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D&O Insurance

Liability insurance payable to the Directors and Officers of a corporation or other entity to offset indemnifiable losses they have suffered as a result of specified acts or failures to act in their capacities as Directors or Officers. D&O Insurance also typically covers reimbursement of the costs associated with defending a lawsuit. Startups often agree to obtain D&O Insurance as a condition to a VC Financing.


Acronym for the Delaware General Corporation Law.

Data Room

Where Due Diligence materials are located. Originally a Data Room was a physical location, such as a room set aside in the building of the Target Company, stacked with boxes of paper; these days it is a virtual Data Room that can be accessed online. A well-done Data Room can be critical to a smooth transaction, and can take a substantial amount of time to populate (depending on the amount of existing documents a company has — which tends to increase with the length of time a company has existed — and the scope of the Due Diligence Request List received). Early planning is key.

Deal Flow

The rate at which Venture Capitalists and Angel Investors receive business proposals or investment offers.

Deal Structure

The legal structure used for a transaction, which is often driven by tax implications or other matters dictating the type of documentation needed.


An obligation owed by one party (the borrower or debtor) to a second party (the lender or creditor). Debt is generally subject to contractual terms such as the amount and timing of payments of principal and Interest, events of defaults, Covenants, Maturity DateConversion Rights (if applicable) and more. The most common types of Debt in Startups are Convertible Promissory Note and Venture Debt.


Startup with a valuation of at least US$10 billion. Even rarer than a Unicorn, and much more exciting than a Unicorpse.

Deemed Liquidation Event

A term defined in a corporation’s Charter that basically means an exit event or the sale of all or substantially all of the corporation’s assets, in each case triggering the company to pay Liquidation Preferences.

Delaware General Corporation Law (DGCL)

The statute governing corporate law in the State of Delaware found in Title 8, Chapter 1 of the Delaware Code.

Demand Registration Rights

A type of Registration Right that entitles the holder, subject to certain agreed upon conditions, to force the Issuer to conduct a registered offering of the Issuer’s Securities. The Issuer files a Registration Statement with the SEC and takes such other actions to conclude an offering pursuant to that Registration Statement. In Preferred Stock Financings, Demand Registration Rights are typically found in the Investors' Rights Agreement. Compare Piggyback Registration Rights.


When an existing Stockholder’s percentage ownership in a company is reduced because a new Investor buys Shares in the company or additional Equity is otherwise issued to a third party. For example, if an existing Stockholder owns one share of a company that has 10 shares outstanding, the existing Stockholder would own 10% of the total number of shares (one out of 10), but if the company issued to a new Stockholder an additional 10 shares then the existing Stockholder would only own 5% of the total number of shares (one out of 20). The existing Stockholder would in this example suffer 5% Dilution of its Share ownership. This Dilution doesn’t necessary mean that the value of the existing Stockholders Shares has decreased, since the overall value of the company might actually (hopefully) have increased.


A member of the Board elected by a corporation’s Stockholders.

Disclosure Schedule

A schedule prepared in connection with a transaction agreement, typically a Stock Purchase Agreement or Note Purchase Agreement in Startups, that discloses exceptions to statements that the Startup makes in the agreement (called Representations and Warranties) regarding the company and its affairs. Also sometimes referred to as a Schedule of Exceptions.

Disinterested Director

Director who does not have a financial or other interest in the matter that is being considered for approval by the Board of Directors.


The delivery of some sort of compensation or other value (this can be cash, Stock or even a company asset) to the Stockholders in a company because the Stockholders hold Shares (could also be used to describe the Redemption or repurchase of a single person’s Shares).


A type of Distribution, typically provided for in the Certificate of Incorporation of a corporation.

Double Trigger Acceleration

When the Vesting that applies to either Stock or an Option can be accelerated upon the occurrence of two events, both of which must occur for the acceleration to be triggered. The first triggering event is usually a Change of Controlof the company, and the second triggering event is the termination of a Stockholder’s employment without “cause” (a term defined in either the Option AgreementEquity Incentive Plan or RSPA) or terminating a Stockholder’s employment for “good reason” (a term defined in either the Option Agreement, Equity Incentive Plan or RSPA).

Down Round

When a company completes an Equity Financing at a Per Share Price that is lower than the price at which Shares were sold in the previous FinancingStartups generally do not like Down Rounds because of the optics of the company’s value decreasing and the fact that a Down Round typically means the Investor coming in can negotiate for much more investor-friendly terms. Existing Investors are often displeased, and a Down Round may also increase the difficulty of recruiting Employees. A Down Round often triggers Anti-Dilution Protection rights.

Drag Along Rights

Allows a majority Stockholder to require that a minority Stockholder vote to approve a sale of the company to a third party. The idea is that a majority Stockholder may not be able to recognize the full value of the Stockholders stock holdings unless the majority Stockholder can sell the entire company to a third party by “dragging” along minority Stockholders. Drag Along Rights generally provide that the minority Stockholder enjoy some protections against abuse, including receiving the same terms in the sale as the majority Stockholder. In Preferred Stock Financings, Drag Along Rights are typically found in the Voting Agreement. Compare Tag Along Rights.

Due Diligence

What lawyers, bankers and Investors do to learn about a company. In a VC Financing, Investors (and their lawyers) conduct Due Diligence so they can understand what they are investing in. Due Diligence activities are broad and range from a review of relevant documents (often housed in a Data Room) and Financial Statements to on-site visits and interviews with management, outside accountants, counsel, customers and suppliers. In Capital Markets transactions, the bankers and lawyers conduct Due Diligence in order to establish a Due Diligence Defense.

Due Diligence Defense

The Underwriters' principal defense in Securities offerings lawsuits. The securities laws impose liability on certain persons and entities for damages resulting from any material untrue statement contained in, or omitted from, a Registration StatementIssuers are strictly liable for the information in the Registration Statement, but other entities (including Underwriters and the Board) involved in the offering can avoid liability by demonstrating a Due Diligence Defense. Specifically, Underwriters and the Board have an affirmative defense to liability if they have relied on experts for the Expertized Parts of the Prospectus and conducted a “reasonable investigation” for the other portions. Similar defenses are available to Rule 10b-5 claims made with respect to Rule 144A Financings and Regulation S offerings.

Due Diligence Request List

A list Investors provide to a company that they are considering investing in. The list requests certain information in order to conduct their Due Diligence. Depending on the type of company and the length of its existence, the depth of the Due Diligence Request List can vary and the process of preparing the response can either require a great deal of work or a lot of “not applicable” responses.

Duty of Candor

Fiduciary Duty of Director under Delaware judicial decisions that requires the Board of Directors to provide Stockholders with all the material information necessary to decide how to vote on a matter.

Duty of Care

Customarily articulated using the so-called objective “reasonable man” standard — that in making a decision a member of the Board of Directors must use the same degree of care as a reasonable business person would do in the conduct of his/her own business affairs. Under Delaware statutory law and judicial decisions, Directors clearly have an obligation to understand the situation and relevant facts, laws, etc., but in doing so are entitled to rely on Officers and other Directors of the corporation and on Advisors whom they reasonably believe are knowledgeable in the area. The seminal Delaware case on the Duty of Care is Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985), often referred to simply as Van Gorkom. See also Duty of Loyalty.

Duty of Loyalty

Encompasses both conflicts of interest (and how to guard against them) and the requirement that the Board of Directors act in Good Faith in what they believe is the best interests of the corporation and its Stockholders.

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