Knockout

Definition

A deal term that prevents certain actions without investor approval. The clause that prevents your CEO from going rogue.

Example Usage

Our financing agreement includes knockouts on hiring over $500K, raising debt over $1M, and any strategic partnerships.

Origin

Venture capital legal terminology, evolved from protective clauses

Fun Fact

The broadest knockouts are usually negotiated away—founders resist having every decision subject to investor veto.

Source: Venture capital legal terminology

Related Terms

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Scaleup

A startup that's past the early stage and trying to grow as fast as possible. It's the phase where you hire thousands of people who aren't sure what the product is.

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Intermediate

voting rights

The power to vote on corporate matters, typically held by common stock and sometimes special classes of preferred stock. Theoretically democratic, practically controlled by whoever wrote the term sheet.

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Intermediate

dragalong rights

A provision forcing minority shareholders to join a sale if majority shareholders approve it, preventing holdouts from blocking acquisitions. Democracy dies in shareholder agreements.

🚀 Startup / VC

Beginner

jumpstart

To forcefully resurrect a dead project, company, or relationship using emergency measures and borrowed energy. Like CPR but for your failing startup's momentum.

🚀 Startup / VC

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Incubator

A program that nurtures early-stage startups by providing office space, mentorship, and a false sense of security. It's called an incubator because, much like the medical device, it keeps fragile things alive that probably wouldn't survive in the real world.

🚀 Startup / VC

Intermediate

New Money

A business innovator who shakes up stagnant industries with fresh ideas instead of recycling the same tired playbook everyone else follows.

🚀 Startup / VC

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