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• Reverse Merger
  What is a Reverse Merger? A reverse merger is a process where a private company becomes publicly traded without going through the traditional initial public offering (IPO) process. Instead, the private company acquires a majority of the shares in a public company (often called a shell corporation) that is currently not operating any business. Why Do Companies Choose a Reverse Merger? Companies opt for reverse mergers primarily to bypass the lengthy and complex process of an IPO. It provides a faster way for private companies to gain access to public capital markets. Traditionally, private companies aiming to go public lean…
• Data room for investors
  In the world of early-stage venture deals and startup investment, trust and transparency between founders and investors are paramount. One essential tool that plays a pivotal role in this dynamic is the Investor Data Room. In this article, we will dive into what an investor data room is, its role in early-stage venture deals, why startups should consider having one, what to include, and best practices for creating an effective data room. What is a Data Room for Investors? An Investor Data Room, often referred to as a virtual data room (VDR), is a secure online repository where startups store…
• Founders agreement
  Title: The Founders’ Agreement: Navigating Essential Agreements for Startup Success In the ever-evolving startup landscape, where innovation and collaboration reign supreme, the importance of clear communication and shared understanding among co-founders cannot be overstated. This is where the Founders’ Agreement comes into play. In this article, we will explore the intricacies of this crucial document, why it’s indispensable for startups, what should be included, and common pitfalls to avoid. What is a Founders’ Agreement? A Founders’ Agreement is a legally binding document that outlines the roles, responsibilities, and rights of the co-founders of a startup. It acts as a roadmap,…
• Ebitda vs revenue
  In the world of startups and venture capital, financial metrics play a pivotal role in evaluating the health and potential of a business. Two crucial metrics that often take center stage in these assessments are EBITDA and revenue. Understanding the differences, similarities, and significance of EBITDA and revenue can help investors make informed decisions. In this article, we’ll delve into these key financial concepts and explore their importance to investors. What is EBITDA? EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, is a financial metric that provides a snapshot of a company’s operating performance and profitability. Essentially,…
• Investment Memorandum
  In the world of finance and business, clarity is paramount. When it comes to securing investments or making them, everyone involved needs a crystal clear understanding of the terms and conditions. This is where the investment memorandum comes into play. What is an Investment Memorandum? An investment memorandum, also referred to as a private placement memorandum or offering memorandum, is a detailed document that outlines the specifics of an investment opportunity. It provides investors with all they need to know about the potential investment, including its risks, benefits, and the specifics of the business or project in question. Purpose of…
• Deal Flow
  What is Venture Capital Deal Flow? Venture Capital (VC) deal flow refers to the stream of investment opportunities that come across a venture capitalist or a venture capital firm. It encompasses the proposals, plans, and pitches from entrepreneurs seeking funding for their startups or from companies at various stages of their business life cycle. How Deal Flow Works Deal flow is the lifeblood of any VC firm. It involves a series of steps starting from sourcing and screening potential investment opportunities to deciding which ones to pursue. A consistent deal flow ensures that a venture capitalist has a steady stream…
• Bear hug
  What is a Bear Hug in Finance? A bear hug in finance refers to an unsolicited takeover bid made by one company to acquire another. Although unsolicited, it’s typically presented in a friendly manner, meaning it’s not directly hostile. The term “bear hug” conjures an image of an overwhelming embrace — the acquiring company essentially “hugs” its target with an attractive offer that is hard to refuse. How Does a Bear Hug Work? The process begins when one company approaches another with a proposal to buy a significant portion or all of its outstanding stock at a premium to the…
• Buyout Private Equity
  Private equity (PE) is a type of investment that involves taking ownership stakes in private companies, rather than buying publicly traded stocks. Within the broad sphere of PE, buyout funds are one of the most prominent and influential strategies. These funds focus on acquiring significant, often controlling, equity interests in companies, with the intention of enhancing their value and later selling them for a profit. What is a Buyout Fund? A buyout fund is a type of private equity fund that pools capital from institutional and individual investors to purchase a controlling interest in mature companies. The goal is to…
• Berkus Valuation Method
  The Berkus Method is a valuation approach used for companies that have yet to generate their first revenue. This method was first devised in the 1990s by Dave Berkus, a renowned angel investor and venture capitalist in the United States. Let’s delve deeper into the Berkus Method of valuation for a more comprehensive understanding. What is the Berkus Method of Valuation? The Berkus Method of Valuation is a technique designed specifically to establish a starting point for valuing early-stage companies without relying on the founder’s financial projections. This method, developed by Dave Berkus, a renowned angel investor and venture capitalist,…
• White Knight
  What is a White Knight? In the world of business and finance, a “White Knight” is a term used to describe a company or an individual that comes to the rescue of another company that’s facing a hostile takeover bid from a third entity. The White Knight offers a friendly takeover bid, which is more acceptable to the management of the target company. What Is a Hostile Takeover? A hostile takeover is a type of acquisition where the acquiring company seeks to take over a target company against the wishes of the target company’s management and board of directors. This…
• Bootstrapping startup
