Capital raising glossary
I use this glossary to explain the words I hear in capital raising conversations. Each definition gives a plain-language starting point, not legal, tax, or investment advice. A term can mean something different in a particular deal, so I read it with the governing documents and ask qualified professionals about decisions. I have worked with investors and capital raisers through the Family Office Club since 2007. The definitions here cover companies, funds, securities, investor relationships, and deal processes. I also link each term to a relevant guide or question so you can keep learning in context. If a term affects your transaction, get advice from professionals who understand your facts and the applicable rules.
A
Accredited investor
An accredited investor is a person or entity that meets specified criteria under a securities exemption. The criteria depend on the applicable rules and facts.
Why it matters It helps me describe which investor groups a raise may address. I confirm eligibility with qualified counsel.
Related: Qualified purchaser, Reg D
Accredited investor verification
Accredited investor verification is the process of documenting that an investor meets the relevant eligibility criteria. The method can depend on the offering exemption.
Why it matters It helps me plan a consistent investor intake process. I get legal guidance on what records are appropriate.
Related: Accredited investor, 506(c)
Read more: How do I prepare for investor due diligence?
Accrued return
An accrued return is a preferred or other contractual return that accumulates over time before payment. The governing documents define its calculation and timing.
Why it matters I make the accrual method clear so investors can understand the economics being discussed.
Related: Preferred return, Waterfall
Allocation
An allocation is the amount of an investment opportunity assigned to an investor or group. It may be limited by demand, fund capacity, or deal terms.
Why it matters I communicate allocation expectations early so investors know what is available.
Related: Anchor investor, Co-invest
Alternative investment
An alternative investment is an investment outside common public stocks, bonds, or cash instruments. Private company equity, private funds, and real estate are examples.
Why it matters I use the term carefully because it covers many different structures and risks.
Related: Private equity, Real estate fund
Anchor investor
An anchor investor is an early or significant investor whose commitment can help establish momentum for a raise. The term has no single universal threshold.
Why it matters I explain what is committed and what remains open, without implying that an anchor guarantees other commitments.
Related: Lead investor, First close
Angel investor
An angel investor is an individual who invests personal capital in an early stage company. Some angels also provide experience or introductions.
Why it matters I identify whether an angel's experience and expectations fit the company's stage.
Related: Seed round, Startup
Angel round
An angel round is an early financing round that includes one or more angel investors. It may use equity, a SAFE, or another instrument.
Why it matters I match the round structure to the company's stage and investor group with professional guidance.
Related: Angel investor, SAFE
Anti-dilution protection
Anti-dilution protection adjusts certain investor rights or conversion terms after a later financing at a lower price. The details depend on the documents.
Why it matters I understand how these terms may affect future ownership before discussing a raise.
Related: Dilution, Preferred stock
Ask
An ask is the specific request I make to a prospective investor, such as a meeting, feedback, or consideration of an offering.
Why it matters A clear ask helps the other person decide what next step makes sense.
Asset
An asset is a resource with economic value that a person or entity owns or controls. In a deal, the term may refer to property, securities, or other holdings.
Why it matters I name the assets involved so investors can understand what the opportunity relates to.
Related: Portfolio, Real estate fund
B
Bad actor disqualification
Bad actor disqualification refers to certain events involving covered persons that can affect eligibility to use some securities exemptions. The rules and exceptions are specific.
Why it matters I treat this as a matter for securities counsel during offering preparation.
Related: Reg D, 506(b)
Basis point
A basis point is one hundredth of one percentage point. It is commonly used to describe fees, rates, or changes in rates.
Why it matters I use basis points when precision matters and state the equivalent percentage when helpful.
Related: Management fee, Preferred return
Blind pool
A blind pool is a fund that raises capital before identifying all of the investments it will make. Investors evaluate the manager, strategy, and governing terms.
Why it matters I explain the investment scope and decision process because investors cannot assess every asset in advance.
Related: Fund, Fund of funds
Board observer
A board observer is a person allowed to attend board meetings without being a voting director. Rights and limits are set by agreement.
Why it matters I understand how information access and governance expectations affect the relationship.
Related: Governance, Term sheet
Bridge financing
Bridge financing is temporary capital intended to cover a period before a later financing, sale, or other funding event. Its repayment or conversion terms vary.
Why it matters I describe the expected next funding event and what happens if it is delayed.
