Private Equity & VC.

VC typically invests in early growth phases (start-ups) with high risk and high growth opportunities. PE often invests in more mature companies (mid-market to large cap), frequently with stronger cash flows and a focus on value appreciation through strategy, efficiency, and potentially leverage.

These are financing phases: Pre-Seed (idea/prototype), Seed (product/market fit), Series A (scalable business model), Series B/C (strong growth, internationalization, M&A, or profitability).

A business angel is usually a high-net-worth individual who invests early (often pre-seed/seed) and additionally contributes expertise, network, and coaching.

The Investment Committee is the internal decision-making body of a fund that finalizes votes on investments, terms, and exit decisions. "IC approval" is often a prerequisite for signing.

A term sheet is a (usually) non-binding agreement on the key points of financing: valuation, structure, investor rights, liquidation preference, vesting, ESOP, etc. It serves as the blueprint for the subsequent contracts.

DD is the structured examination of the target (legal, tax, financial, commercial, tech/IP, HR). The goal is to identify risks and align the deal structure (price, warranties, conditions) accordingly.

Valuation is the company's appraised value. Pre-money is the valuation before investment; post-money = pre-money + new investment. This determines the investor's percentage share.

The capitalization table shows who owns how much of the company (founders, investors, ESOP, convertible loans) — including dilution per round.

Dilution describes the reduction in the percentage shares of existing shareholders due to new shares in a financing round. Dilution can be economically neutral if the company's valuation increases.

A convertible is financing that later converts into shares. Typical mechanisms: valuation cap (upper limit of valuation) and discount (price reduction for the next round). SAFE (Simple Agreement for Future Equity) is a simplified convertible structure.

The liquidation preference regulates the order and amount in which investors receive money first upon an exit (e.g., 1x non-participating). It influences the distribution of proceeds in a sale or liquidation.

Drag-along forces minority shareholders to sell their shares in the event of a sale (deal capability). Tag-along protects minorities by allowing them to sell proportionally when the majority sells.

Vesting means that founder shares are "earned" over time (e.g., 4 years with a 1-year cliff). It protects the company if key individuals leave early.

ESOP (Employee Stock Option Plan) gives employees real options/shares. VSOP is a virtual participation (cash-oriented, often exit-based). Both serve as incentives and for talent retention.

Governance includes decision-making and control rights: information rights, veto rights (reserved matters), board/advisory board, reporting, budget approval — essentially "who gets to decide what."

These are decisions that management cannot make alone (e.g., new financing, M&A, budget, change of managing directors). This provides investors with protective rights.

Leverage is the use of debt capital to increase returns on equity. In PE deals (e.g., LBO), a portion of the purchase price is often financed through bank/unitranche financing.

An LBO is a company acquisition in which a significant portion of the purchase price is financed via debt, which is serviced from the target company's cash flows.

A management buyout (MBO) is a company acquisition where the existing management acquires the company (or a part of it) themselves — often with the support of a private equity investor and/or debt capital. The goal is often continuity in leadership while restructuring ownership and governance. Typical issues include incentives (equity roll-over), financing (leverage), and conflicts of interest, as management is simultaneously the buyer and the existing leadership level.

Managers typically invest with their own capital and additionally receive virtual or real shares with vesting and leaver provisions.

Covenants are contractual obligations in loan agreements, e.g., financial covenants (leverage ratio, interest cover) or information duties. Breaches can trigger default rights.

A buy-and-build strategy is an approach where an investor first acquires a platform company ("platform") in a specific market and then grows targetedly through several add-on acquisitions. The goal is to realize economies of scale by bundling market shares and synergies (e.g., purchasing, sales, IT, administration), increase profitability, and thereby often achieve a higher valuation multiple upon exit than with the individual companies. In implementation, buy-and-build is typically demanding because several transactions must be structured, financed, and integrated in a short time — including standardized contracts, efficient due diligence, integration issues, as well as antitrust and labor law aspects.

LPs (Limited Partners) are the capital providers of a fund, i.e., investors who pay money into a private equity or venture capital fund. Typical LPs are pension funds, insurance companies, foundations, family offices, sovereign wealth funds, or high-net-worth individuals. LPs are generally not involved operationally in investment decisions; these are made by the fund manager (often referred to as the GP — General Partner). In return, LPs receive contractually regulated information and control rights (e.g., reporting, certain approval matters) as well as a share in the fund's earnings according to the fund structure.

Carried interest is the performance-related compensation for fund management (GP/manager) and means that the manager receives a percentage share of the fund's profit after reaching a defined minimum hurdle (e.g., hurdle rate). Carry is intended to ensure that the interests of LPs and managers are economically aligned: the manager benefits disproportionately if the fund is successful. In practice, carry rules are often designed via mechanisms such as a distribution waterfall, catch-up, and clawback to ensure a fair distribution of profits over the entire life of the fund.