SPV (Special Purpose Vehicle)

Investment funding provided to established companies to accelerate expansion, enter new markets, develop products, or make acquisitions. Growth capital sits between venture capital (higher risk, earlier stage) and traditional private equity (mature businesses, often leveraged).

The process by which private equity and venture capital firms identify, evaluate, and originate potential investment opportunities. Effective deal sourcing increasingly relies on proprietary data, network effects, and reputation — all intangible assets that distinguish top-performing funds.

An investment vehicle that allocates capital to a portfolio of private equity, venture capital, or hedge fund managers rather than investing directly in companies. Fund of funds provide diversification across managers, strategies, and vintages, though they involve an additional layer of management fees and carried interest.

A direct investment made by a limited partner alongside a private equity or venture capital fund in a specific portfolio company. Co-investments allow LPs to increase exposure to particular deals, typically at reduced or no management fees and carry, while giving the GP additional capital for larger transactions.

The duration for which an investor retains an investment before exit, typically measured from the date of initial acquisition to the date of sale or IPO. In private equity and venture capital, holding periods typically range from three to seven years and influence the internal rate of return calculation.

The configuration of financial, legal, and operational terms governing a merger, acquisition, or investment transaction. Deal structure encompasses the mix of cash and equity consideration, earn-out arrangements, escrow provisions, representations and warranties, indemnification mechanisms, and governance rights.

A business arrangement in which two or more parties agree to pool resources for a specific project or business activity while maintaining their separate identities. Joint ventures often involve the sharing of intangible assets such as technology, brand rights, and market access, requiring careful valuation and allocation of contributed and created value.

An equity-based compensation structure in private equity-backed companies that aligns management's financial interests with those of the PE sponsor by giving managers the opportunity to share in the equity upside upon exit. MIPs typically allocate 10-20% of the equity to management through sweet equity, share options, or ratchet mechanisms linked to achieving specified return hurdles.

What is a private equity fund and how do they use valuations?

PE funds buy companies at entry multiples, operate them to improve cash flows and competitive position, then exit at higher multiples — valuations are critical for entry/exit decisions.

What are liquidation preferences and how do they affect founders?

Liquidation preferences give investors priority over common shareholders in an exit, ensuring they recover their investment first — participating preferences can significantly reduce founder payouts in moderate exit scenarios.