Venture Capital Glossary: 40 Essential Terms

Introduction

The world of venture capital has a vocabulary of its own — dense, precise and at times intimidating for the uninitiated. Whether you are the innovation director of a large group, the manager of a family office, the head of a startup raising funds, or simply curious to understand how this ecosystem works, this glossary is for you.

Mandalore Partners, a pioneer of Venture Capital-as-a-Service in Europe, shares here 40 essential definitions, organised by theme, to help you decode the conversations, documents and structures that shape the world of VC.

A. Fund structures & investment vehicles

SPV (Special Purpose Vehicle)

An ad hoc legal vehicle created to carry out one specific investment. An SPV isolates the risk of an investment from the rest of the fund and makes targeted co-investments possible.

FPCI (Fonds Professionnel de Capital Investissement)

A French investment vehicle reserved for professional investors. The main tool used by venture capital and private equity funds in France.

LP (Limited Partner)

An investor in a venture capital fund. LPs provide the capital but have no operational role in the management of the fund. Examples: family offices, pension funds, insurers.

GP (General Partner)

The manager of the venture capital fund. The GP makes the investment decisions, handles relationships with the startups and is accountable to the LPs.

Carried Interest (Carry)

The share of the capital gains realised by a VC fund that goes to the managers (GP). Generally set at 20% of the gains once the capital has been returned to the LPs. The main mechanism for aligning the interests of GPs and LPs.

Management Fee

The annual management fee charged by the GP on the total capital of the fund, generally between 1.5% and 2.5%. It covers the operating costs of the management team.

Hurdle Rate

The minimum rate of return the fund must reach before the GP can receive its carried interest. Generally set at 8% per year.

B. Investment mechanisms & financial instruments

Term Sheet

A non-binding document summarising the main terms of a contemplated investment. It precedes the definitive documents (SHA, BSA) and serves as the basis for negotiation.

Cap Table (capitalisation table)

A document setting out the shareholding structure of a startup: who holds what, in what proportion and in what form (ordinary shares, BSA, BSPCE, convertible bonds).

Pre-money / Post-money valuation

The pre-money valuation is the value of the startup before a fundraising. The post-money valuation includes the new capital raised. Example: €10M pre-money + €2M raised = €12M post-money.

Dilution

The reduction of a shareholder's ownership percentage when new shares are issued. A founder going from 60% to 45% after a funding round has been diluted by 15 points.

Liquidation Preference

The right of investors to recover their investment (or a multiple of it) ahead of the founders in the event of a sale or a liquidation. A 1x non-participating preference means that the investor recovers its investment before anything is shared.

Anti-dilution

A mechanism protecting investors in the event of a fundraising at a lower valuation (down round). A standard clause in most institutional term sheets.

SAFE (Simple Agreement for Future Equity)

A simplified financing instrument allowing a rapid investment without setting the valuation immediately. The investor receives shares at the next financing round, with a discount or a valuation cap.

BSA (Bon de Souscription d'Actions)

A French legal instrument granting the right to subscribe for shares at a price fixed in advance. Used for financing rounds and for management compensation packages.

BSPCE (Bons de Souscription de Parts de Créateur d'Entreprise)

A French employee share ownership scheme reserved for young companies (less than 15 years old). It allows employees to benefit from the increase in the value of the startup with favourable tax treatment.

C. Financing stages

Pre-seed

The first investment stage, generally between €100K and €500K. It finances validation of the idea, development of the MVP and the first hires.

Seed

The initial financing round to bring the product to market. Typical amounts: €500K to €3M in Europe. Seed investors take the highest risks but can benefit from the largest increases in value.

Series A

The first major institutional round, generally between €5M and €20M. It comes once an initial product-market fit and first growth metrics have been demonstrated.

Series B / C

Growth rounds financing commercial acceleration, international expansion and strategic hires. Series B: €20-50M. Series C and beyond: €50M+.

Bridge Financing

Interim financing between two funding rounds, often in the form of convertible bonds or BSA. It provides the runway to reach the next round without immediate dilution.