  What Is Bootstrapping? Financial bootstrapping refers to the process of starting and growing a business using only personal savings and the initial revenue generated by the business. It’s a method of self-funding where entrepreneurs rely on their resources to start and expand their businesses. This approach eliminates the need for external funding or loans, allowing the entrepreneur to maintain full control over the business. Why Is It Called Bootstrapping? The term “bootstrapping” originates from the phrase “pulling oneself up by one’s bootstraps.” This phrase symbolizes self-sufficiency and the ability to improve one’s situation through one’s efforts. In the context of…
• MVP
  Minimum Viable Product (MVP) The term MVP, or Minimum Viable Product, is a concept that has become a fundamental part of the startup and product development world. It represents the most basic version of a product that can be released to the market. What is a Minimum Viable Product? A Minimum Viable Product is the simplest form of a product that a company can release to its customers. It has just enough features to satisfy early customers and provide feedback for future product development. History of the MVP The concept of the MVP originated in the Lean Startup methodology, a…
• Burn rate
  What Is Burn Rate? Burn rate refers to the rate at which a company is spending its capital, especially for startups that are not yet profitable. It’s a measure of negative cash flow, typically quoted as a monthly rate. Why Burn Rate is So Important Burn rate is crucial because it helps determine how long a company can continue to operate before it runs out of money, assuming income and expenses stay constant. It’s a key metric for investors, as it helps them understand a company’s financial health and sustainability. How to Calculate the Burn Rate Burn rate is calculated…
• Churn Rate
  What is Churn Rate? Churn rate, also known as attrition rate, is a business metric that calculates the number of customers who leave a product over a given period of time, divided by the remaining number of customers. It’s a critical figure in many businesses, as it’s often much less expensive to retain existing customers than it is to acquire new ones. How to Calculate Churn Rate? Churn rate is calculated by dividing the number of customers lost during a given period (usually a month or a year) by the number of customers you had at the beginning of that…
• ARPU
  ARPU, or Average Revenue Per Unit, is a crucial metric in the business world, particularly for companies that operate in the subscription-based or user-centric sectors. It provides insights into the revenue generated per user or unit, helping businesses understand their profitability and growth potential. What Is Average Revenue Per Unit (ARPU)? Average Revenue Per Unit (ARPU) is a measure used primarily by companies that offer subscription-based services or products. It represents the average revenue generated per user or unit over a specific period. This metric is particularly useful for businesses in the telecommunications, SaaS (Software as a Service), and media…
• Simple Agreement for Future Equity (SAFE)
  What is a SAFE? A Simple Agreement for Future Equity (SAFE) is a flexible investment contract that enables startups to secure funding without immediately surrendering equity. Investors provide capital in return for the future right to equity, subject to specific terms. Unlike debt financing, SAFEs don’t necessitate interest payments, have no maturity date, and aren’t loans to be repaid. Instead, they grant the right to future company shares upon a triggering event like a financing round or liquidity event. SAFEs are typically simpler and more adaptable than other investment agreements like priced equity rounds, convertible debt, and traditional equity financing,…
• Convertible Note
  Convertible notes, also known as “convertible loan notes” or “CLNs,” have gained significant traction in the startup financing landscape, especially among seed-stage companies. What is a Convertible Note? A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round. In essence, the investor loans money to a startup and instead of getting a return in the form of principal plus interest, the investor would receive equity in the company. What Is a Senior Convertible Note? A senior convertible note is a debt security that gives the holder the right to…
• Liquidation preference
  What Is a Liquidation Preference? Liquidation preference is a term used in contracts to specify the hierarchy of payout to the shareholders when the company is liquidated, sold, or goes bankrupt. Essentially, it ensures that certain investors receive their investment back before other shareholders. Liquidation Preference Definition It refers to the order in which shareholders are paid if the company is sold or liquidated. Preferred shareholders typically have liquidation preferences over common shareholders, meaning they will be paid first. The exact preferences depend on the terms agreed upon by the shareholders and company. Preference is related to the series of…
• Angel Investor
  What Is an Angel Investor? Angel investors are wealthy individuals who provide financial backing for small startups or entrepreneurs. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through its early stages. Unlike venture capitalists, angel investors invest their personal funds, often in exchange for equity ownership or convertible debt. Why Look for an Angel? Angel investors can be a vital source of capital for startups, particularly in the early stages where traditional financing may be more challenging to secure. They often invest based on their belief in the entrepreneur’s…
• Protective Provisions
  What are Protective Provisions in a Term Sheet? Protective provisions are specific clauses within a shareholders agreement designed to safeguard an investor’s rights. These rights might include the ability to veto decisions or actions that the investor disagrees with, such as issuing more stock, liquidating the company, or pursuing an acquisition. By establishing clear guidelines and limitations, protective provisions work to minimize risk for investors. They also play a vital role in defending the interests of minority shareholders, particularly when disagreements arise about the optimal direction for the company. Why are protective provisions important? They are essential for safeguarding the…
• Drag Along Rights
