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. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  2. What are the pros and cons of downround financing?

    Down round financing is often reflected in very negative terminology. In some cases, it can be very bad for existing shareholders. ... Read Full Answer >>
  3. What type of companies use downround financing?

    Down round financing involves selling stock to new investors at a lower price than the investors paid. Shares for the company ... Read Full Answer >>
  4. What are the pros and cons of holding a non-controlling interest in a company?

    Most investors hold a non-controlling interest – also known as a minority interest – of the companies in which they own shares. ... Read Full Answer >>
  5. How do changes in capital stock illustrate the overall health of a company?

    Changes in capital stock normally illustrate that the overall health of a company is strong, and that it is seeking to raise ... Read Full Answer >>
  6. What type of funding options are available to a private company?

    Similar to public companies, private companies also need funding for various reasons. A business typically needs the greatest ... 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. Professionals

    Top Strategies to Attract Elite Clients

    Here's how to think outside of the box when it comes to attracting a high-net-worth client base.
  4. Investing Basics

    Explaining the Volcker Rule

    The Volcker Rule prevents commercial banks from engaging in high-risk, speculative trading for their own accounts.
  5. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.
  6. Economics

    What Does Capital Intensive Mean?

    Capital intensive refers to a business or industry that requires a substantial amount of money or financial resources to engage in its specific business.
  7. Personal Finance

    5 Assets Only The Ultra Rich Can Afford

    Yacht? Private jet? Not that unusual. If you’re rolling in the big bucks, you can buy something much more interesting.
  8. Entrepreneurship

    Three Steps Elon Musk Took To Become Successful

    What steps did Elon Musk take to become the person he is today? We explore three steps that are accessible to all of us.
  9. Entrepreneurship

    Who Invented Apps For Smart Phones?

    Mobile devices have radically changed how we communicate, conduct business, consume entertainment, and manage our lives, all thanks to apps.
  10. Entrepreneurship

    The Story Behind Tesla's Success

    Tesla’s cars have been a hit not only car buyers, but also catapulted the company into the spotlight as one of the few successful independent automakers.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
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!