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Glossary: Venture Fund Accounting

Posted by Early Growth

April 5, 2017    |     6-minute read (1134 words)

We wrote previously about the rising trend of seasoned entrepreneurs within the startup ecosystem who are launching Micro VC funds. Often those new, or even those who have been involved in fundraising before, can get lost in the jargon. Terms bandied about can cover a wide range mixing regulatory, legal, financial as well as industry lingo. Below is a basics primer to assist when you find yourself wondering what’s what. We’re always glad to help you CYA.

"A" Round

: Usually this is used to reference the first institutional investment where previously all financing was either from bootstrapping or angels. It’s named such after series A preferred stock. Subsequent rounds are lettered “B”, “C”, etc.


A program supporting startups with funding options and mentor cultivation geared towards accelerating growth. Most take an equity stake in exchange

Accountant's Opinion

: A formal report from an independent accounting firm, this attests that an accountant has reviewed and audited the financial statements of a firm to confirm compliance with GAAP.

Accredited Investor

Category of savvy investors who having met the SEC net worth and/or income requirements are deemed to be sophisticated and in less need of protection.

Accrual Accounting

: Most widely used method, reports income when earned as well as expenses when incurred.

Anchor Tenant

The first limited partner to join and invest in a fund.


An early stage investor who directly invests in high risk/high reward new startups.

Asset Allocation

: Description of the mixture of holdings within a portfolio as determined by the timetable, risk comfort levels and overall stated goals.

Asset-based Lending

: Any lending that is secured or achieved through utilizing an asset on the balance sheet.


: The comparison of a portfolios return in regards to the returns of peers’ portfolios.

Break-Up Fee

: A seller paid fee in the event of breaches or termination of a definitive acquisition agreement.

Bridge Loan

: Temporary and smaller scale funding on the path towards acquiring a larger long term investment.

Burn Rate

: The timetable projection of expected normal spending till full depletion of operation capital occurs.


: The acquisition of most or all equity in a business through cash and/or debt by a private equity firm.

Capital Call

: When a private equity fund requests previously committed capital from its limited partners to execute on an investment.

Carried Interest/Carry Fee

: The general partner’s share of the gains on capital from a fund, generally 20%. Usually limited partnerships include a stipulation that allows the carry only after the limited partners have achieved a stated rate of return.


: When a parent company sells a portion or all ownership interests in a subsidiary, or division of its operations.

Cash Based Accounting

: The reporting of income when received and expenses when they are paid.

Convertible Debt

Debt that can be converted to equity based on certain conditions

Corporate Venture Capital

: Investment from corporations that see synergy between companies and the parent company’s goals.

Club Deal

: two or more parties involved in a shared private equity transaction.


: Using an online platform in most cases to solicit funding a venture by raising portions of a larger stated goal amount from a wide-ranging collection of individual investors/interested parties (the crowd).

Deal Flow

The tracking tally of private equity transactions that have occurred within a given period.

Distressed Investment

: Taking an ownership stake into a company experiencing liquidity, capitalization, and/or underperformance issues.

Distributed to Paid-In (DPI)

: Cash disbursements to limited partners divided by amount paid in to the partnership.

Drawdown Rate

How rapidly a general partner calls in the capital previously committed by its limited partners.

Early Stage

a period of venture capital investment in-between seed and late stage deals that includes Series A and Series B financings. These companies typically have a proven concept and little revenue.

Evergreen Fund

A private equity fund that recurrently raises funds rather than holding a final close to maintain regular capital on hand.

Founder Partner (FP) Class

: Pre-existing shareholders in a company before an acquisition. Usually lead management and other early participants who maintain equity throughout being bought.

Fund Summary

: States funds objectives, risk profile and performance.

General Partner (GP)

The person in a limited partnership that is responsible for operational expenses. The GP oversees all aspects of the fund, including investment decisions, and earns a management fee and percentage of the carried interest (assuming the fund attains its goals).

Hurdle Rates

A preset minimum rate of return that general partners must meet before they can receive carried interest.

Interim Close

When funds engaged in raising capital have one or more provisional closes to switch focus towards making investments.

Lead Investor

The largest investor in each venture capital round. The lead investor sets the current valuation of the target company.

Limited Partner (LP)

: A stakeholder, usually an accredited investor, that commits capital to a private equity limited partners.
Liable only to extent of the amount of money committed.

Limited Partnership Agreements (LPAs)

: The document that details the relationship between all participating classes of partner and outlines responsibility, division of profits/losses as well as other operational decisions.

Limited Partnership

: Legal term for the affiliation between a general partner and their assorted limited partners.

Liquidity Event

The process of selling equity in an investment to realize an investment and return capital.

Management Fee

The amount general partners receive from limited partners in a fund that typically ranges from 0.5% to 3% of the invested capital, usually applied to the day-to-day operation costs of running the fund.

Monitoring Fee

a fee charged to portfolio companies by private equity firms for advisory and management services.

Operating Partner

: The partner focused on increasing portfolio companies value. Usually have a specific proficiency, for example an industry focus, such as biotechnology.

Paid-In Capital

: The amount of committed capital that has been transferred from the limited partner to the general partner.


Very early stage investment in a company often consisting of just an established founder(s) and an idea. As seed round investing becomes crowded this has grown.

Private Merger

: When two or more unlisted companies combine into a new single entity.

Private Placement Memorandum (PPM)

: Disclosure document, contains a summary of the offering.

Remaining Value to Paid-In (RVPI)

the value of a fund’s unrealized investments as determined by investment paid-in to the partnership

Seed Capital

The preliminary stage of venture capital in startups

Senior Debt

Top priority debt over other securities in the event of liquidation.

Venture Capital

: Privately held investment in startup and early stage companies with long-term, high-growth potential.

Vintage Year

: The year that a fund held its closing round and/or began initiating investments.


: A security that provides the possessor the option to purchase a company’s stock at a preset price for a stated period.

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