Founder reverse vesting is the mechanism by which a VC requires founders to “re-earn” their pre-existing equity stake over time, typically 4 years with a 1-year cliff.

Sweet equity is the equity stake — typically 5-15% — that private equity sponsors allocate to the management team in a leveraged buyout (LBO).

Participating preferred stock gives investors the right to receive both (1) their liquidation preference and (2) their pro-rata share of remaining proceeds — the “double dip.” A USD 10M investment with 1× participating preferred at a USD 50M exit returns USD 10M (the preference) plus 20% × USD 40…

Super pro-rata rights let an investor increase — not just maintain — ownership in future rounds. Why seed funds ask, why founders resist, and the caps, sunsets and conditions that get negotiated.

The Most Favoured Nation (MFN) clause gives an early SAFE or convertible note investor the automatic right to substitute any more favourable terms that the company subsequently grants to later investors.

The discount in a SAFE (Simple Agreement for Future Equity) is the percentage reduction applied to the next priced round’s share price when the SAFE converts.

A drawdown (also called “capital call”) is the GP’s formal demand for LPs to transfer a portion of their committed capital to the fund. Unlike hedge funds that hold all LP capital from day one, venture funds typically call capital only as needed — over 4-6 years matching the investment period.

The GP catch-up is the third step in a standard carry waterfall: after LPs receive their paid-in capital and the preferred return, the GP “catches up” by receiving 100% of further profits until the cumulative profit split reaches 80% LP / 20% GP.

Preferred return is the LP’s contractual right to receive a minimum annualised IRR — typically 8% — before the GP can collect any carried interest.

The hurdle rate (or “preferred return”) is the minimum annualised return — typically 8% IRR — a venture fund must deliver to LPs before the GP can start collecting carried interest.