  What are drag along rights? Drag along rights empower a majority shareholder to force minority shareholders to join in the sale of the company. It ensures that minority shareholders comply with the terms of a sale, providing greater fluidity to transactions. Drag along rights are typically codified within a shareholders’ agreement. The specific terms, triggering events, and conditions of these rights would be detailed in this agreement. Why are drag along rights used? They are used to protect the interests of majority shareholders, ensuring that minority shareholders cannot obstruct a sale. This facilitates smoother sales transactions and can add to…
• Startup stock options
  What are Startup Stock Options? Startup stock options are a type of equity compensation given to employees, advisors, and occasionally contractors in lieu of or in addition to a regular salary. They provide the option holder the right to buy shares of the company at a predetermined price in the future. Why do Startups Use Stock Options? Startups often have limited cash flow but need top-tier talent to grow. Offering stock options allows them to: What are the Different Types of Startup Stock Options? There are primarily two: Startup Stock Options for Advisors Advisors can be invaluable to startups, providing…
• What is a cap table?
  A cap table is a spreadsheet or table that provides a detailed overview of the ownership structure of a company. It includes information about the company’s shares, who owns them, and the different types of securities like common stock, preferred stock, warrants, and options. What’s a pre-money cap table? A pre-money cap table details the company’s ownership structure before any new investments or financing rounds. It represents a snapshot of the ownership just before new capital is injected into the company. What is a post-money cap table? A post-money cap table, on the other hand, details the ownership structure of…
• Liquidity Premium
  Definition of Liquidity Premium The liquidity premium refers to the additional return or yield demanded by investors for holding an investment that is less liquid or harder to convert into cash quickly compared to a more liquid investment with similar characteristics. In other words, it is the compensation that investors require for taking on the risk of holding an asset that may be difficult to sell without incurring significant price discounts. Liquid Investments vs. Illiquid Investments Liquid investments are assets that can be easily bought or sold in the market without causing substantial price movements. Examples of liquid investments include…
• Burn rate
  What is Burn Rate? Burn rate refers to the rate at which a company or startup uses up its cash reserves or funding to cover its operating expenses. It is an essential metric for understanding how quickly a company is spending its available resources. Why Burn Rate is Important Burn rate provides critical insights into a company’s financial health and sustainability. It helps entrepreneurs, investors, and stakeholders assess how long a company can continue its operations before needing additional funding. Gross Burn Rate vs. Net Burn Rate Gross burn rate refers to the total operating expenses of a company, including…
• Hype factor
  What is the Hype Factor? The Hype Factor is a metric used to measure the level of excitement, buzz, and anticipation surrounding a startup in its pre-launch or early stages. It gauges the attention and interest generated by the startup within its target audience and the broader market. Why is the Hype Factor Important for Startups? The Hype Factor plays a crucial role in determining a startup’s potential success. It can impact investor interest, customer engagement, and overall market reception. A higher Hype Factor often translates to a stronger initial user base, more attention from the media, and increased chances…
• Stealth startup
  In the dynamic landscape of business and entrepreneurship, new strategies and approaches continue to emerge, reshaping the way companies establish themselves in the market. One such strategy that has gained prominence is the conceptof a “stealth startup.” This intriguing approach revolves around secrecy, minimal public exposure, and discreet operations during the initial phases of a company’s development. In this article, we’ll delve into the world of stealth startups, discussing what they are, why businesses opt for them, the different types of stealth modes, their operational mechanics, associated benefits and drawbacks, and even provide examples of successful stealth startups. A stealth…
• Cap table software
  For startups and growing companies, managing equity distribution can quickly become complex and time-consuming. Enter cap table software, a technology solution designed to simplify the management of a company’s ownership structure. In this article, we’ll explore what cap table software is, its benefits, top players in the market, considerations for choosing the right software, and even touch upon some frequently asked questions about cap tables. What Is Cap Table Software? A cap table, short for capitalization table, is a document that outlines the ownership structure of a company, detailing who owns what percentage of equity. Cap table software, also known…
• Cliff vesting
  What Is Cliff Vesting? Cliff vesting is a specific type of stock vesting that introduces an initial waiting period, known as the “cliff,” before any ownership is granted to employees. During this cliff period, employees do not have ownership rights to the stocks or equity. After the cliff is passed, a portion of the stocks becomes vested, and the remaining stocks vest gradually according to the predetermined schedule. What’s a Cliff? In the context of cliff vesting, a “cliff” refers to the initial period of time during which no ownership or equity is granted to employees. It acts as a…
• Hurdle Rate (Preferred Return)
  In private equity investing, the hurdle rate, also known as the preferred return, plays a crucial role in determining the distribution of profits between the limited partners (investors) and the general partner (fund managers). This explainer will delve into what a hurdle rate is, its types, how it is determined, and its significance in the world of private equity. What is a Hurdle Rate in Private Equity? The hurdle rate, or preferred return, is the minimum rate of return that limited partners (LPs) expect to receive from their investments before the general partner (GP) can receive any carried interest (profit…
• Private Equity Fund Structure
