- D -

Deal Flow: The measure of the number of potential investments that a fund reviews in any given period.
Deal Structure: An Agreement made between the investor and the company defining the rights and obligations of the parties involved. The process by which one arrives at the final term and conditions of the investment.
Deficiency Letter: A letter sent by the SEC to the issuer of a new issue regarding omissions of material fact in the registration statement.
Demand Rights: Contemplate that the company must initiate and pursue the registration of a public offering including, although not necessarily limited to, the shares proffered by the requesting shareholder（s）.
Depreciation: An expense recorded to reduce the value of a long-term tangible asset. Since it is a non-cash expense, it increases free cash flow while decreasing the amount of a company's reported earnings.
Dilution: A reduction in the percentage ownership of a given shareholder in a company caused by the issuance of new shares.
Dilution Protection: Applies to convertible securities. Standard provision whereby the conversion ratio is changed accordingly in the case of a stock dividend or extraordinary distribution to avoid dilution of a convertible bondholder's potential equity position. Adjustment usually requires a split or stock dividend in excess of 5% or issuance of stock below book value. Share Purchase Agreements also typically contain anti-dilution provisions to protect investors in the event that a future round of financing occurs at a valuation that is below the valuation of the current round.
Director: Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice president and all other operating officers, and decide when dividends should be paid （among other matters）.
Disbursement: The investments by funds into their portfolio companies.
Disclosure Document: A booklet outlining the risk factors associated with an investment.
Distressed debt: Corporate bonds of companies that have either filed for bankruptcy or appear likely to do so in the near future. The strategy of distressed debt firms involves first becoming a major creditor of the target company by snapping up the company's bonds at pennies on the dollar. This gives them the leverage they need to call most of the shots during either the reorganization, or the liquidation, of the company. In the event of a liquidation, distressed debt firms, by standing ahead of the equity holders in the line to be repaid, often recover all of their money, if not a healthy return on their investment. Usually, however, the more desirable outcome is a reorganization, which allows the company to emerge from bankruptcy protection. As part of these reorganizations, distressed debt firms often forgive the debt obligations of the company, in return for enough equity in the company to compensate them. （This strategy explains why distressed debt firms are considered to be private equity firms.）
Distribution: Disbursement of realized cash or stock to a venture capital fund's limited partners upon termination of the fund.
Diversification: The process of spreading investments among various different types of securities and various companies in different fields.
Dividend: The payments designated by the Board of Directors to be distributed pro-rata among the shares outstanding. On preferred shares, it is generally a fixed amount. On common shares, the dividend varies with the fortune of the company and the amount of cash on hand and may be omitted if business is poor or if the Directors determine to withhold earnings to invest in capital expenditures or research and development. Dividends can be paid either in cash or in kind, i.e. additional shares of stock.
Cumulative - Missed dividend payments that continue to accrue. Non-cumulative - Missed dividend payments that do not accrue. Participating - Dividends which share （participate） with common stock. Non-participating - Dividends which do not share with common stock.
Down Round: Issuance of shares at a later date and a lower price than previous investment rounds.
Drag-Along Rights: A majority shareholders' right, obligating shareholders whose shares are bound into the shareholders' agreement to sell their shares into an offer the majority wishes to execute.
Due Diligence: A process undertaken by potential investors —— individuals or institutions —— to analyze and assess the desirability, value, and potential of an investment opportunity.