Page 82 - ITI VC Guide V10

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Equity Funding Guide
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 may receive both income and capital gains as a return on their investment.
MANAGEMENT FEE – Compensation for the management of a Venture Fund’s activities, paid from the fund to the general partner or investment advisor. This compensation generally includes an annual management fee.
MANAGEMENT TEAM – The persons who oversee the activities of a Venture Capital Fund.
MEZZANINE FINANCING – Refers to the stage of venture financing for a company immediately prior to its IPO. Investors entering in this round have lower risk of loss than those investors who have invested in an earlier round. Mezzanine level financing can take the structure of preference
shares, convertible bonds or subordinated debt (the level of financing senior to equity and below senior debt).
NEW ISSUE – A stock or bond offered to the public for the first time. New issues may be initial public offerings by previously private companies or additional stock or bond issues by companies already public. New public offerings are registered with the Securities and Exchange Commission. (See Securities and Exchange Commission and Registration).
OPTION POOL – The number of shares set aside for future issuance to employees of a private company.
PORTFOLIO COMPANIES – Portfolio companies are companies in which a given fund has invested.
POST-MONEY VALUATION – The valuation of
a company immediately after the most recent round of financing. This value is calculated by multiplying the company’s total number of shares