sidecar fund

Definition

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.

Example Usage

We raised a $20M sidecar fund to accommodate LPs who wanted more exposure to our AI companies beyond their main fund allocation.

Origin

Investment fund terminology emerging in venture capital in the 1990s-2000s

Fun Fact

Sidecar funds can create conflicts of interest if all LPs aren't given equal access, making their governance structure crucial.

Source: Venture capital fund structures and special purpose vehicles

Related Terms

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anti-dilution provisions

Protective clauses that let early investors maintain their ownership percentage when future rounds price lower, punishing founders for failing to maintain perpetual hockey stick growth. Comes in weighted-average and full-ratchet flavors of pain.

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pivot or die

The startup mantra that romanticizes abandoning your original business plan when it becomes clear nobody wants what you're building. It's plan B through Z, pitched as strategic thinking rather than desperate flailing.

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washout round

A financing so dilutive that existing shareholders are essentially wiped out, often following multiple bridge rounds and broken promises. The financial equivalent of starting over but with more emotional baggage.

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preference stack

The hierarchical order in which different classes of investors get paid during an exit, determined by liquidation preferences from multiple funding rounds. It's a legal game of Jenga where common stockholders usually lose.

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CAC

Customer Acquisition Cost—how much you spend in sales and marketing to land one customer. VCs compare this to lifetime value to determine if your business model is actually viable or just an expensive hobby.

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metrics-driven

A company culture claiming to make decisions based on data analysis rather than gut feeling, though which metrics get measured mysteriously align with what leadership already wanted to do. It's astrology for MBAs.

🚀 Startup / VC

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