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. Dotcom

    A company that embraces the internet as the key component in ...
  2. Venture Capital

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

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

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

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

    The initial capital used to start a business. Seed capital often ...
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. Investing News

    An Emerging Relationship: Tech Startups & Marijuana

    An increasing number of funding platforms are emerging to support marijuana start-ups, although the marijuana industry is still controversial.
  4. Entrepreneurship

    Best Books For Entrepeneurs

    Entrepreneurs wear many hats. Here are books that will help you find and manage talent, provide ultimate customer service, drive up sales, and much more.
  5. Fundamental Analysis

    Private vs Public Equity: What's Best?

    What is the better way for a company to attract investors; by making its stock available for sale to whoever wants some, or by petitioning rich people?
  6. 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, ...
  7. 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.
  8. 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.
  9. 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.
  10. 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.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. 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 ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. 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 ...
Trading Center