Drip Feed

AAA

DEFINITION of 'Drip Feed'

1. The process of investing on an ongoing basis in a small but growing firm over a period of time. Essentially, a drip feed results in a startup company receiving capital contributions as the need for capital arises, rather than getting a lump sum capital contribution at the company's inception.

2. The process of retail investors contributing small amounts of their savings to their investment pool on a periodic basis, such as $200/month, for example.

INVESTOPEDIA EXPLAINS 'Drip Feed'

1. With this type of financing arrangement, startup firms operate with very little surplus capital; their financing needs are only contributed to by venture capitalists as the need for capital arises.

2. Individual investors can benefit from this type of strategy: it reduces the risk of entering positions in overpriced securities, since the investments are spread out. This technique also moderately smooths market fluctuations for the investor, since he or she benefits from dollar-cost averaging (a fixed dollar contribution amount each month, for example, will result in more equity shares being purchased at low market prices than at high prices). Of course, as a trade-off for the safety of this added smoothness, investors sacrifice the potentially higher returns they might have seen if they had simply made a lump sum investment at low market prices.

RELATED TERMS
  1. Dollar-Cost Averaging - DCA

    The technique of buying a fixed dollar amount of a particular ...
  2. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  3. Vulture Capitalist

    1. A slang word for a venture capitalist who deprives an inventor ...
  4. Average Up

    The process of buying additional shares at higher prices. This ...
  5. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  6. Average Down

    The process of buying additional shares in a company at lower ...
Related Articles
  1. Insurance

    Take Advantage Of Dollar-Cost Averaging

    We explain how dollar-cost averaging offers protection and opportunity in a sinking market.
  2. Retirement

    Dollar-Cost Averaging Pays

    Get the most out of your mutual fund by using this simple but powerful strategy.
  3. Investing

    Fight The Good Dollar-Cost Averaging Fight

    Stop sitting on the fence and learn both sides of this hot debate.
  4. Professionals

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  5. Investing News

    #1 Country For Tech Start-Ups: U.S.A

    U.S. tech companies are receiving increased levels of investor funding. In 2014, the number of mega-deals for such ventures doubled over the previous year.
  6. Entrepreneurship

    Go To College Or Become An Entrepreneur?

    The rising cost of higher education and high unemployment rate following the Great Recession has caused many young people to question the value of college.
  7. Entrepreneurship

    How to Make Money with YouTube

    YouTube is the third most visited site in the world, and numerous people are making money thanks to the site's popularity. Here's how you can do it.
  8. Charts & Patterns

    How To Become A Private Equity Associate

    With the right planning, second- and third-year investment banking analysts can graduate to an associate position at a private equity firm.
  9. Investing

    What is Asset Management?

    In the investment world, asset management refers to active management of an investor’s portfolio by a financial services company – usually an investment bank.
  10. Investing

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center