A:

Evergreen funding is a term used to describe the incremental addition of money into a business. Before a business is started or a new product is introduced to market, the business owner or the investment bank that represents the business owner will approach venture capitalists and other investors for financing.

Usually, these investors or venture capitalists will provide the company with capital in one lump sum payment. At this point, the company will invest the capital in short-term securities in order to yield interest.

It is customary to make arrangements to receive venture capital funds upfront. With evergreen funding, however, investors supply the capital in incremental payments throughout the development phase of the company or product. Thus, the company receives money from its investors as the need for funds arises, and alike the evergreen tree, is never without the "green" the company needs to survive.

For more on this topic, read The Frosty, Festive World of Investing.

This question was answered by Chizoba Morah.

RELATED FAQS
  1. How is venture capital different from other kinds of equity financing?

    Learn how venture capital equity financing differs from other funding options and what companies need to be aware of prior ... Read Answer >>
  2. Where does venture capital come from?

    Obtaining funding from venture capitalists is the way to go for those who have great ideas with potential for becoming lucrative ... Read Answer >>
  3. Which industries can benefit the most from venture capital?

    Read about the kinds of industries that tend to receive the most venture capital funding and why private equity investors ... Read Answer >>
  4. How do venture capitalist investors view sustainable growth in a startup?

    Discover how venture capital investors view sustainable growth in a startup. Venture capitalists look to identify startups ... Read Answer >>
  5. What type of funding options are available to a private company?

    Understand how private companies can obtain financing for startup, growth or expansion projects, and learn how this differs ... Read Answer >>
  6. What are the different equity financing options available to companies in the United ...

    Learn what equity financing options are available to small, mid-sized and large companies within the United States and understand ... Read Answer >>
Related Articles
  1. Small Business

    A Day in the Life of a Venture Capitalist

    Learn more about the job description of a venture capitalist and discover what a typical day in the life of this professional might look like.
  2. Insights

    The Frosty, Festive World Of Investing

    From Santa Claus rallies to evergreen loans, Wall Street can be a veritable winter wonderland for investors.
  3. Investing

    A Look Into The Secrets Of Venture Capitalism

    Venture capitalists own an equity stake in the start-up and have a say in the functioning of the company. Investments are generally made in early stages of a company with long term high growth ...
  4. Small Business

    Does Your Startup Need Venture Capital Money?

    Venture capital funding provides capital to grow a business. However, entrepreneurs will also lose some control over business decisions.
  5. Financial Advisor

    A How-To Guide to Being a Venture Capitalist

    So, you want to be a venture capitalist? Here's what it takes (besides capital).
  6. Managing Wealth

    A Look into the Exciting World of Venture Capital

    We look into the world of venture capital, where deep-pocketed investors gamble on funding the next big startup (or the next big flop).
  7. Small Business

    Is Equity Financing the Right Choice for Your Business?

    Discover the benefits and drawbacks of equity financing for a small business, and learn when equity financing should be used instead of debt financing.
  8. Investing

    How Social Venture Capital Is Changing the World

    Learn what social venture capital is and the ways in which it differs from traditional venture capital. Identify two leading social venture capital firms.
  9. Small Business

    Fed Raising Rates Affects Startup Funding

    With interest rates having nowhere else to go but up, the Fed’s impending interest rate raise will likely begin to reverse the flow of startup funding.
  10. Insights

    Is Venture Capital Slowing in the U.S.?

    Venture capitalists are more selective in 2016, turning away from U.S. startups in an era of big business and slow growth prospects.
RELATED TERMS
  1. Evergreen Funding

    Evergreen funding is the gradual infusion of capital into a new ...
  2. Evergreen Option

    A type of employee stock option plan in which additional shares ...
  3. Evergreen Loan

    A loan that does not require the principal amount to be paid ...
  4. Evergreen

    Evergreen is a contract provision that automatically renews an ...
  5. Venture Capital

    Venture Capital is money provided by investors to startup firms ...
  6. Diluted Founders

    A slang term often used by venture capitalists to describe the ...
Hot Definitions
  1. Liquid Asset

    An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
  2. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  3. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  4. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  5. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  6. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
Trading Center