Related: Convertible note, Runway
Broker-dealer
A broker-dealer is a person or firm engaged in securities transactions or related activities that may require registration. Definitions and requirements depend on the facts and applicable rules.
Why it matters I get securities counsel's input before asking anyone to find investors or handle transaction-based compensation.
Burn rate
Burn rate is the pace at which a company uses cash over a period. It is often discussed as gross burn or net burn.
Why it matters I connect the raise amount to a clearly explained operating plan and cash needs.
Related: Runway, Use of proceeds
Read more: How much money should I raise?
Business plan
A business plan describes a company's goals, customers, operating approach, and financial expectations. Its depth depends on the company and audience.
Why it matters I use it to show how the proposed capital relates to the company's plan.
Related: Pitch deck, Use of proceeds
C
Cap table
A cap table is a record of a company's ownership interests and related securities. It may show current and potential ownership.
Why it matters I use an accurate cap table to explain ownership before and after a financing.
Related: Capitalization table, Dilution
Capital call notice
A capital call notice is a communication requesting that an investor fund some or all of a commitment by a stated deadline. The documents set the required content and process.
Why it matters I make funding requests complete and consistent with the fund documents.
Related: Capital call, Capital commitment
Capital commitment
A capital commitment is an investor's agreed maximum contribution to a fund or other arrangement, subject to its documents. It may be funded over time.
Why it matters I distinguish committed capital from cash already received.
Related: Capital call, Fund
Capital formation
Capital formation is the process of sourcing and securing capital for a company, fund, or project. It can include preparation, outreach, diligence, and closing.
Why it matters I treat it as a full process with clear ownership and follow-up.
Related: Fundraising, Due diligence
Capital preservation
Capital preservation is an objective focused on limiting loss of principal. It does not remove risk or assure that principal will be returned.
Why it matters I do not describe an investment as preserving capital without explaining the risks and structure.
Related: Risk disclosure, Preferred return
Capital provider
A capital provider is an individual or organization that supplies financing or investment capital. It may be a lender, investor, or funding institution.
Why it matters I identify the type of capital provider because each has different criteria and terms.
Related: Investor, Debt financing
Capital raise
A capital raise is a defined effort to obtain money for a company, fund, or project. The plan states the amount, intended use, target investors, and process.
Why it matters I set the scope before beginning outreach so that conversations stay focused.
Related: Fundraising, Target raise
Capital raising readiness
Capital raising readiness describes how prepared an issuer is to explain its opportunity, support its claims, and manage investor review. It is a practical assessment, not a certification.
Why it matters I identify gaps in materials, records, and team preparation before approaching investors.
Related: Due diligence, Pitch deck
Read more: How do I raise capital for my business?
Capital stack
A capital stack is the combination and priority of financing sources used for a company, asset, or project. It can include debt and multiple types of equity.
Why it matters I show where each source sits and how claims or repayment priorities interact.
Related: Debt financing, Equity
Capitalization table
A capitalization table, or cap table, records a company's ownership securities and the holders of those securities. It may show ownership on issued and fully diluted bases.
Why it matters I keep it current so investors can understand existing ownership and the effect of new securities.
Related: Dilution, Fully diluted
Carried interest
Carried interest is a share of certain fund profits allocated to the sponsor or manager under the fund documents. It is often subject to distribution priorities and other conditions.
Why it matters I explain how it fits into the fund waterfall so investors can follow the economics.
Catch-up
A catch-up is a distribution provision that directs a portion of proceeds to a specified party after a preferred return or hurdle is met. Its mechanics vary.
Why it matters I show how the provision works in examples reviewed with appropriate professionals.
Related: Carried interest, Waterfall
Closing
A closing is the completion of a transaction or an accepted round of investments under the applicable documents. A fund may have more than one closing.
Why it matters I track outstanding documents and funds so each participant knows what remains.
Related: First close, Subscription agreement
Co-investment
A co-investment is an investment made alongside a fund or lead investor into the same company or asset. Terms and access vary by arrangement.
Why it matters I state how the co-investment relates to the main deal and who makes decisions.
Related: SPV, Lead investor
Commitment period
A commitment period is the period during which a fund may call committed capital for investments or expenses under its documents.
Why it matters I explain when commitments may be called and whether extensions apply.
Related: Capital commitment, Capital call
Common stock
Common stock is an ownership class that typically carries rights defined by a company's charter and agreements. It may have different economic and voting rights from preferred stock.
Why it matters I explain the rights attached to the offered class as well as the ownership percentage.
