When "Liquidity Event" Has Nothing To Do With Beer Or A Close-Out Sale: VC Deal Terminology

Toolbox doesn't want to jinx the recovery, so it won't say business is quite booming, but from where things started a little over a year ago, things aren't half bad. You can't even find good clearance sales anymore — always a sign of at least a decent economy, if not quite Happy Days Are Here Again. But if you really want to know what's bubbling underneath the surface, you have to know what the real moneyed are doing, that is the VC guys and gals. When their buy-ins to start-ups are increasing at a fast clip, start singing. And things definitely bottomed out for VC along with the rest of the economy — VC activity in biotech is even sort of booming a little bit. Maybe now's the time to think about being a lawyer on that end of things.

Of course, if you don't know VC-deal speak, you won't get far, which is why Toolbox dug up Introduction to Venture Capital Deal Terms, by Ellen B. Corenswet (Covington & Burling LLP) and Sarah Reed (Charles River Ventures LLC). This is more than a simple, alphabetical glossary; it places the terms in the context of the deal process. So it starts with "What is Venture Capital?" And while you get a definition, i.e., "money invested in early stage companies with the expectation of significant growth in the value of the investment," you get more, such as what venture capital funds do and how. And that's where the term "liquidity event" is defined. Indeed, it is not a sale at Wholesale Liquidators, but "an initial public offering or an M&A transaction." That's how the VC folks cash out. You'll finish this with beginning literacy in VC-speak. And if you snag some good VC clients, you'll never have to shop clearance again!

Introduction to Venture Capital Deal Terms — Download

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