recapitalization

Definition

Restructuring a company's capital stack—often a euphemism for 'things went poorly and we need to reset everyone's expectations and ownership.' Can range from modest adjustments to burning everything down and starting over.

Example Usage

After missing revenue targets for three straight years, the board forced a recapitalization that wiped out most employee options and heavily diluted the founders.

Origin

Corporate finance term dating to early 20th century, adopted into venture restructurings during the 1980s

Fun Fact

Some recapitalizations are so brutal they're called 'cram-downs,' where new investors force existing shareholders to accept punitive terms or risk the company shutting down entirely.

Source: Corporate finance and venture restructuring documentation

Related Terms

Beginner

founder dilution

The reduction in founders' ownership percentage that occurs each time the company raises money or issues new equity. It's the slow, inevitable erosion of ownership that founders signed up for when they took outside capital.

🚀 Startup / VC

Advanced

sidecar fund

A supplemental investment vehicle created alongside a main fund to accommodate additional capital from LPs or special investors, often for a specific deal or opportunity too large for the main fund. The VC version of ordering extra fries because one serving isn't enough.

🚀 Startup / VC

Beginner

bridge round

Emergency funding meant to tide a startup over until the 'real' funding round happens, often at desperate terms. Named after a bridge because you're hoping it doesn't collapse before you reach the other side.

🚀 Startup / VC

Beginner

Ramen Profitable

The stage at which a startup makes just enough revenue to cover the founders' basic living expenses, assuming those expenses are limited to instant noodles and shared housing. It's the lowest bar of financial success that still technically counts as success.

🚀 Startup / VC

Beginner

warm introduction

A referral to an investor through a trusted mutual connection, as opposed to cold outreach. The difference between getting a response and having your email automatically archived.

🚀 Startup / VC

Intermediate

information rights

Contractual provisions granting investors access to a startup's financial statements, board minutes, and other operational data. Essentially, the legal right to know how badly founders are spending their money.

🚀 Startup / VC

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