Demystifying venture capital jargon

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Ever read a LinkedIn post where someone casually says “Yeah, the J-curve just kicked in and carry is finally accruing thanks to our 3x DPI”? No? Me either but I didn’t know how else to open while still illustrating what’s to come in this week's episode of The Unsophisticated Investor.

Whether you’re new to startup investing or just curious, understanding the lingo is the first step to levelling up. So let’s dive into this acronym salad and make sense of the most common venture capital terms.

VC (Venture Capital)

A form of private equity where investors back high-growth startups before they’re profitable (or sometimes even before they have customers). These are the companies that could become the next Airbnb.

LP (Limited Partner)

The capital behind the capital. LPs are the investors in the VC funds. Typically institutions like pension funds, university endowments, family offices, and increasingly, wealthy individuals (and soon, thanks to platforms like Shuttle, you) .

They commit money to a fund but don’t make the day-to-day decisions, hence the “limited” part.

GP (General Partner)

The folks actually running the fund. GPs choose which startups to back, negotiate deals, and work closely with founders.

Fund

A pool of money collected from LPs and managed by GPs. VCs don’t just invest their own cash, they raise a fund with a defined lifespan (usually 10 years) and deploy that capital across startups. They typically invest heavily in the first few years and spend the rest of the time managing those bets.

IRR (Internal Rate of Return)

This one’s a mouthful but important. IRR measures the annualised return on invested capital, factoring in time. So a 3x return in 3 years is way better than a 3x return in 10 years, and IRR captures that nuance.

VCs live and die by this metric because it gives LPs an indication of how efficiently they’re turning capital into returns.

MOIC (Multiple on Invested Capital)

How much money you got out compared to what you put in. If you invested €100K and received €300K back, your MOIC is 3x. Unlike IRR, MOIC doesn’t factor in how long it took, it’s just the raw multiple.

Carry (Carried Interest)

The GP’s incentive. Once a fund returns the original capital to LPs, any profits are usually split 80/20 — 80% to LPs, 20% to GPs. That 20% is called carry, and it’s how VCs really make money. But they only earn it if they perform.

Capital Call

When LPs commit money to a fund, they don’t transfer it all at once. VCs “call” the capital gradually as they make investments.

DPI (Distributions to Paid-In Capital)

A snapshot of real, realised returns. It’s how much money the fund has actually returned to LPs compared to what they put in. A DPI of 1.0x means you’ve broken even. Higher is better. Lower means… you’re still waiting.

TVPI (Total Value to Paid-In Capital)

Think of this as the paper valuation — DPI (realised gains) + the unrealised value of still-active investments. A high TVPI but low DPI means your fund looks good but hasn’t exited much yet.

Hurdle Rate

Before GPs can start taking carry, many LPs require a minimum annual return (usually 8%) known as the hurdle rate. If the fund underperforms that threshold, GPs get no carry. Sad GPs.

Clawback

A safety net for LPs. If GPs took carry early on and later exits tank, clawback provisions can require them to return some of that carry to ensure LPs aren’t short-changed .

NAV (Net Asset Value)

What a fund’s holdings are worth today, on paper. Useful for quarterly reporting and judging if that hot fintech you backed is still hot… or not.

The J-Curve:

No, this isn’t a Peloton workout, it’s the shape your returns take over time in venture capital: down before it goes up. You lose money early, then (hopefully) ride the hockey stick up when exits start accruing.

Power Law:

Also known as the Pareto Principle. This means a few big winners will return the bulk of your entire portfolio. One single outlier company can make up for all the flops. 20% of your investments will make up 80% of your returns.

Asymmetric Returns:

Risk a €1 to gain €1000. It’s the VC dream, and the reason your investment in that pre-product startup might just 1000x… or go to zero. Asymmetric returns are exactly why VC should be in your portfolio, but only as a small percentage of your overall position.

Pro-Rata Rights:

When companies raise more money, your shares will be diluted. This is an unavoidable fact of life. Want to maintain your full slice of the pie when the company grows? Pro-rata lets you invest again to maintain your % ownership.

Information Rights:

These give you access to company updates, financials, and other juicy details. Crucial for knowing when to double down or peace out. These rights are typically not available to individual investors, but when investing as a collective through Shuttle, we can fight to gain those rights on your behalf.

The venture capital world can seem complex at times, not because the ideas are always difficult, but because the language is so often cloaked in acronyms, metaphors, and insider speak. At Shuttle, we’re building a platform that makes private market investing uncompromisingly simple, transparent and actually understandable.

Hopefully this breakdown makes you feel confident enough to casually drop “asymmetric risk profile” into your next LinkedIn post…

Until next time friends!

What we’ve been working on at Shuttle

• We just launched our 4th investment opportunity 🚀

• Shipped our internal due diligence tools 🛠️

• Shipped a number of UI improvements and general performance upgrades 🏎️

• Working on a new referral leaderboard for our most competitive customers 🥇

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z tech professionals and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders