parachute round

Definition

Emergency financing raised by a struggling startup at unfavorable terms just to avoid immediate shutdown. It's the fundraising equivalent of pulling the ripcord on a failing skydive.

Example Usage

The company closed a parachute round with harsh terms after missing revenue targets, giving investors 3x liquidation preference.

Origin

Derived from emergency parachute imagery, used in distressed startup financing

Fun Fact

Parachute rounds often include 'pay-to-play' provisions that punish existing investors who don't participate.

Source: Distressed startup financing terminology

Related Terms

Intermediate

option pool

A reserve of shares set aside to recruit employees with stock options, typically carved out before valuation to dilute founders rather than investors. A necessary evil that feels like robbery when you're calculating founder ownership.

🚀 Startup / VC

Advanced

full ratchet

The most aggressive anti-dilution protection where early investors' conversion price adjusts to match a down round price, regardless of how small the down round is. Financial punishment for daring to need more money.

🚀 Startup / VC

Intermediate

valuation cap

The maximum valuation at which a convertible note or SAFE will convert to equity—a safety net for early investors betting on you when you were nobody. The lower the cap, the more expensive your desperation was.

🚀 Startup / VC

Intermediate

inside round

A funding round where only existing investors participate, with no new outside investors joining. It's either a vote of confidence from believers or a sign that no one else wanted in.

🚀 Startup / VC

Advanced

carry

Short for 'carried interest'—the percentage of fund profits that goes to VCs as performance compensation, typically 20%. It's why venture capitalists drive Teslas even when most of their portfolio is worthless.

🚀 Startup / VC

Beginner

limited partner

The actual money behind venture capital—pension funds, endowments, and rich people who give VCs money to invest and hope they know what they're doing. They're 'limited' because they can't tell the GP how to do their job.

🚀 Startup / VC

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See “parachute round” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.

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