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

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