Related: Equity, Preferred stock
Company valuation
Company valuation is an estimate or agreed measure of a company's value for a particular purpose and point in a transaction. Methods and assumptions differ.
Why it matters I explain the basis for a valuation discussion and its limits.
Related: Pre-money valuation, Post-money valuation
Confidentiality agreement
A confidentiality agreement sets conditions for handling specified nonpublic information shared between parties. Its scope and exceptions are set by the document.
Why it matters I organize information sharing while asking counsel to review the terms where needed.
Related: Data room, Due diligence
Control rights
Control rights are contractual or governance rights that affect decisions in a company or investment vehicle. They may include voting, consent, or board rights.
Why it matters I discuss decision rights alongside economics so expectations are clear.
Related: Governance, Term sheet
Conversion discount
A conversion discount allows an investment instrument to convert into equity at a price below a later financing price, as defined in its terms.
Why it matters I model how the discount may affect ownership at conversion.
Related: SAFE, Convertible note
Conversion price
A conversion price is the price used to convert an instrument into equity under specified terms. It may reflect a discount, valuation cap, or other formula.
Why it matters I make the conversion mechanics understandable before accepting funds.
Related: Convertible note, SAFE
Convertible note
A convertible note is a debt instrument that may convert into equity after specified events or on specified terms. It can include interest, maturity, discount, and valuation cap provisions.
Why it matters I track both the debt terms and the potential ownership impact of conversion.
Related: SAFE, Conversion price
Corporate venture capital
Corporate venture capital is investment capital provided by a company through an investment program or related entity. Strategic aims may sit alongside financial aims.
Why it matters I assess whether the corporate investor's goals and decision process fit the company.
Related: Strategic investor, Lead investor
Covenant
A covenant is a promise or restriction in a financing or investment agreement. It may require an action or limit specified actions.
Why it matters I review covenants with counsel and assess how they may affect business operations.
Related: Debt financing, Term sheet
Crowdfunding
Crowdfunding is the process of seeking contributions or investments from many people, often through an online platform. Securities offerings through crowdfunding can have specific rules.
Why it matters I distinguish donation or rewards campaigns from securities fundraising.
D
Data room
A data room is an organized collection of documents shared with prospective investors or other reviewers. It may be virtual or physical.
Why it matters I keep materials accurate, organized, and access controlled during diligence.
Related: Due diligence, PPM
Deal memo
A deal memo summarizes an investment opportunity, its structure, key assumptions, and open questions. It is a working communication document.
Why it matters I use it to help an investor decide whether to review the full materials.
Related: One-pager, Pitch deck
Deal sponsor
A deal sponsor is the person or organization arranging or running a specific investment opportunity. The sponsor's role depends on the transaction.
Why it matters I state my role and responsibilities so investors know who is accountable for each part.
Related: General partner, Syndication
Debt financing
Debt financing provides capital that a borrower agrees to repay under specified terms. It may include interest, collateral, covenants, or maturity provisions.
Why it matters I compare repayment obligations with the company's expected cash needs and plans.
Related: Equity, Convertible note
Dilution
Dilution is a reduction in an existing holder's ownership percentage when additional shares or convertible securities are issued. The holder's economic value does not necessarily change in the same way.
Why it matters I show current and potential ownership changes when discussing a financing.
Related: Cap table, Pre-money valuation
Direct investment
A direct investment is an investment made into a company or asset, outside a pooled fund.
Why it matters I explain who makes decisions, handles reporting, and manages the investment.
Related: Co-investment, SPV
Discount
A discount is a reduction from a reference price or value under specified terms. In early financing instruments, it can apply when converting into shares.
Why it matters I specify the reference price and calculation so investors can understand the effect.
Related: SAFE, Convertible note
Distribution
A distribution is cash or property paid from a company, fund, or other entity to its owners or investors. Timing and priority depend on the governing documents.
Why it matters I explain when distributions may occur and how they are calculated.
Related: Waterfall, Preferred return
Distribution waterfall
A distribution waterfall sets the order and conditions for distributing proceeds among investors and the sponsor. The sequence is defined by the governing documents.
Why it matters I walk through the order with clear examples so participants can understand how proceeds flow.
Related: Hurdle, Catch-up
Due diligence
Due diligence is the review of information about a company, fund, sponsor, or transaction before a decision. It can cover business, financial, operational, and legal matters.