  Private equity funds play a significant role in the world of finance, facilitating investments in various companies and industries. Understanding the structure of a private equity fund is crucial for investors and those interested in the workings of these investment vehicles. In this article, we will delve into the components and stages that make up the private equity fund structure, shedding light on its key features, parties involved, management, fees, and the fund’s lifecycle. What Is the Structure of a Private Equity Fund? A private equity fund is a collective investment vehicle that pools funds from various investors to make…
• Disinvestment
  What Is Disinvestment? Disinvestment, at its core, refers to the action of selling or liquidating assets, stakes, or subsidiaries by a company or government. Often, it is implemented as a financial strategy, usually when an entity believes the asset is no longer core to its ongoing strategy or it could be better utilized elsewhere. How Does Disinvestment Work? The disinvestment process generally involves a detailed assessment of assets, determining which parts of the business are underperforming or no longer align with the company’s or government’s strategic vision. Post assessment, these assets, whether they’re business units, shares, or stakes, are then…
• ISO vs NSO
  What are Incentive Stock Options (ISOs)? Incentive Stock Options (ISOs) are a type of employee stock option that offers tax advantages for the recipient, primarily in the form of delaying tax liability until the stock is sold, rather than when it’s exercised. ISOs can only be granted to employees of the company. How Are ISOs Taxed? The main benefit of ISOs is the favorable tax treatment: What are Non-Qualified Stock Options (NSOs)? Non-Qualified Stock Options (NSOs) are more flexible than ISOs. They can be granted to anyone—employees, contractors, board members, etc. They do not offer the same tax benefits as…
• Equity Grants
  Equity grants are an increasingly popular compensation tool for startups and established businesses alike. Let’s dive into what they are, how they work, and their benefits. What is an equity grant? An equity grant provides an individual the right to purchase or receive shares in a company. This can be in the form of stock options, restricted stock units, or other equity-based awards. Essentially, it’s a way for a company to share a portion of its value with its team members. How do equity grants work? Equity grants are a form of compensation offered by companies, particularly startups, to reward…
• Letter of Intent (LOI)
  What is a Letter of Intent (LOI)? A Letter of Intent (LOI) is a formal written document that outlines the preliminary agreements between two or more parties before a legal agreement is finalized. It sets the foundation for a future detailed contract. Why is a Letter of Intent Important? A Letter of Intent is essential as it provides a structured pathway for negotiations, indicating the seriousness of the parties involved, and minimizing misunderstandings during the negotiation process. Purpose of a Letter of Intent (LOI) The main purpose of an LOI is to outline the basic terms of an agreement, clarify…
• Forward integration
  What Is Forward Integration? Forward integration refers to a strategic business move where a company takes control over its direct distribution or supply chain. This typically implies that a manufacturer will seek to dominate the retailing or distribution components of its products, ensuring a more direct relationship with its customers. How Forward Integration Works When a company engages in forward integration, it takes on roles traditionally managed by its distributors or intermediaries. For instance, a manufacturer might initiate its own distribution channels, or even open retail outlets to sell its products directly to consumers. When Forward Integration Makes the Most…
• Hedge fund manager salary
  Hedge funds are a crucial part of the finance world, and the managers leading these funds are often regarded as some of the top professionals in the industry. The salary of a hedge fund manager can be a topic of significant interest for many, not just due to the potential sums involved, but also due to the structure and dynamics of their compensation. Let’s dive into the intricacies of a hedge fund manager’s earnings. How Much Does a Hedge Fund Manager Make? The exact amount a hedge fund manager earns can vary widely based on the performance of their fund,…
• Venture Capital Metrics
  Venture Capital (VC) metrics play a vital role in evaluating the performance of investments made by venture capitalists. These metrics help investors understand the value they’ve created, assess the potential return, and make future investment decisions. Let’s delve into these metrics and understand their importance. VC Metrics & Why Are They Important? VC metrics provide quantitative ways to measure the success or potential of an investment. By assessing these metrics: VC Fund Performance Metrics Venture Capital (VC) metrics play a vital role in evaluating the performance of investments made by venture capitalists. These metrics help investors understand the value they’ve…
• Investment Time Horizon
  An investment time horizon refers to the length of time an investor plans to hold an investment before needing to access the funds or achieve specific financial goals. It is the period between the initial investment and the planned exit or withdrawal from the investment. Why Understanding Your Time Horizon is So Important Understanding your time horizon is crucial because it helps align your investment strategy with your financial goals and risk tolerance. Different investment options perform differently over various timeframes, and having a clear time horizon allows you to select investments that match your needs and objectives. What Is…
• Down Round
  What is a Down Round? A down round refers to a financing round where a company sells its shares at a lower valuation than in previous rounds. It’s often seen as a negative signal about the company’s performance and prospects. What Causes a Down Round? Several factors might lead to a down round, such as declining sales, increasing costs, negative market perceptions, or a general economic downturn affecting the industry. Down rounds occur in private companies for reasons that mirror those in publicly traded companies: Why Does it Matter if a Company Does a Down Round? A down round can…
• MIRR
  MIRR (Modified Internal Rate of Return) MIRR, short for Modified Internal Rate of Return, is a financial metric used to evaluate the profitability and performance of an investment, especially in the context of private equity. It is an improvement over the traditional Internal Rate of Return (IRR) method, addressing some of its shortcomings and providing a more accurate assessment of investment returns. What is MIRR? MIRR is a financial metric that takes into account both the cost of investment and the reinvestment of cash flows at a predetermined rate. Unlike the IRR, which assumes reinvestment at the original rate, MIRR…
