Private Equity and Venture Capital Glossary


The process by which a business receives a state charter, allowing it to become a corporation. Many corporations choose Delaware because its laws are business-friendly and up to date.


A company or facility designed to host startup companies. Incubators help startups grow while controlling costs by offering networks of contacts and shared backoffice resources.


Clauses often included in sale and purchase agreements that establish circumstances under which, post-completion, the vendor will be required to pay the purchaser sufficient funds to cover certain losses or damages in relation to the target company, usually with limits on value and scope. These tend to be specific in nature; for example, if the company operates on contaminated land, the seller may grant an indemnity that if the EPA requires the acquirer to decontaminate the site within a specified timeframe, the vendor will pay the acquirer funds sufficient to meet the clean-up costs, most likely to a pre-determined maximum limit.


The terms and conditions between a bond issuer and bond buyers.

Initial public offering (IPO)

The first offering of stock by a company to the public. New public offerings must be registered with the Securities and Exchange Commission. An IPO is one of the methods that a startup that has achieved significant success can use to raise additional capital for further growth. See Qualified IPO.

In-kind distribution

A distribution to limited partners of a private equity fund that is in the form of publicly traded shares rather than cash.

Inside round

A round of financing in which the investors are the same investors as the previous round. An inside round raises liability issues since the valuation of the company has no third party verification in the form of an outside investor. In addition, the terms of the inside round may be considered self-dealing if they are onerous to any set of shareholders or if the investors give themselves additional preferential rights.

Institutional investor

Professional entities that invest capital on behalf of companies or individuals. Examples are: pension plans, insurance companies and university endowments.

Intellectual property (IP)

Knowledge, techniques, writings and images that are intangible but often protected by law via patents, copyrights, and trademarks.

Internal rate of return (IRR)

The interest rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a specific time in the future.

Investment thesis / Investment philosophy

The fundamental ideas which determine the types of investments that an investment fund will choose in order to achieve its financial goals.


International Private Equity and Venture Capital, a body established by AFIC, BVCA and EVCA, which includes a Valuations Board that produces valuation guidelines for private equity and venture capital firms. Widely regarded in the U.S. as the global succesor to the U.S.-focused PEIGG group.


The company that chooses to distribute a portion of its stock to the public.