Why it matters I prepare consistent records and answer questions directly so investors can evaluate the opportunity.
Related: Data room, Investor diligence
Read more: How do I prepare for investor due diligence?
E
Early-stage company
An early-stage company is a business in an early phase of development, often still building its product, customers, or operating model. There is no universal definition.
Why it matters I frame the company's progress and capital needs in terms that fit its actual stage.
Related: Seed round, Startup
Economic interest
An economic interest is a right to receive specified financial benefits from an entity or arrangement. It may or may not include voting or management rights.
Why it matters I distinguish financial participation from governance rights in the terms.
Related: Equity, Control rights
Emerging manager
An emerging manager is a fund manager building an investment firm or fund track record. The term has no single universal definition.
Why it matters I explain the team's relevant experience, process, and plan with precision.
Related: First-time fund, Track record
Equity
Equity is an ownership interest in a company or other entity. The rights attached to equity depend on the class and governing documents.
Why it matters I describe the ownership offered together with voting, economic, and transfer terms.
Related: Common stock, Preferred stock
Equity financing
Equity financing is capital raised by issuing ownership interests in an entity. It can change ownership and governance arrangements.
Why it matters I consider how much capital is needed and how a new issuance affects existing holders.
Exit
An exit is an event in which an investor or owner sells, transfers, or otherwise realizes an interest. Timing and proceeds are uncertain.
Why it matters I describe possible paths without promising that any particular exit will occur.
Related: Liquidity event, Distribution
F
Family office
A family office is an organization that coordinates services or manages affairs for a wealthy family. Its structure, scope, and investment activity vary.
Why it matters I learn how a specific office makes decisions before deciding whether to approach it.
Family office investor
A family office investor is a family office or related investment entity that considers investing in companies, funds, or assets. Mandates differ widely.
Why it matters I qualify fit by mandate, decision process, and relationship context.
Related: Family office, Direct investment
Fee offset
A fee offset reduces certain fees payable to a manager by specified amounts received from other sources, as described in fund documents.
Why it matters I identify which receipts are offset and how the calculation works.
Related: Management fee, Fund expenses
Finder
A finder is a person who introduces potential investors or parties to a transaction. Whether the activity requires registration depends on the facts and applicable law.
Why it matters I seek advice from securities counsel before engaging someone to source investors or receive compensation.
Related: Broker-dealer, Warm introduction
First close
A first close is the initial completion of subscriptions or commitments in a fund or offering that permits activity to begin under its terms.
Why it matters I communicate the closing conditions and what investors can expect after it.
Related: Closing, Capital commitment
First-time fund
A first-time fund is a fund raised by a manager without a prior fund under the relevant strategy or firm. The label depends on context.
Why it matters I address questions about experience, operations, and alignment directly.
Related: Emerging manager, Track record
Follow-on financing
A follow-on financing is additional capital raised after an earlier financing. It may involve existing or new investors.
Why it matters I show what changed since the prior round and how the new capital will be used.
Related: Bridge financing, Seed round
Fully diluted ownership
Fully diluted ownership estimates ownership after accounting for specified outstanding and potential shares or conversion rights. The calculation conventions matter.
Why it matters I state which securities and assumptions are included in the cap table.
Fund
A fund is a pooled investment vehicle that holds capital from multiple investors for a stated strategy. Its legal form and terms vary.
Why it matters I explain the mandate, governance, fees, and investor rights in plain language.
Related: Blind pool, General partner
Fund of funds
A fund of funds invests primarily in other funds, which in turn own operating companies or assets. It may add an additional layer of fees and reporting.
Why it matters I clarify the investment approach and layers of costs for investors.
Related: Fund, Management fee
Fund of one
A fund of one is a vehicle or arrangement created for a single investor, with terms tailored to that relationship. Structure varies.
Why it matters I confirm the investor's requirements and the operating implications before designing the vehicle.
Related: SPV, Family office
Fund term
A fund term is the stated duration of a fund, including any extension options described in its documents.
Why it matters I set expectations about the intended investment and realization period.
Related: Fund, Extension
Fundraising
Fundraising is the process of seeking and securing capital from investors. It includes preparation, outreach, communication, diligence, and closing.
Why it matters I run fundraising as a clear process with consistent materials and follow-up.
Related: Capital formation, Investor pipeline
G
General partner
A general partner is a party with management or other responsibilities in a partnership, as set out in its documents and applicable law. In a fund, the GP often directs operations.