• Post-Money Valuation
  Post-Money Valuation is a crucial concept in the world of finance, particularly in the context of venture capital and startup funding. It refers to the valuation of a company or startup after external financing or investment has been added to its balance sheet. What is the Post-Money Valuation? The Post-Money Valuation is the total value of a company or startup after new external funding or investment has been added to its capital structure. It represents the company’s worth at a specific point in time after the funding round has been completed. Importance of Post-Money Valuation to Financing Rounds The Post-Money…
• Distributed to Paid-In Capital (DPI)
  Definition of Distributed to Paid-In Capital (DPI) The Distributed to Paid-In Capital (DPI) refers to the additional return or yield demanded by investors for holding an investment that is less liquid or harder to convert into cash quickly compared to a more liquid investment with similar characteristics. In other words, it is the compensation that investors require for taking on the risk of holding an asset that may be difficult to sell without incurring significant price discounts. DPI in Private Equity – Why is it Important? DPI is an essential metric in private equity because it provides insights into the…
• Founders Syndrome
  What is Founder’s Syndrome? Founder’s Syndrome, also known as Founder’s Effect, is a term used to describe a situation in a startup or non-profit organization where one or more of the founders maintain disproportionate power and influence over the organization’s operations and strategic direction. This often occurs when the organization has grown and evolved, but the founder(s) continue to operate in the same manner as they did during the early stages of the organization. What is the Problem of the Founder Effect? The main issue with the Founder Effect is that it can stifle the growth and development of the…
• Unicorn Company
  An increasingly prevalent term in the startup ecosystem, ‘unicorn company,’ or simply ‘unicorn,’ has transformed from a mythical creature into a business phenomenon. Unicorns are no longer just creatures of fantasy; they are now symbolic of extraordinary success in the modern corporate world. This article delves into the concept of unicorn companies, their characteristics, how their valuation is determined, and reasons for their typically high valuations. What’s a unicorn startup? A unicorn startup, or unicorn company, is a private company with a valuation over $1 billion. The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical…
• Blind Pool in Private Equity
  In the realm of private equity, a blind pool is a type of investment fund where investors commit their capital without having full knowledge of the specific investments the fund manager will make. Blind pools are a common structure used in private equity funds, and they offer both benefits and limitations to investors. What Is a Blind Pool? A blind pool, also known as a blind investment or a blind trust, is a fund where investors provide capital to a fund manager without knowing the specific companies or assets the manager will invest in. Instead, investors place their trust in…
• Private Markets
  What are private markets? Private markets refer to investment opportunities that are not available on public stock exchanges. These markets are where companies and assets are bought, sold, and traded among a limited number of investors, as opposed to public markets, which involve securities that are accessible to the general public. What is Private Market Investing? Private market investing involves allocating funds to various private assets, such as private equity, venture capital, real estate, private debt, infrastructure, and more. Investors participate in private markets through private placements, direct investments, or through private investment funds managed by professionals. Private markets are…
• Residual Value to Paid-In Capital (RVPI)
  Residual Value to Paid-In Capital (RVPI) is a key performance metric used in the realm of private equity investments. It evaluates the ratio of the remaining value of an investment (residual value) to the total amount of capital contributed by investors (paid-in capital). RVPI is a valuable tool for investors and fund managers to assess the progress and potential returns of their private equity investments. What is Residual Value to Paid-In Capital (RVPI)? RVPI is a financial ratio that measures the remaining value of an investment in relation to the total capital contributed by investors. It is calculated by dividing…
• Alternative investments
  Alternative investments refer to a broad category of investments that fall outside the traditional asset classes of stocks, bonds, and cash. These investments offer unique opportunities and are considered alternative because they often exhibit different risk-return profiles and may have low correlations with traditional investments. What Is an Alternative Investment? Alternative investments encompass a diverse range of investment options, including private equity, hedge funds, real estate, commodities, infrastructure, and more. They are an alternative to the traditional investments commonly found in public markets. The Difference Between Alternative and Traditional Investments Characteristics Traditional Investments Alternative Investments Risk and Return Generally lower…
• What is Form 3921?
  Form 3921 is a tax form used by corporations to report exercises of Incentive Stock Options (ISOs) to the IRS. It provides essential details about the option, such as the grant date, exercise date, exercise price, and fair market value of the shares. What are Incentive Stock Options (ISOs)? Incentive Stock Options (ISOs) are a type of employee benefit that gives the right to buy shares of the company at a predetermined price. They are used to incentivize employees, and they offer certain tax advantages compared to non-qualified stock options. Who should file Form 3921? Any corporation that transfers stock…
• Carried interest in venture capital