D. Performance metrics

IRR (Internal Rate of Return)

The standard metric for assessing the performance of a VC fund over time. A net IRR of 20%+ is considered excellent for a venture fund.

MOIC (Multiple on Invested Capital)

The multiple of invested capital returned to the LPs. A MOIC of 3x means that for €1M invested, the LP recovers €3M. An essential complement to IRR when assessing performance.

DPI (Distributed to Paid-In)

The ratio of the capital actually distributed to the LPs over the capital called. A DPI of 1x means the LPs have recovered their initial investment.

RVPI (Residual Value to Paid-In)

The unrealised value of the portfolio relative to the capital called. RVPI + DPI = TVPI (Total Value to Paid-In), the overall indicator of a fund's performance.

Power Law

The statistical phenomenon characteristic of VC: a small number of investments (often 1 or 2 out of 10) generates the majority of a fund's returns. It is what makes building a diversified portfolio necessary.

E. Ecosystem & process

Deal Flow

The flow of projects and investment opportunities reviewed by a fund. A high-quality, proprietary and diversified dealflow is one of the main sources of competitive advantage for a VC fund.

Due Diligence (DD)

The in-depth audit of a startup before an investment: financial, legal, technical, commercial and ESG analysis. Rigorous DD is at the heart of VCaaS investment discipline.

Portfolio Management

Active management of a fund's holdings: KPI monitoring, governance, strategic support, help with recruitment and with subsequent fundraisings.

Exit

The realisation of the value of an investment: IPO (stock market listing), trade sale (M&A), buyout by a growth or private equity fund. The exit defines the actual return for the investors.

Unicorn

A startup valued at more than one billion dollars. In 2025, Europe counts more than 150 unicorns, with a strong concentration in France (Alan, Doctolib, Contentsquare…) and in the United Kingdom.

F. Regulation & impact (ESG)

AIFMD (Alternative Investment Fund Managers Directive)

The European directive governing the management of alternative funds (including VC funds). It imposes transparency, reporting and risk management obligations on GPs running funds intended for professional investors.

SFDR (Sustainable Finance Disclosure Regulation)

European regulation requiring fund managers to disclose how sustainability risks are taken into account. Article 8 funds integrate ESG criteria; Article 9 funds have an explicit sustainable investment objective.

CSRD (Corporate Sustainability Reporting Directive)

The European directive requiring large companies (and progressively SMEs) to report on their ESG performance according to harmonised standards (ESRS). It affects the ESG due diligence of VC funds.

ESG (Environmental, Social, Governance)

The framework for assessing the sustainability and social responsibility of a company or an investment. Built into the due diligence and portfolio monitoring of institutional funds.

G. Corporate Venture Capital & VCaaS

CVC (Corporate Venture Capital)

A venture capital investment programme run by a large non-financial company. It gives corporates access to external innovation and lets them build strategic partnerships with startups.

VCaaS (Venture Capital-as-a-Service)

An operating model in which a specialised external partner provides an organisation with the full set of VC capabilities, without that organisation having to build an internal team. A model pioneered by Mandalore Partners in Europe since 2016.

Co-investment

An investment made alongside a VC fund or another institutional investor. Co-investment rights allow LPs to increase their exposure to specific deals without increasing management fees.

Syndication

The allocation of a financing round among several investors. A lead fund structures and negotiates the terms; the co-investors join the round on the basis of the lead's term sheet.

Venture Building

An approach that consists in creating startups from the inside, with a dedicated team and a shared infrastructure. Complementary to VCaaS: Mandalore Partners offers venture building to corporates wishing to create their own startups.

Conclusion

Mastering this vocabulary is the first step towards navigating the venture capital world effectively. Whether you are considering launching a CVC programme, allocating capital as a family office or simply want to understand your discussions with investment partners better, these 40 definitions are your reference base.

Mandalore Partners' Venture Capital-as-a-Service (VCaaS) model draws on precisely this expertise to give its partners turnkey access to the VC ecosystem — without the needless jargon, and with full operational rigour.

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