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

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.

🚀 Startup / VC

Advanced

recycle provision

A fund agreement clause that allows GPs to reinvest early returns back into new deals rather than distributing them to LPs, extending the fund's effective deployment capacity. A controversial provision that LPs love to scrutinize because it delays their returns.

🚀 Startup / VC

Intermediate

lever

A mechanical advantage device that pivots on a fulcrum to multiply force, or in startup parlance, anything you can use to do more with less. Every MBA in Silicon Valley thinks they've found a "lever" to pull, usually right before asking for $5M in seed funding. Physics teachers hate how loosely VCs use this term, but hey, at least someone's paying attention to simple machines.

🚀 Startup / VC

Intermediate

dry powder

Unspent capital sitting in a VC fund, waiting to be deployed into investments. The ammunition that lets VCs act fast when hot deals emerge or support portfolio companies needing emergency cash.

🚀 Startup / VC

Intermediate

give-to-get

The VC expectation that founders will make introductions, provide advice, and help other portfolio companies in exchange for investment and support. Networking as a contractual obligation.

🚀 Startup / VC

Intermediate

nail it then scale it

The strategy of perfecting product-market fit and unit economics in one market before expanding broadly. It's the anti-blitzscaling approach that prioritizes learning over land grabbing.

🚀 Startup / VC

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

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