Corporate Finance: Private Equity

Flashcards covering key vocabulary and definitions related to private equity and corporate finance.

Angel Investors

Wealthy individuals who provide capital to startups in exchange for ownership equity or convertible debt.

Crowdfunding

A method of raising capital through the collective effort of a large number of individuals, typically via online platforms.

Venture Capital Firms

Investment firms that manage pooled funds from many investors to invest in high-growth potential startups.

Preferred Stock

A type of equity security that provides preferential treatment in terms of dividends and liquidation over common stock.

Convertible Note

A short-term debt instrument that converts into equity, typically in conjunction with a future financing round.

SAFE (Simple Agreement for Future Equity)

An agreement that allows an investor to convert their investment into equity at a future event, typically a priced funding round.

Dilution of Ownership

A reduction in existing shareholders' ownership percentage caused by the issuance of new shares.

Liquidation Preference

The order in which investors are paid in the event of a liquidation, sale, or merger of the company.

Anti-Dilution Protection

Provisions that protect investors from dilution of their ownership stake, often in a down round of funding.

Down Round

A financing round in which the company is valued at a lower valuation than in previous rounds.

Institutional Investors

Organizations that invest large sums of money into various assets, including private equity and venture capital funds.

Corporate Investors

Established companies that invest in startups or private firms often for strategic purposes, as well as financial returns.

Pre-Money Valuation

The valuation of a company prior to a new round of funding.

Post-Money Valuation

The valuation of a company immediately after a financing round, including the new capital raised.

Carried Interest

The share of profits that the general partners of a private equity or venture capital fund receive as compensation.

Employee Option Pool

A portion of a company's equity reserved for employee stock options intended to attract and retain talent.

Series A Funding

The first significant round of business financing by private equity investors or venture capitalists.

Liquidation Preference Payout

The minimum amount that must be paid to certain security holders before any payments to common stockholders during a liquidation.

Convertible Preferred Stock

Preferred stock that can be converted into common stock at the investor's option.

Funding Rounds

Stages of venture capital financing categorized by the sequence and amount of investment received.

Valuation Challenge

The difficulty in determining the market value of a startup, especially in early funding stages.