Here’s a concise glossary of key private equity terms:

Investment stages

• Seed capital: Initial funding provided to startups for concept development and early operations³.
• Early-stage: Investments in young, emerging companies in their initial growth phases³.
• Growth capital: Funding provided to relatively mature companies for expansion or restructuring.
• Buyout: Acquisition of a controlling stake in a mature company, often using significant debt.

Key players

• General Partner (GP): The firm managing a private equity fund and making investment decisions².
• Limited Partner (LP): Investors in a private equity fund, typically institutional investors or high net worth individuals².
• Angel investor: High net worth individuals providing early-stage funding to startups².

Fund terms

• Dry powder: Committed but uninvested capital available to a private equity firm³.
• Hurdle rate: Minimum return that must be achieved before fund managers can receive carried interest².
• Carried interest: Share of profits paid to fund managers as performance incentive.

Valuation and performance

• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization; a key profitability metric³.
• Multiple: Investment return expressed as a multiple of invested capital.
• IRR (Internal Rate of Return): Annualized return metric used to evaluate investment performance.

Exit strategies

• IPO (Initial Public Offering): Process of taking a private company public by offering shares on a stock exchange².
• Trade sale: Sale of a portfolio company to another company, often a strategic buyer.
• Secondary sale: Sale of private equity fund interests in the secondary market³.

Other terms

• Due diligence: Comprehensive evaluation of a potential investment opportunity³.
• Cap table: List of a company’s securities and their owners¹.
• Unicorn: Privately held startup valued at $1 billion or more³.