warrants

Definition

Options for investors to purchase additional equity at a predetermined price, typically sweetening deals when a startup is desperate or when investors have serious FOMO about missing upside. The financial equivalent of a rain check.

Example Usage

The bridge round included warrants at a 20% discount to the next round's valuation, because apparently our current desperation wasn't generous enough.

Origin

Traditional financial instrument dating back centuries, adapted for venture capital in the mid-20th century

Fun Fact

Warrants can create phantom dilution that founders don't anticipate, making cap table management even more of a headache than it already is.

Source: Venture capital and securities law terminology

Related Terms

Advanced

preferred return

The minimum annual return (typically 8%) that limited partners receive before general partners can claim carried interest, functioning as a hurdle rate to ensure LPs get paid first. Think of it as making the GP eat their vegetables before getting dessert.

🚀 Startup / VC

Intermediate

diluted

The soul-crushing moment when a founder's ownership percentage shrinks because the company issued more shares to new investors. It's weaker coffee, but for equity—you still own shares, they're just worth relatively less of the pie. Every funding round brings this special joy, where you simultaneously celebrate getting money and mourn losing control.

🚀 Startup / VC

Intermediate

Exit Strategy

The plan for how founders and investors will eventually cash out, ranging from IPO to acquisition to quietly shutting down and pretending it never happened. It's planning your escape route before you've even built the building.

🚀 Startup / VC

Intermediate

churned

Past tense of churning, describing customers who've abandoned ship or accounts that have been excessively traded for commissions. In the startup world, it's the past tense of failure—these are the users who tried your product and decided literally anything else was better. When your investors ask about churned customers, it's never a fun conversation.

🚀 Startup / VC

Beginner

minimum viable product

The most stripped-down version of your product that customers will actually use without demanding a refund—or at least that's the theory. In practice, it's whatever you can ship before running out of money.

🚀 Startup / VC

Advanced

note tsunami

The overwhelming wave of convertible notes and SAFEs that convert to equity during a priced round, often revealing a far more complex cap table than founders realized. The moment when chickens come home to roost, except the chickens are financial instruments.

🚀 Startup / VC

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