Advanced investor terms explained
These come up when you talk about funds, follow-on rounds and exits. This section explains 15 of them in plain English. Jump to the calculator to try it with your own numbers.
Section 8 of 10
15 terms explained
Bridge round
A smaller round to keep the company going until the next larger one, often from existing investors.
Down round
A round at a lower valuation than the last one, on a comparable basis. Existing shareholders are diluted more, and anti-dilution terms may apply.
Up round
A round at a higher valuation than the last one, on a comparable basis.
Flat round
A round at about the same valuation as the last one, on a comparable basis.
Unicorn
A privately held startup valued at US$1 billion or more.
Decacorn
A privately held startup valued at US$10 billion or more.
Dry powder
Money a fund has raised but not yet invested.
Lead investor
The investor who negotiates and structures the round, usually putting in the most money and setting the terms others follow.
Follow-on investment
More money from an existing investor in a later round.
Secondary sale
Existing shareholders sell their shares to a buyer. The company issues no new shares and receives none of the money.
Exit
The event where investors turn their shares into cash, usually an acquisition, a secondary sale or an IPO.
MOIC
Multiple on invested capital
The value returned or still held, divided by the money invested. £1 million back on £250,000 invested is a 4x MOIC.
IRR
Internal rate of return
A yearly return that allows for timing. Turning £1 into £4 over three years is an IRR of about 59% a year; over ten years it is about 15%.
TVPI
Total value to paid-in capital
A fund measure: cash paid back to investors plus the value of what the fund still holds, divided by the money investors have paid in.
DPI
Distributions to paid-in capital
A fund measure: cash actually paid back to investors divided by the money they have paid in. A DPI of 1.0x means they have their money back.
Try it with your numbers
MOIC and IRR calculator
What an investor gets back on one cheque, as a multiple and a yearly return, the sale price they need for a 10x, and whether a new round is up, flat or down.
Multiple on invested capital
4.0x
£1,000,000 back on £250,000 over 3 years
Invested £250,000Returned £1,000,000
- The same 4.0x over 6 years would be an IRR of 26.0%: time costs investors.
- IRR
- 58.7%
- a year
- Share at exit
- 10.00%
- Sale price for a 10x
- £25.0m
- Proceeds
- £1.0m
Round type
Down round: 20.0% below the last round's post-money. Check the anti-dilution terms: earlier investors may get extra shares, which comes out of the founders' stake.
Compared on valuation. Strictly, it is the price per share that counts, which can differ if the share count changed.
Last checked . Estimates only, not financial, tax or legal advice: deal terms vary, so check your documents and take advice before you sign. More terms in the startup glossary.