Definition
Loss Ratio
The percentage of investments in a fund's portfolio that return zero capital. Seed funds run high loss ratios; growth funds run low ones.
From the episode “"Your Code Is Worthless" A Top VC Just Told Us Why | The Trillion-Dollar Founder Personality Type Nobody Talks About”Hear it on the podcast1 episode
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Related terms in Startups & Fundraising
IP assignmentTransferring intellectual property to the company so a founder cannot leave and start a competitor with it.IPOInitial public offering, taking a private company onto public markets.Liquidity eventAny transaction that converts founder equity into cash.LOILetter of intent, the early signal Nick groveled for to prove demand.LP Interest (Limited Partner Interest)A proportional ownership stake in a limited partnership fund, entitling the holder to a share of the fund's assets and returns without direct management authority over the underlying investments. In Collective Liquidity's exchange fund, contributors receive LP interests representing their proportional share of the diversified pool of private company shares. Unlike direct stock ownership, LP interests in a diversified fund provide quarterly liquidity (the fund provides a mechanism to borrow against or exit LP interest), can be used as collateral for lower-cost loans than single-stock concentration would allow, and enable access to wealth management strategies like donor-advised fund contributions that are impractical with illiquid single-company shares. The LP interest is the instrument that converts illiquid, concentrated private company equity into a more flexible, manageable financial asset.M&AMergers and acquisitions.Market TimingThe alignment between a product's launch and market conditions that make adoption natural. Mike's NFT metaverse startup succeeded in part because the timing was perfect during the 2021 boom; the same product would have failed 18 months earlier or later. A component of startup success that is not fully controllable but is prospectively analyzable — founders should assess timing explicitly before committing to a category rather than assuming a good idea will overcome a bad moment.Meta FactoryA system for spawning entire AI-led companies as outputs of a parent organization. The factory itself is the product — each company it produces runs on AI co-founders from day one.