The total dollar value of all outstanding shares. Computed as shares multiplied by current price per share. Prior to an IPO, market capitalization is arrived at by estimating a company’s future growth and by comparing a company with similar public or private corporations. (See also: Pre-Money Valuation.)³

Based on supply and demand, this term refers to the societal arrangement whereby consumers purchase goods and services from businesses and individual sellers in exchange for currency. In economic relevance, the “market” can be divided into different industries, such as biotechnology, food, etc. The exchange between the consumer and seller contribute to a society’s market economy which greatly depends on these transactions for economic viability.⁴

The individuals who oversee and manage the operations and activities of a startup company or angel / venture capital fund.⁶

Compensation typically paid annually from an investment fund to the general partner or investment advisor of the fund to cover administration costs, expenses related to investor relations and to compensate them for their services and expertise.⁶

• The period of time that certain stockholders have agreed to waive their right to sell their shares of a public company. Investment banks that underwrite initial public offerings generally insist upon lockups for a set period of time, typically 180 days from large shareholders (such as 1% ownership or more) in order to allow an orderly market to develop in the shares. The shareholders that are subject to lockup usually include the management and directors of the company, strategic partners, and such large investors. These shareholders have typically invested prior to the IPO at a significantly lower price to that offered to the public and therefore stand to gain considerable profits. If a shareholder attempts to sell shares that are subject to lockup during the lockup period, the transfer agent will not permit the sale to be completed.³
• Lock-Up Period is the period an investor must wait before selling or trading company shares subsequent to an exit, usually in an initial public offering the lock-up period is determined by the underwriters.⁵

Liquidity preference is the right to receive a specific value for the stock if the business is liquidated.⁵

• An event that allows a VC to realize a gain or loss on an investment. The ending of a private equity provider’s involvement in a business venture with a view to realizing an internal return on investment. Most common exit routes include Initial Public Offerings [IPOs], buy backs, trade sales, and secondary buyouts. (See also: Exit Strategy.)³
• This occasion represents the common exit strategy of most entrepreneurs and investors. When a corporation is purchased (through a merger or acquisition) or when an IPO is made, equity is converted to cash.⁴
• Liquidity event is the way in which an investor plans to close out an investment. Liquidity event is also known as exit strategy.⁵

• When a business is bankrupt or terminated, its assets are sold and the proceeds pay creditors. Anything left over is distributed to shareholders.²
• 1) The process of converting securities into cash. 2) The sale of the assets of a company to one or more acquirers in order to pay off debts. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.³
• This is an event that represents the complete or partial closing of a company. In a liquidation event, a company’s assets and material goods (securities) are converted into cash and/or distributed for sale to pay off existing corporate debt.⁴
• Liquidation is the sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.⁵

• An organization comprised of a general partner, who manages a fund, and limited partners, who invest money but have limited liability and are not involved with the day-to-day management of the fund. In the typical venture capital fund, the general partner receives a management fee and a percentage of the profits (or carried interest). The limited partners receive income, capital gains, and tax benefits.³
• Limited partnership is a business organization with one or more general partners, who manage the business and assume legal debts and obligations and one or more limited partners, who are liable only to the extent of their investments. Limited partnership is the legal structure used by most venture and private equity funds. Limited partners also enjoy rights to the partnership’s cash flow, but are not liable for company obligations.⁵

(LP) An investor in a limited partnership who has no voice in the management of the partnership. LPs have limited liability and usually have priority over GPs upon liquidation of the partnership.³