Why it matters I explain the GP's role, authority, and economics to prospective limited partners.
Related: Limited partner, Carried interest
Governance
Governance is the system of rights, responsibilities, and processes used to direct and oversee an organization.
Why it matters I describe who makes decisions, what requires consent, and how information is shared.
Related: Control rights, Board observer
Gross return
Gross return is a return measure before specified fees, expenses, or other deductions. The precise calculation should be stated.
Why it matters I label gross figures clearly and explain what has not been deducted.
Related: Net return, IRR
Growth equity
Growth equity is capital invested in a company seeking to expand, often after it has established operations. The label can mean different things across investors.
Why it matters I describe the company's stage and funding purpose in plain words alongside the category label.
Related: Equity financing, Valuation
H
Hurdle rate
A hurdle rate is a threshold return that may need to be met before a manager receives specified incentive compensation. The calculation and timing are set by the documents.
Why it matters I explain how the threshold is measured and how it fits into distributions.
Related: Preferred return, Carried interest
I
Independent sponsor
An independent sponsor sources and organizes an acquisition or investment, often raising capital for each transaction. Roles and economics are deal-specific.
Why it matters I make the sponsor's responsibilities, experience, and compensation clear.
Related: Deal sponsor, Syndication
Information rights
Information rights are contractual rights to receive specified reports or company information. Their scope and frequency vary.
Why it matters I set a reporting plan that is useful and practical for the company and investors.
Related: Investor reporting, Term sheet
Institutional investor
An institutional investor is an organization that invests capital, such as a pension plan, insurer, endowment, or investment firm. Requirements differ by institution.
Why it matters I learn the mandate, review process, and evidence expected before making an approach.
Related: Family office, Qualified purchaser
Investor diligence
Investor diligence is the review an investor conducts to understand a proposed investment and its risks, terms, and sponsor.
Why it matters I prepare answers and source documents so the review can proceed efficiently.
Related: Due diligence, Data room
Read more: How do I prepare for investor due diligence?
Investor pipeline
An investor pipeline is an organized record of prospective investors and the status of each relationship or discussion.
Why it matters I use it to manage follow-up and avoid losing context across conversations.
Related: Investor list, Follow-up
Investor relations
Investor relations is the ongoing communication and coordination between an issuer or manager and its investors.
Why it matters I set a clear cadence and point of contact before and after a close.
Related: Investor update, Reporting
Investor reporting
Investor reporting is the delivery of financial or operational information to investors. Timing and content may be governed by agreements.
Why it matters I align reporting with the documents and provide clear, accurate updates.
Related: Information rights, Investor update
Investor suitability
Investor suitability is an assessment of whether an investment may fit an investor's circumstances, objectives, and constraints. The process and obligations vary.
Why it matters I avoid making suitability judgments and direct investors to their own professional advisers.
Related: Accredited investor, Qualified purchaser
Investor update
An investor update is a periodic communication about a company, fund, or project. It may cover progress, challenges, finances, and upcoming needs.
Why it matters I keep updates factual and consistent to support trust and informed discussion.
Related: Investor reporting, Follow-up
IRR
Internal rate of return, or IRR, is a calculation that expresses the rate at which the net present value of a series of cash flows equals zero. Results depend on timing and assumptions.
Why it matters I explain the cash flows and calculation basis because IRR alone does not show total dollars received.
Related: MOIC, DPI
K
K-1
A Schedule K-1 is a tax form used to report certain items allocated to a partner or other recipient. Tax treatment depends on individual facts and professional advice.
Why it matters I tell investors what reporting the entity expects to provide and when, with tax questions referred to advisers.
Related: Limited partner, Fund
L
Lead investor
A lead investor is an investor who takes a prominent role in a financing, which may include setting terms or coordinating other participants. The role varies.
Why it matters I clarify responsibilities and decision authority in writing alongside the label.
Related: Anchor investor, Syndicate
Limited partner
A limited partner is an investor in a limited partnership whose rights and responsibilities are set by law and the partnership agreement.
Why it matters I explain the LP's economic, information, and governance rights in the fund documents.
Related: General partner, Fund
Liquidity event
A liquidity event is a transaction or event that may allow owners or investors to convert an interest into cash or other liquid assets.
Why it matters I describe possible liquidity paths as possibilities, not guarantees.
Related: Exit, Distribution
LOI
A letter of intent, or LOI, summarizes proposed terms for a possible transaction. Some provisions may be binding while others are not, depending on wording and law.
