Pledge Fund

AAA

DEFINITION of 'Pledge Fund'

A special type of fund in which members of the fund work toward a specific investment goal by making defined contributions in a pool over a period of time. Many angel investors have started to employ a pledge fund format in venture capital investing.

INVESTOPEDIA EXPLAINS 'Pledge Fund'

After the dotcom bubble, venture capitalists became more concerned about the start-up companies that they would finance. Many venture capitalists decided to set up pledge-fund style angel investor clubs instead of following the conventional format that was popularized in the 1990s. This was largely because using a pledge fund format would not force individual angel investors to invest in ventures that the majority of the group decided on, but would allow each member to elect whether to take part in an investment opportunity on a case-by-case basis. This method was well received by investors who were skittish about start-up investments after the dotcom bubble had burst.

RELATED TERMS
  1. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  2. Angel Investor

    An investor who provides financial backing for small startups ...
  3. Venture Capital Funds

    An investment fund that manages money from investors seeking ...
  4. Bubble

    1. An economic cycle characterized by rapid expansion followed ...
  5. Seed Capital

    The initial capital used to start a business. Seed capital often ...
  6. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
RELATED FAQS
  1. How do you find the break-even point using a payback period?

    It does not make sense to find the breakeven point using a company's payback period. A company's payback period is concerned ... Read Full Answer >>
  2. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  3. What is considered a reasonable interest rate for a syndicated loan?

    A 2010 survey of syndicated loans found an average interest rate of 7.9%. However, the majority of syndicated loans are floating ... Read Full Answer >>
  4. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  5. How strong are the barriers to entry for new companies in the telecommunications ...

    The barriers to entry for new companies in the telecommunications sector are very strong and primarily revolve around the ... Read Full Answer >>
  6. How much, if any, influence do non-controlling interest shareholders have?

    Non-controlling interest shareholders do not typically have much influence. The level of influence can vary, however, depending ... Read Full Answer >>
Related Articles
  1. Active Trading

    The Benefits Of An Investment Club

    Don't want to be a passive investor? Discover how investment clubs allow you to take control of your portfolio.
  2. Personal Finance

    4 Tips For Joining An Investment Club

    These circles of like-minded people are a wonderful way to explore investing without laying out large sums.
  3. Entrepreneurship

    How a Higher Minimum Wage Would Impact the Economy

    Doubling pay for hourly workers could have several knock-on effects to the economy. Here's a brief look at a big issue.
  4. Entrepreneurship

    How Peter Thiel Became a Superstar

    A review of the career of legendary Silicon Valley entrepreneur and investor Peter Thiel.
  5. Professionals

    Advisors: Get Those Referrals! (Here's How)

    If you're not talking to your clients about referring you to friends, you should be.
  6. Entrepreneurship

    10 Richest, Most Successful Tech Geniuses

    Unlike many industries, tech billionaires are mostly self-made. Many of these billionaires came from humble means and, through their own genius, changed the world.
  7. Entrepreneurship

    The 10 Richest Women In Finance

    Who are the top 10 women in the financial industry?
  8. Investing Basics

    Today's Top Young Investors

    Given the very different world that we live in as compared to the one the Warren Buffett graduated into, young, hopeful investors should be looking up to people closer to their own age.
  9. Economics

    Understanding Capital Investment

    Capital investment is a term that describes a company’s expenditures for long-term assets used in the operation of its business.
  10. Investing Basics

    4 Ways Millennials Can Buy Private Businesses

    Buying private businesses is a good way to have greater control over your investments while increasing your income and avoiding the fluctuations of the market.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!