What does that Venture Capital Term Mean? – Part 2

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Venture capital (VC) is a form of financing that is private and provided by investors, investment banks, or other financial institutions to startup companies and small businesses, particularly those with long-term growth potential. Often seen as the “engine of economic growth”, venture capital investors provide funds to early-stage companies or start-ups in exchange for equity or ownership stake. To help introduce you to the world of Venture Capital, we’ve compiled a list of some of the most common terms in this field. You can find part one of this blog here.

Common Venture Capital Terms & Concepts

Securities and Exchange Commission (SEC): The SEC is a federal government regulatory agency. It operates independently to protecting investors, securities markets, and capital formation.

Minimum viable product (MVP): The minimum viable product is a version of a product that has enough features to attract early customers for product development and feedback.

Burn rate: The burn rate is the rate at which an enterprise spends venture capital in excess of income.

Freedom to operate: The freedom to operate can be defined as the ability to make and sell a product without infringing on exiting third party rights.

Accredited investor: An accredited investor is an individual or business entity, one that may not be registered with financial authorities, that can trade securities by satisfying certain requirements regarding status or income.

Anti-dilution: An anti-dilution clause is a clause that allows investors to maintain the ownership shared regardless of new issued shared.

           Types of Anti-Dilution Provisions:

        • Full Ratchet: A full ratchet provision is a clause that protects investors that own options or convertible securities, allowing the investors to convert at the lowest sale price offered.
        • Weighted average: The weighted average provision is conducted using a formula to determine the new conversion price.

Cap table: Cap tables, or capitalization table, provide analysis of a company’s percentage of equity capitalization.

Clawback: A clawback is contractual clause used to force fraudulent executives to return due bonuses and pay.


  • https://hbr.org/1998/11/how-venture-capital-works
  • https://medium.com/rbl1/100-venture-capital-terms-the-ultimate-vc-glossary-71a08b938b7a
  • https://dictionary.cambridge.org/us/dictionary/english/clawback