  What is carried interest? Carried interest, often referred to as “carry,” is a share of the profits earned by general partners (GPs) in private equity and venture capital funds. It serves as an incentive for the GPs to generate strong returns for the limited partners (LPs) who invest in the fund. Carried interest in Private Equity and Venture Capital Carried interest is a common compensation structure used in private equity and venture capital to align the interests of the GPs and LPs. GPs receive carried interest based on the fund’s performance, particularly when the fund achieves returns that exceed certain…
• Pro Rata Rights in Venture Capital Deals
  What is Pro Rata in Venture Capital? In venture capital, “pro rata” means that the existing investors have the right to invest an amount proportionate to their current ownership stake in the company when new equity is issued. Pro Rata explained to a teenager Imagine you and four friends order a large pizza and split it equally, so each of you gets one-fifth of the pizza. Now, let’s say two more friends join the party, and you all decide to order another large pizza. To ensure fairness, you want everyone, including the new friends, to have an equal share of…
• Definition: Qualified Purchaser
  A Qualified Purchaser is a specific type of investor defined by the U.S. Securities and Exchange Commission (SEC) under the Investment Company Act of 1940. Qualified Purchasers are individuals or entities that meet certain financial criteria, allowing them to invest in certain private investment funds. What Is a Qualified Purchaser? A Qualified Purchaser is an investor who meets one of the following criteria: Examples of Qualified Purchasers Examples of Qualified Purchasers include: Why Is It Important? Being a Qualified Purchaser grants investors access to certain private investment funds that are not available to retail investors. This allows qualified investors to…
• Anti-Dilution Protection for VC Investors
  What Is Anti-Dilution Protection? Anti-Dilution Protection is a safeguard mechanism for venture capital (VC) investors that helps protect their ownership percentage in a company from being diluted when new shares are issued at a lower price than the original investment. How Dilution Occurs Dilution occurs when a company issues additional shares, typically during subsequent funding rounds or stock offerings, which results in a decrease in the ownership percentage of existing shareholders. Why Is Anti-Dilution Important? Anti-Dilution Protection is essential for VC investors as it ensures that the value of their investment is not significantly reduced by subsequent financing rounds or…
• ROFR meaning in VC
  The Right of First Refusal (ROFR) is a provision in startup equity deals that gives a particular investor the first opportunity to invest in additional shares of a company before those shares are offered to other potential investors. What is the Right of First Refusal When It Comes to Startup Equity? The Right of First Refusal grants an investor the privilege of being offered shares of the company’s stock before other investors when new shares are issued. It provides the investor with the option to maintain their ownership percentage by buying a proportionate number of shares. What is ROFR and…
• Venture Capital Fund
  A Venture Capital Fund is a type of investment fund that provides financing to startups and small businesses with high growth potential. These funds are managed by professional investors who make strategic investments in early-stage companies and help them grow and succeed. What are Venture Capital Funds? Venture Capital Funds are pools of capital raised from various investors, such as institutions, high-net-worth individuals, and corporations. The fund managers use this capital to invest in startups and early-stage companies with innovative ideas and high growth potential. How do Venture Capital Funds Help Startups? Venture Capital Funds play a crucial role in…
• What is Stock Vesting?
  Stock vesting refers to the process by which an employee gains ownership of company stock over time. It is a method used by companies to reward and retain their employees by granting them the rights to shares gradually, rather than all at once. What Does It Mean to Be Vested? Being vested means that an employee has earned the right to own certain shares of the company’s stock. Once the shares are vested, the employee can sell or transfer them, and they are protected from forfeiture. Why Are Vesting Rules Important for Startups? Vesting rules are crucial for startups to…
• Distribution Waterfall
  The distribution waterfall is a fundamental concept in the realm of private equity investments. It outlines the process by which investment returns are distributed among the various stakeholders in a private equity fund, including general partners (GPs) and limited partners (LPs). Understanding the distribution waterfall is essential for investors to comprehend how profits are shared and the factors that influence the distribution process. What is a private equity waterfall? A private equity waterfall is a structured framework that defines the sequence and priority of profit distributions from a fund’s investments to its investors. It follows a step-by-step process, often depicted…
• What is a VC Term Sheet?
  A VC term sheet is a document used in venture capital financing, outlining the main terms and conditions of an investment agreement between a startup and venture capitalists. It serves as a blueprint for the detailed legal documents to be drafted later in the process. VC Term Sheet Definition The VC term sheet defines the structure of the investment, specifying key aspects like the valuation of the company, the amount of investment, the ownership stake, and other vital terms related to governance, liquidation preferences, and more. Purpose of the Term Sheet The primary purpose of the term sheet is to…
• Fund administration
  What is fund administration in venture capital? Fund administration in venture capital involves managing the legal and financial responsibilities associated with the fund. It covers a wide range of functions including accounting, compliance, reporting, and investor relations. Why do businesses or fund managers need fund administrations? Managing a venture capital fund involves complex processes that require expertise in finance, law, and compliance. Fund administration helps fund managers to handle these complex tasks efficiently, ensuring accuracy and transparency. What is the difference between fund accounting and fund administration? Fund accounting focuses on the financial tracking and reporting aspects, whereas fund administration…
• General Partner (GP) in Venture Capital
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Who we are

