Private Equity & VC

Angel Investor

An individual who invests personal money in early-stage start-ups.

ESOP

Employee Stock Option Plan

A plan that gives employees the right to buy company shares at a fixed price in future.

Private Equity

PE

Investment in companies that are not listed, usually taking a large stake to improve and later sell them.

Seed Funding

The first formal money a start-up raises to build its product.

Venture Capital

VC

Funding for young, high-growth start-ups in exchange for equity.

AIF

Alternative Investment Fund

A SEBI-regulated pooled fund in India for private equity, venture capital, hedge funds and similar strategies.

General Partner & Limited Partner

GP / LP

The GP manages a fund; LPs are the investors who provide most of the money.

Hurdle Rate

The minimum return a fund must deliver to investors before managers earn carried interest.

MOIC

Multiple on Invested Capital

How many times the original investment was returned.

Pre-money & Post-money Valuation

A start-up's value just before and just after new investment comes in.

Term Sheet

A short, mostly non-binding document listing the key terms of an investment.

Carried Interest

Carry

The share of a fund's profits paid to the managers, typically around 20%.

IRR

Internal Rate of Return

The annual return that makes the present value of all cash flows equal zero.

Liquidation Preference

An investor's right to get their money back before others when the company is sold or wound up.