Glossary

UBTI, Unrelated Business Taxable Income, is a concern to tax exempt investors in a hedge fund because the receipt of UBTI requires the tax exempt entity to file a tax return that it would not otherwise have to file and pay taxes on income that would otherwise be exempt, at the corporate rate. UBTI includes most business operations income and does not include interest, dividends and gains from the sale or exchange of capital assets. Hedge Funds trade their own securities and therefore the tax exempt investor's share of such income of the hedge fund is not UBTI and not subject to federal income tax. However, hedge funds may subject tax exempt entities to UBTI under certain circumstances where the hedge fund is borrowing or purchasing securities on margin. Such transactions may subject the tax exempt to UBTI tax.

Uniform Limited Partnership Act, see also the RULPA, Revised Uniform Limited Partnership Act U.L.P.A. § 101 et seq. (1976), as amended in 1985 (R.U.L.P.A.).

basically, the investors get no guarantee of what value the company can be valued at before their note (debt) converts to equity. Ex. with a capped note, a $500,000 investment in a company with a $5M cap would translate to a 10% stake in the company. However, with an uncapped note, the same $500,000 will only translate to a 5% stake in the company if the founders get the company valued at $10M (see capped note).

a private, investor-backed company valued at $1B+. (They have a pretty nifty club.)

The point at which 25% of all returns in a group are greater and 75% are lower.

- sometimes there are limits placed on what companies can use their newly-acquired VC funds for; it behooves founders to keep these terms as vague as possible so that they can do whatever they need to with that moola.