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Fundraising glossary
51 terms that come up when you raise capital, in plain English. US rules and thresholds were checked against the Code of Federal Regulations in October 2026; figures that change carry their year.
Offerings and securities law
12 terms
- Accredited investor
- An investor who meets a test in Rule 501(a) of Regulation D, for example a person with net worth over $1 million excluding the primary home, or income over $200,000 ($300,000 with a spouse or partner) in each of the last two years. Entities qualify on other tests. Thresholds as of 2026; check the current rule.
- Rule 506(b)
- The Regulation D exemption most private raises use. No general solicitation; unlimited accredited investors and up to 35 non-accredited but sophisticated purchasers in any 90-day period, who must receive extra disclosure.
- Rule 506(c)
- A Regulation D exemption that allows general solicitation, such as public posts about the raise, if every purchaser is accredited and the issuer takes reasonable steps to verify it.
- Form D
- The notice filed with the SEC for a Regulation D offering, due no later than 15 calendar days after the first sale. Most states also require a notice filing and fee.
- Regulation Crowdfunding (Reg CF)
- An exemption for raising up to $5 million in 12 months from the public through a registered funding portal or broker-dealer, with Form C disclosure. Limit as of 2026; check the current figure.
- Regulation A (Reg A)
- A lighter registration path with two tiers: Tier 1 up to $20 million and Tier 2 up to $75 million in 12 months, with an offering statement qualified by the SEC. Limits as of 2026; check the current figures.
- Private placement
- A sale of securities to selected investors under an exemption from registration, rather than a public offering.
- General solicitation
- Offering securities to the public at large, for example through ads, open websites or social media. Not allowed under Rule 506(b); allowed under 506(c), Reg CF and Reg A within their rules.
- Bad actor rule
- Rule 506(d): an issuer cannot use Rule 506 if certain people involved in the offering have specified disqualifying events, such as some securities convictions. Issuers collect certifications from covered persons.
- Qualified purchaser
- A higher investor test under the Investment Company Act, for example a person with at least $5 million in investments. Funds relying on Section 3(c)(7) sell only to qualified purchasers.
- Section 3(c)(1) and 3(c)(7)
- The two Investment Company Act exemptions most private funds use. 3(c)(1) caps the fund at 100 beneficial owners (more for a qualifying venture capital fund under a size limit set by statute); 3(c)(7) has no owner cap in that section but requires qualified purchasers.
- ERISA and the 25% test
- If benefit plan investors hold 25% or more of a class of a fund's equity, the fund's assets can be treated as plan assets under ERISA. Funds track this in the subscription documents and often in side letters.
Fund terms
16 terms
- Limited partner (LP)
- An investor in a fund, such as a pension, endowment, family office or individual. LPs commit capital and have limited liability and limited control.
- General partner (GP)
- The entity that manages the fund and makes investment decisions, usually tied to the management company.
- Limited partnership agreement (LPA)
- The contract that sets a fund's terms: term, fees, carry, waterfall, investment limits, LP rights and GP duties.
- Private placement memorandum (PPM)
- The offering document that describes the fund or offering, strategy, terms, team, risks and conflicts. Investors and their counsel read it closely. PPM and other raise documents
- Due diligence questionnaire (DDQ)
- A standard set of questions LPs ask a manager about the firm, strategy, team, operations, compliance and ESG. Many use the ILPA DDQ or an AIMA template.
- Side letter
- An agreement between the GP and one LP that changes or adds terms for that LP, such as fee discounts, reporting, co-investment rights or regulatory carve-outs.
- Most favored nation (MFN) clause
- A side letter right that lets an LP elect terms given to other LPs of the same or smaller size.
- Capital call
- A notice from the GP asking LPs to pay in part of their commitment, usually within about ten business days. Capital call schedule calculator
- First close and final close
- The first close admits the first group of LPs so the fund can start investing; later closes add LPs until the final close, often within 12 to 18 months under the LPA.
- Management fee
- The yearly fee paid to the manager, often around 2% of commitments during the investment period and lower after it. Management fee calculator
- Carried interest (carry)
- The GP's share of fund profits, commonly 20%, paid after LPs receive their capital and any preferred return. Carried interest calculator
- Hurdle or preferred return
- The return LPs receive before the GP earns carry, often 8% a year in private equity and real estate.
- GP catch-up
- After the preferred return, a period in which the GP receives most or all distributions until it has its full carry share of profits.
- Distribution waterfall
- The order in which cash is paid out: return of capital, preferred return, catch-up, then the carry split. Whole-fund (European) or deal-by-deal (American).
- GP commitment
- The capital the GP and its team commit to their own fund, often 1% to 5% of the fund. LPs see it as alignment.
- Placement agent
- A registered broker-dealer paid to introduce investors to a fund or offering, usually for a share of the capital raised. Placement agent fee calculator
Returns and metrics
8 terms
- IRR
- Internal rate of return: the yearly rate that makes the present value of all cash flows zero. Sensitive to timing. IRR and MOIC calculator
- MOIC
- Multiple on invested capital: total value returned divided by capital invested, usually per deal.
- TVPI
- Total value to paid-in: distributions plus remaining value, divided by capital paid in by LPs. A fund-level multiple.
- DPI
- Distributions to paid-in: cash actually returned to LPs divided by capital paid in. LPs watch it closely because it is realized.
- RVPI
- Residual value to paid-in: the unrealized value still in the fund divided by paid-in capital. TVPI = DPI + RVPI.
- Pre-money and post-money
- Company value before and after new money in a priced round. Post-money = pre-money + new money. Round dilution calculator
- Dilution
- The drop in an existing holder's ownership share when new shares are issued.
- Runway
- Months a company can operate on the cash it has at its current net burn.
Debt and real estate
9 terms
- DSCR
- Debt service coverage ratio: net operating income or cash flow divided by yearly debt service (interest and principal). Lenders set a minimum. DSCR calculator
- Loan to value (LTV)
- The loan amount divided by the appraised value of the collateral.
- Net operating income (NOI)
- Property income minus operating expenses, before debt service, depreciation and income taxes.
- T-12
- A trailing 12-month operating statement for a property, which buyers, investors and lenders compare with the pro forma.
- Real estate syndication
- A sponsor pools equity from passive investors to buy or build a property, usually through an LLC under Rule 506(b) or 506(c). Pref and split calculator
- Capital stack
- The layers of money in a deal, from senior debt through mezzanine and preferred equity to common equity, in order of repayment.
- Mezzanine debt
- Debt that ranks below senior loans and above equity, usually with a higher rate and sometimes warrants or conversion rights.
- Covenant
- A promise in a loan agreement, such as keeping a minimum DSCR or delivering financial statements on time.
- Recapitalization
- A change in a company's mix of debt and equity, such as new debt used to pay a dividend (a dividend recap) or to buy out shareholders.
Data room terms
6 terms
- Virtual data room (VDR)
- A secure online space where an issuer shares raise documents with investors, with permissions, watermarks, Q&A and a record of who viewed what. Best data rooms for fundraising
- Permission group
- A set of users, such as the lead investor or a group of LPs, that share the same access to folders and files.
- Dynamic watermark
- A mark with the viewer's name, email and time added to each page at viewing, so a leaked copy can be traced.
- Activity log
- A record of who opened which file, when and for how long, used to follow investor interest and as an audit trail.
- Q&A module
- A tool in the room where investors ask questions against documents and the issuer assigns, answers and releases replies.
- NDA gate
- A step where each investor accepts an NDA or confidentiality terms before the first file opens.