Why it matters I ask counsel to review an LOI and avoid treating a proposal as a completed agreement.
Related: Term sheet, Closing
M
Management fee
A management fee is compensation paid to a manager under an agreement, often calculated using a defined base and schedule.
Why it matters I state the calculation base, timing, and any changes over the life of the arrangement.
Related: Fee offset, Fund expenses
Management team
A management team is the group responsible for running a company, fund, or project. Its composition and duties vary.
Why it matters I show relevant roles and experience so investors know who will execute the plan.
Related: Track record, Sponsor
Market size
Market size is an estimate of the potential demand or revenue opportunity for a product, service, or asset strategy. Estimates rely on assumptions.
Why it matters I show the method and sources behind a market estimate in my materials.
Related: Pitch deck, Business plan
MFO
A multi-family office, or MFO, serves or coordinates services for more than one family. Its services and investment activity vary by firm.
Why it matters I learn the MFO's process and client mandate before seeking an introduction.
Related: Family office, SFO
Minimum investment
A minimum investment is the smallest amount an investor may contribute under an offering's terms. Exceptions may be possible if the documents allow them.
Why it matters I state the minimum clearly and explain whether it is firm or subject to approval.
Related: Subscription agreement, Allocation
MOIC
Multiple on invested capital, or MOIC, compares value received or held with the amount invested. The calculation may be gross or net and realized or unrealized.
Why it matters I state which amounts are included and avoid presenting a multiple without context.
Related: IRR, DPI
N
Net return
Net return is a return measure after specified fees, expenses, or other deductions. The deductions included should be stated.
Why it matters I label net figures and explain the period and assumptions used.
Related: Gross return, IRR
Non-binding indication of interest
A non-binding indication of interest is a preliminary expression that a party may consider a transaction or investment. It is generally subject to further review and documentation.
Why it matters I treat it as an early signal, not as committed capital.
Related: LOI, Soft circle
O
One-liner
A one-liner is a short description of a company, fund, or investment opportunity. It states what it is and why a relevant audience may care.
Why it matters I use a clear one-liner to help an investor decide whether to hear more.
Related: Pitch deck, Warm introduction
P
Participation rights
Participation rights give an investor the ability to take part in specified future offerings or distributions, subject to the terms.
Why it matters I identify when the right applies and how it may affect future financing.
Related: Pro rata rights, Term sheet
Pitch
A pitch is a concise presentation of an opportunity and a request for a next step or investment consideration.
Why it matters I tailor the explanation to the listener and make the ask clear.
Related: Pitch deck, One-liner
Pitch deck
A pitch deck is a presentation that summarizes a company, fund, or project for prospective investors. It often covers the problem, approach, team, market, plan, and capital request.
Why it matters I make each slide clear and support key claims with appropriate evidence.
Read more: What should be in a pitch deck?
Portfolio company
A portfolio company is a company held by an investment fund or investment entity.
Why it matters I describe the manager's role and the company's progress accurately when discussing a portfolio.
Related: Fund, Track record
Post-money valuation
Post-money valuation is a company valuation measured after a specified financing is included. The calculation depends on the round terms and securities counted.
Why it matters I reconcile it with the amount raised and ownership issued so the cap table is clear.
Related: Pre-money valuation, Dilution
Pre-money valuation
Pre-money valuation is a company valuation measured before a specified financing is included. It is used with financing terms to calculate ownership.
Why it matters I show the assumptions and securities included in the calculation.
Related: Post-money valuation, Cap table
Pre-seed financing
Pre-seed financing is capital raised at an early stage, often before a company has a fully established product or operating history. There is no single standard definition.
Why it matters I tie the requested capital to specific early milestones and costs.
Related: Seed round, SAFE
Preferred return
A preferred return is a contractual distribution priority or threshold that may be paid to investors before other specified distributions. It is not a guaranteed return.
Why it matters I explain how it accrues, when it is payable, and where it sits in the waterfall.
Related: Hurdle, Waterfall
Preferred stock
Preferred stock is an equity class with rights that may differ from common stock, including preferences on distributions or liquidation. Terms vary by company.
Why it matters I explain the preference and other rights alongside the company's capitalization.
Related: Equity, Liquidation preference
Private equity
Private equity is ownership investment in companies that are not publicly traded, often through a fund or direct transaction. The term covers varied strategies.
Why it matters I specify the actual strategy, stage, and structure.