HardGamma operates as an accelerator program for technology startups based in Warsaw, Poland.

Our primary market is in Poland, but we also reach out across the Central and Eastern European (CEE) region and further afield to the UK and US.

HardGamma Ventures has been at the forefront of technology investments since its establishment in 2011 after successful angel investments made by HardGamma Consulting.

We look for and invest in startups within the software, hardware, IoT and mobile environments which already have an existing product or a service and are proven to gain initial customer or revenue traction.

Portfolio

hardGAMMA Ventures is a seed and early stage Venture Capital. We are interested in IT, internet, mobile technologies projects as well as in biotechnology and physicochemical technologies area. hardGamma Ventures invests in projects held strong teams that may require some business support in planning, marketing, product positioning and other business functions.

hardGAMMA Ventures is ready to fully support the teams and assumes that they will require strong cooperation with the teams on the business and operational level (lower than the board).

Our main areas of interest includes:

– Semantic Web projects

– Geolocation and social networks projects

– Cloud computing projects

– Social gaming projects

– Biotechnology and physicochemical technologies projects

In particular we are interested in projects in stage of proof of concept.If you are an entrepreneuer with a project matching to our areas of interest and you would like to cooperate with us contact us via e-mail.

Our investments

The team

The hardGAMMA Ventures fund is managed by Chris Kowalczyk, with a support from a team of advisors and assistants. The management team along with the support team has a wide competence, resulting from education and professional experience. Team members are, among others, science and information technology graduates, which plays a significant role in the assessment of tech projects. Furthermore, among the managers and team members are MBA graduates and lecturers. Their professional experience includes setting up and developing startups, strategic and operational consulting, project management, conducting departments of developed companies, internet marketing, acquisition of EU funds, Mergers and Acquisitions.

Chris Kowalczyk

Graduate of Warsaw School of Economics (Management of Information Systems, 2001). He holds CEMS Master’s Degree in International Management from Community of European Management Schools (2001) and additional degree in German Studies in Economics (Deutsch- Polnisches Akademiker Forum, in cooperation with University of Duisburg and University of Mainz).

