Private Equity and Venture Capital Glossary

Management buyout (MBO)

A leveraged buyout controlled by the members of the management team of a company or a division. Often an MBO is conducted in partnership with a buyout fund.

Management fee

A fee charged to the limited partners in a fund by the general partner. Management fees in a private equity fund usually range from 0.75% to 3% of capital under management, depending on the type and size of fund. For venture capital funds, 2% is typical.

Management rights

The rights often required by a venture capitalist as part of the agreement to invest in a company. The venture capitalist has the right to consult with management on key operational issues, attend board meetings and review information about the company’s financial situation.

Market capitalization

The value of a publicly traded company as determined by multiplying the number of shares outstanding by the current price per share.

Memorandum of understanding (MOU)

See Letter of intent.


A layer of financing that has intermediate priority (seniority) in the capital structure of a company. For example, mezzanine debt has lower priority than senior debt but usually has a higher interest rate and often includes warrants. In venture capital, a mezzanine round is generally the round of financing that is designed to help a company have enough resources to reach an IPO. See Bridge financing.

Middle stage

The state of a company when it has received one or more rounds of financing and is generating revenue from its product or service. Also known as Growth stage.


Operational or financial goals of a company that are often used to determine whether a company will receive additional financing or whether management will receive additional compensation.


See Memorandum of understanding.


A valuation methodology that compares public and private companies in terms of a ratio of value to an operations figure such as revenue or net income. This includes both comparable quoted multiples (where a publicly traded company with similar characteristics is used as a valuation benchmark) and comparable transaction multiples (where historic transactions for entire publicly traded or private companies are used as a valuation benchmark). For example, if several publicly traded computer hardware companies are valued at approximately 2 times revenues, then it is reasonable to assume that a startup computer hardware company that is growing fast has the potential to achieve a valuation of 2 times its revenues.