Related: Fund, Growth equity
Private placement
A private placement is an offering of securities made without a public offering, relying on an available exemption where required. Rules vary by jurisdiction and facts.
Why it matters I work with securities counsel on the offering process and communications.
Related: Reg D, PPM
Private placement memorandum
A private placement memorandum, or PPM, is an offering document that describes a private securities offering, its terms, and associated risks. Its use and contents vary.
Why it matters I ensure offering materials are accurate and consistent with counsel's guidance.
Related: Subscription agreement, Data room
Pro rata rights
Pro rata rights allow an investor to maintain a specified ownership share by participating in later issuances, subject to the agreement.
Why it matters I consider how these rights affect future allocations and fundraising capacity.
Related: Dilution, Participation rights
Q
Qualified purchaser
A qualified purchaser is a defined investor category under certain investment company rules. Criteria are specific and differ from accredited investor criteria.
Why it matters I use the correct eligibility category for the relevant structure and ask counsel about application.
Related: Accredited investor, Private fund
R
Real estate fund
A real estate fund is a pooled vehicle that invests in real property, real estate debt, or related assets. Strategies and terms vary.
Why it matters I explain the property strategy, investment period, and reporting approach.
Related: Fund, Syndication
Reg A+
Regulation A, often called Reg A+, provides an exemption that permits certain securities offerings subject to eligibility, filing, and other requirements.
Why it matters I have securities counsel assess whether it fits the issuer and offering.
Reg CF
Regulation Crowdfunding, or Reg CF, is a securities offering exemption that permits eligible issuers to raise through registered intermediaries under specified rules.
Why it matters I understand the platform, disclosure, and investor requirements with professional guidance.
Related: Crowdfunding, Reg A+
Reg D
Regulation D is a set of exemptions from Securities Act registration requirements used for certain private offerings. Different rules have different conditions.
Why it matters I work with securities counsel to identify the exemption and follow its requirements.
Related: 506(b), 506(c)
Reg D 506(b)
Rule 506(b) is a Regulation D safe harbor that generally restricts general solicitation and has conditions for sales to accredited investors and a limited number of non-accredited purchasers.
Why it matters I get legal guidance on investor communications, purchaser qualifications, and disclosures.
Related: Reg D, Accredited investor
Reg D 506(c)
Rule 506(c) is a Regulation D safe harbor that permits general solicitation under conditions, including sales to accredited investors and required verification steps.
Why it matters I plan communications and verification with securities counsel before outreach.
Related: Reg D, Accredited investor verification
S
SAFE
A SAFE, or simple agreement for future equity, is a contract that may give an investor a right to equity upon specified future events. It is generally not debt, but its exact terms matter.
Why it matters I model how its cap, discount, and conversion provisions may affect ownership.
Related: Valuation cap, Convertible note
Secondary sale
A secondary sale is a sale of existing shares or interests by a current holder.
Why it matters I distinguish proceeds to selling holders from capital received by the company.
Related: Liquidity event, Equity
Seed round
A seed round is an early financing round used to support a company's initial development and growth. Instruments and company stages vary.
Why it matters I connect the amount and terms to the milestones planned for this stage.
Related: Pre-seed financing, Angel round
Series A
A Series A is a labeled financing round that commonly follows earlier seed financing, though practices vary. The label alone does not define the terms.
Why it matters I focus on the company's progress, capital needs, and proposed terms.
Related: Follow-on financing, Equity financing
SFO
A single-family office, or SFO, serves the needs of one family. Its investment function and services vary.
Why it matters I learn the office's mandate and decision path before sharing an opportunity.
Related: Family office, MFO
Skin in the game
Skin in the game refers to a sponsor or manager having personal or organizational exposure to the outcome of a deal. The form and amount vary.
Why it matters I describe the sponsor's actual commitment and distinguish it from investor capital.
Related: Alignment of interests, Sponsor
Soft circle
A soft circle is a preliminary, nonbinding indication that an investor may consider committing a stated amount.
Why it matters I track it separately from signed commitments and funded capital.
Related: Non-binding indication of interest, Capital commitment
Sponsor
A sponsor is a person or entity that organizes, manages, or promotes an investment opportunity. The specific duties depend on the arrangement.
Why it matters I clarify who is responsible for operations, investor communication, and decisions.
Related: Deal sponsor, General partner
SPV
A special purpose vehicle, or SPV, is an entity formed for a defined transaction or purpose. It may pool investors for a single investment.
