Venture Capital Terms 101

The top of the VC ladder. General partners or GPs for short run the fund, engage in fundraising and has say in deals the firm does. They make management fees & carry.

Limited Partners or LPs, are the institutional or individual investors that have invested capital in the funds of the VC firm that they are investing off of. LPs include endowments, corporate pension funds, sovereign wealth funds, wealthy families, and funds of funds.

Carry or carried interest is the percentage of profits that goes to the fund managers.

Two and twenty describes the fees charged by managers of VC funds—specifically, the 2% annual fee and 20% performance fee (also called carried interest).

CAC measures how much it costs a startup in order to acquire a customer.

LTV or life time value, this is how much gross profit you expect an average customer to generate over the course of their relationship with a startup

Burn rate is the amount of money a startup is spending (usually per month)

How much time a startup has left before they go bankrupt

SAFE is a contract (not a traditional loan) where an investor chooses to make a cash payment to a business in return for the negotiated right to turn that amount into stock if a predetermined trigger event occurs.

The value of a startup before it raises funding

The value of a startup after it raises funding

Minimum viable product or MVP is a early concept product that has just enough features to iterate on and find product market fit

Rate of which a customer stop using a startup’s services

A term sheet is a non binding agreement given by VC to startup detailing their interest in investing and laying out the terms of investment

Or cap table for short, is a list of shareholders of a startup and the percentage of how much they own

ARR is how much revenue a company makes from reoccurring purchases

A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round

A fund that invests in other venture fund

How much a company makes

A company that is valued at $1B or more

Investor who sets the terms of a startup investment and writes the biggest check into a startup’s funding round

A company that a venture fund invested in

A pro rata right is a right that is given to an investor that allows them to maintain their initial level of ownership percentage during later financing rounds.

IRR or internal rate of return, it is a metric used in estimated the return of investments

​