Do you speak VC? You know you want to. Here’s a sample list of lingo that’s good to know, courtesy of David S. Rose, managing partner of Rose Tech Ventures and the chief executive officer of Gust.com, the largest global platform for early stage investors.
1. The Golden Rule:
What you think it means: Treating others as you’d like them to treat you.
What it really means: The investor makes the rules. If you need money and only one source is willing to supply it, you'll take the money on their terms, period.
2. Cram Down:
What you think it means: Working through your lunch.
What it really means: When a new funding round is done at a lower valuation than the previous one, meaning the original investors (or founders) end up with a much smaller percentage ownership.
3. Dry powder:
What you think it means: What Rick James said.
What it really means: Money held in reserve by a VC or angel in order to be able make additional investments in a company.
4. Pay to play:
What you think it means: A sure-fire way to get your 4-year old off the Little League bench.
What it really means: Requiring investors to participate in future down-valuation financings of the company or face consequences (such as getting their preferred stock converted into common stock).
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What you think it means: A six-inch heel’s natural habitat.
What it really means: How long a startup can survive before it goes broke, the amount of cash in the bank divided by a pre-profitable startup’s negative cash flow.
6. Valley of Death:
What you think it means: A beach vacation gone horribly wrong.
What it really means: The period between the initial funding and the end of the runway, when cash flow can be dicey. Navigating through Death Valley is essential to long-term survivial.
7. Drip Feed:
What you think it means: The only way to consume all espresso.
What it really means: When investors fund a startup a little bit at a time instead of in a lump sum. This process can be nerve wracking for entrepreneurs and painful for the investors.
8. Walking Dead:
What you think it means: A show about a dystopian zombie future where every episode is exactly the same.
What it really means: A company that isn't bankrupt, but will never succeed, and thus can't be sold or otherwise exited.
9. Dead Pool:
What you think it means: The fifth, best and last Dirty Harry movie, home to these memorable lines.
What it really means: Where companies go when they die.
10. Tag Along:What you think it means: A delicious Girl Scout cookie. The one with the peanut butter.
What it really means: Provisions in a Shareholders Agreement that permit investors under certain defined circumstances to sell their shares if you sell yours.
What you think it means: Something you shouldn’t chase. Please stick to the rivers and the lakes that you’re used to.
What it really means: The order in which investors (and everyone else) get their money out on an exit. Almost always this is 'last in, first out'
12. Lock Up:
What you think it means: A place where everyone in the televised zombie dystopian future lives, by their own choice, because they can't have nice things.
What it really means: A period of time (typically after an IPO, or an acquisition of a startup by a public company) during which certain shareholders are not allowed to sell their stock. Sometimes this period lasts 90 or 180 days, but it could last up to a year.
13. Zombie Fund:
What you think it means: A helpful savings account for the undead. Possibly one used in a dystopian future where 'retirement' takes on new meaning.
What it really means: It’s a VC firm that can't raise new funding, and thus can't make new investments.
14. Vulture Capitalist:
What you think it is: A Portland-based indie band.
What it really means: A venture capitalist who takes advantage of an entrepreneur's troubles.
15. "You can't push a string":
What you think it means: Not sure, but it was probably a lesson from The Karate Kid.
What it really means: Marketing a product that users won't buy.
16. "Be a bull or a bear...but don't be a pig":
What you think it means: Nothing. You made that up.
What it really means: Be optimistic and invest, or skeptical and pass, but don't be greedy and push for ridiculous terms