Why it matters I explain the SPV's purpose, costs, control, and relationship to the underlying asset.
Related: Syndication, Co-investment
Subscription agreement
A subscription agreement is a document through which an investor applies to purchase an interest in an offering and agrees to specified terms.
Why it matters I use a consistent process to collect signed documents and confirm funding.
Related: PPM, Closing
Syndicate
A syndicate is a group of investors participating in a transaction, sometimes coordinated by a lead or sponsor.
Why it matters I explain who coordinates the group and how interests are held.
Related: SPV, Lead investor
Syndication
Syndication is the process of pooling capital from multiple investors for a transaction or investment. Structures and roles vary.
Why it matters I map the participants, entity, and responsibilities before describing the raise.
Related: SPV, Real estate fund
T
Target raise
A target raise is the amount of capital an issuer or fund intends to seek. It may differ from a minimum or maximum amount.
Why it matters I connect the target to a stated use of proceeds and operating plan.
Related: Use of proceeds, Minimum investment
Read more: How much money should I raise?
Term sheet
A term sheet summarizes proposed key terms for a possible investment or transaction. It is often preliminary, and binding effect depends on its wording.
Why it matters I use it to identify open business points and have counsel review legal language.
Related: LOI, Valuation cap
Track record
A track record is a record of prior relevant results or experience attributed to a person, team, or strategy. Attribution and context matter.
Why it matters I support claims with verifiable information and explain my role in each result.
Related: Emerging manager, Due diligence
TVPI
Total value to paid-in capital, or TVPI, compares the total value attributed to a fund with investor capital contributed. It includes realized and unrealized value under the stated method.
Why it matters I explain valuation assumptions and label unrealized amounts clearly.
Related: DPI, MOIC
U
Use of proceeds
Use of proceeds describes how raised capital is expected to be spent. It may be set out by category or milestone.
Why it matters I link the amount sought to specific operating needs and explain any flexibility.
Related: Target raise, Runway
V
Valuation
Valuation is an estimate or agreed measure of an entity or asset's worth for a particular purpose. Methods and outcomes can differ.
Why it matters I explain the method, assumptions, and purpose behind the figure.
Related: Pre-money valuation, Post-money valuation
Valuation cap
A valuation cap sets a maximum company valuation used to calculate conversion terms for certain instruments. It does not necessarily set the company's current valuation.
Why it matters I show how the cap interacts with other conversion terms and future financing.
Related: SAFE, Convertible note
Venture capital
Venture capital is investment in companies with potential for significant growth, commonly through equity or convertible instruments. Fund mandates vary.
Why it matters I determine whether the company's stage and growth plan fit a venture investor's mandate.
Related: Equity financing, Seed round
W
Warm introduction
A warm introduction is an introduction made by someone with a relationship to both parties. It can provide context but does not assure interest.
Why it matters I make the request specific and give the connector a concise, accurate description to share.
Related: One-liner, Investor pipeline
Waterfall
A waterfall is the agreed order for allocating cash or proceeds among investors and managers. The details are set in governing documents.
Why it matters I use a clear distribution example so investors can see how the terms operate.
Related: Preferred return, Catch-up
Wire instructions
Wire instructions are the details needed to send funds electronically to an account. They should be checked through a secure process.
Why it matters I provide checked instructions through the approved closing process and confirm receipt.
Related: Closing, Subscription agreement
Working capital
Working capital is money available to support a business's ordinary operating needs. Definitions may vary in accounting and transaction contexts.
Why it matters I explain how much working capital the raise supports and for what activities.
Related: Use of proceeds, Runway
Y
Yield
Yield is an income measure expressed relative to an investment amount or value, using a stated calculation. It does not capture every aspect of return.
Why it matters I state the calculation and distinguish yield from total return or a guaranteed payment.
Related: Distribution, Preferred return
A term can mean something different in a particular deal, so read it with the governing documents. General education only. Not legal, tax or investment advice.
About Richard C. Wilson
Richard C. Wilson has run the Family Office Club since 2007. It is the largest investor club in the world by media reach. The 15-person team hosts 30 events a year, including 16 in person, and has hosted more than 340 events since 2007. Richard shares what he has learned on the Centimillionaire Strategies YouTube channel.
Text or WhatsApp Richard at (808) 600-9260 or email Richard@FamilyOffices.com with a question about your raise. More about Richard.
General education only. Not legal, tax or investment advice.