Pari Passu At an equal rate or pace, without preference.
Partnership A non-taxable entity in which each partner shares in the profits, losses and liabilities of the partnership. Each partner is responsible for the taxes on its share of profits and losses. Partnership Agreement The contract that specifies the compensation and conditions governing the relationship between investors (LPs) and the venture capitalists (GPs) for the duration of a private equity fund’s life. Post-Money Valuation The valuation of a company immediately after the most recent round of financing. This value is calculated by multiplying the company’s total number of shares by the share price of the latest financing. Preemptive Right A shareholder’s right to acquire an amount of shares in a future offering at current prices per share paid by new investors, whereby his/her percentage ownership remains the same as before the offering. Preferred Dividend A dividend ordinarily accruing on preferred shares payable where declared and superior in right of payment to common dividends. Preferred Shares A class of shares that may pay dividends at a specified rate and that has priority over common shares in the payment of dividends and the liquidation of assets. Many venture capital investments use preferred shares as their investment vehicle. Preferred shares are convertible into common shares at the time of an IPO. Pre-Money Valuation The valuation of a company prior to a round of investment. This amount is determined by using various calculation models, such as discounted price/earnings ratios (P/E ratios) multiplied by periodic earnings, a multiple times a future cash flow discounted to a present cash value, and a comparative analysis to comparable public and private companies. Private Equity Equity securities of companies that have not gone public (are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer in the absence of a marketplace. In addition, there are many transfer restrictions on private securities. Investors in private securities generally receive their return through one of three ways: an initial public offering, a sale or merger, or a recapitalization.
How to Achieve Good Returns
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