His professional experience includes E.piphany CRM package implementation in Procter&Gamble divisions in Great Britain and USA (2000), co-managing Internet start-up (System Internet Provider, 2000) and introducing the Lycos Europe portal to the Polish market as Head of Content and Technology (Lycos Poland, 2001). He was also a Management Consultant with McKinsey&Company (2003-2004).

Between 2001-2008, Krzysztof Kowalczyk was an assistant professor at Warsaw School of Economics with the Faculty of Business Informatics and a lecturer in Warsaw Executive MBA and CEMS (Community of European Management Schools – Master in International Management) programs.

Member of Mensa Poland and founding member of the Internet Society (ISOC) Poland.

In 2007, he co-founded and pioneered leading Polish startups scene meet-ups, Aula Polska.

Past member of the Supervisory Board of Oriaq.com, currently president of the Supervisory Board of Macoscope.net and advisor to the board at Codility.com.

Marek Piotr Tarnowski

Marek commands long-term experience in general/strategic and operational management and business development from seed and start-up stage to exit: pre-IPO (4funMedia S.A.), IPO (Arteria S.A., 4funMedia S.A.), trade sale (Comtica sp. z o.o., HalloNet) and M&A. He specializes in financial management and managerial accounting, feasibility studies and legal environment of business, merger and acquisition, corporate government.
Connected with TMT sector from 2000 being operationally involved into creation, business development and exit from several start-ups (Polymus sp. z o. o., Program sp. z o .o., Comtica sp. z o .o., 4fun.tv sp. z o.o., Arteria S.A.) and later into investment process and supervision of portfolio companies (MCI Management S.A., CR Media S.A., Nova (Cyprus) Group Ltd.).

Currently he is a member of the supervisory board of 4funMedia S.A. and Ballroom International CEE Holding GmbH.

Educated at Warsaw School of Economics (Finance and Banking / Quantitative Methods and Information Systems (1998) and University of Minnesota (Carlson School of Management) / Warsaw School of Economics – executive MBA (2008).

prof. F. M. Wurm

In order to ensure the highest possible competencies in evaluating biotechnology projects, the team will cooperate with professor Florian Wurm, founder (2001) of the swiss company ExcellGene, leader in the area of “biosimilars” manufacturing.
Professor Wurm will act as “Scientific Advisor – Biotechnology”.
Profesor Wurm is a biologist and molecular geneticist, he graduated from the University in Giessen, between 1985 and 1986 he was Research Fellow in molecular biology at the Harvard Medical School in Boston. Between 1986-1995 he worked at Genentech in San Francisco, a company recognized as the creator of the biotechnology industry. Since 1995 he is professor of biotechnology at the Swiss Federal Institute of Technology in Lousanne. He has published over 130 scientific papersand holds 10 patents.
Besides the function of Chief Scientific Officer at ExcellGene (from 2001) professor Wurm has also acted as scientific advisor in the following companies and institutions: Genentech Inc. (1995-1999), ZLB-Bioplasma AG (1997-2001), International AIDS Vaccine Initiative IAVI (od 1998), Aventis Pharma (od 1998), Astra-Zeneca (from 2000), Vaxgen Inc (from 2000), Cambrex (from 2000), Novartis Consumer Health Foundation (Vice President from 2003).

Our vision

We feel that HardGamma Ventures is a livewire in the regional tech ecosystem, and we continue to look for promising startups – no matter where they are based – which have matured and are gearing up for a serious funding round.

Do you need help getting your next big idea off the ground?

Our pedigree

HardGamma Ventures is based locally but driven globally. We are a fully privately-owned fund, meaning we are not held up by unnecessary bureaucracy. As a result we can make quick and informed decisions on all our activities and investments.

We have invested in two editions of the Springboard accelerator (Springboard London and Springboard IoT), and we are a current investor in Techstars London. We also run our own accelerator, GammaRebels, which also operates a number of pre-acceleration programs.

International Cooperation

hardGAMMA Ventures team is in a constant touch with the leading contests and incubators in Europe and USA such as: Seedcamp (UK), The Difference Engine (UK), TechStars (US), Meryland International Incubator (US) and Pan-European incubator program HackFwd (from 2010), where we are resposible for startups assessment and qualification.

hardGAMMA Ventures team currently builds an affiliate network with other VC funds in the region in order to extend the range investment opportunities and to increase international support and business opportuinities for portfolio projects.

This partnership significantly increases the chances of introducing the product of portfolio company to global markets and achiving global success.

HardGamma Consulting

• Reverse Merger
• Data room for investors
• Founders agreement
• Ebitda vs revenue
• Investment Memorandum
• Deal Flow