Exits & the Capital Landscape: 21 Key Terms

By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026

Exits are the events through which founders and investors convert ownership into liquidity, whether through an acquisition, a direct listing, or a recapitalization. The vocabulary of this stage mixes deal-process documents such as the letter of intent and the CIM with legal and tax concepts including indemnification, the lockup, and the ISO versus NSO distinction for employee options. Familiarity with terms like acquihire and bridge note can also clarify the broader capital landscape in which startups raise money between formal rounds, as presented in the free Entrepreneurial Finance course.

These terms are taught in Week 10: Exits, Fundraising, and the Capital Landscape of the free Entrepreneurial Finance course; the full course glossary collects every chapter in one place.

Accelerator: A fixed-term cohort program trading a standard investment for equity (the YC deal is the reference point) plus mentorship and demo-day access.
Acquihire: An acquisition priced primarily for the team rather than the business, often paying investors little beyond preferences while retention packages go to the hires.
AMT: The alternative minimum tax, a parallel tax computation that can tax the paper spread on ISO exercises even when no shares are sold.
Bridge note: A convertible note, usually insider-led, that extends runway to a milestone or next round; needing one that insiders refuse is itself a signal.
CIM: The confidential information memorandum, the detailed company overview a banker circulates to qualified buyers in a sale process.
Direct listing: Going public by listing existing shares without underwriters or a primary raise, avoiding underpricing but forgoing new capital.
Indemnification: The seller's post-closing obligation to compensate the buyer for breaches of representations and warranties, typically backed by the escrow.
ISO: An incentive stock option: no ordinary tax at exercise, but the exercise spread counts toward AMT; qualifying sales get capital-gains treatment.
Letter of intent (LOI): A mostly non-binding offer letter in an M&A process stating price and key terms, usually with a binding exclusivity period that pauses the auction.
Lockup: The roughly 180-day period after an IPO during which insiders may not sell shares, often followed by price pressure at expiry.
NSO: A non-qualified stock option: the spread between strike and fair market value is taxed as ordinary income at exercise.
Recapitalization: A restructuring of the cap table (often in distress) that resets preferences and ownership, frequently washing out earlier holders.
Regulation Crowdfunding (Reg CF): The SEC exemption letting companies raise up to about $5M in a 12-month window from the public, typically via crowd SAFEs on a funding portal.
Right of first refusal (ROFR): The right to match a proposed share transfer or company sale before it closes; a known ROFR can chill other bidders in an auction.
RSU: A restricted stock unit: full share value taxed as ordinary income when it vests (or settles), with no exercise decision.
SBIR: Small Business Innovation Research: federal non-dilutive grant funding awarded in phases for research-driven ventures.
SPAC: A special purpose acquisition company, a listed shell that merges with a private company as an IPO alternative.
SPV: A special purpose vehicle, a single-deal entity that pools many small investors into one line on the cap table.
Syndicate: A deal-by-deal investor group, typically organized by a lead through an SPV, in which backers invest alongside the lead for a share of carry.
Tender offer: An organized secondary event where an approved buyer offers to purchase shares from many employees and early holders at one price.
Venture studio: An organization that originates and builds companies in-house, taking a much larger equity stake than an accelerator in exchange for doing early work.

More Entrepreneurial Finance term guides

Put the vocabulary to work: the free calculators and decision guides apply these terms, and the free Entrepreneurial Finance course teaches them in context.