚𝐲: Requires proportional participation in funding rounds.

𝐃𝐫𝐚𝐠-𝐀𝐥𝐨𝐧𝐠: Majority can force minority to sell shares.

𝐓𝐚𝐠-𝐀𝐥𝐨𝐧𝐠: Ensures minority gets same terms when selling shares.


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- Gerald 

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