Soft circle
A verbal indication from an investor of a specific amount they intend to invest, subject to conditions.
Why it matters
A soft circle is not money. It is a statement of intent that depends on a lead emerging, a committee approving, or the round coming together. Counting it as committed capital is how founders convince themselves a round is closing when it is not.
A worked example
An investor says they are "in for $500K once you have a lead." That is a soft circle, and it disappears if no lead appears.
What is typical
A meaningful share never converts. Track soft circles separately from committed capital and assume attrition.
Related terms
Lead investor
The investor who sets the terms, does the deepest diligence and usually takes the largest allocation.
Read more →Term sheet
A mostly non-binding document setting out the proposed valuation, structure and key economic and control terms of an investment.
Read more →Run your raise on this
VCTerminal models these terms on your real cap table, so you can see what a term sheet pays you before you sign it.
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