Recapitalization
Definition
A recapitalization restructures a company’s ownership and preference stack, often wiping or converting old preferred stock so new money can come in clean.
How it comes up in fundraising
Recaps rescue fundable businesses trapped under broken cap tables, at the cost of heavy dilution for prior holders.
Frequently asked questions
When does a recap make sense?
When total preferences and dead equity make new investment impossible; a painful reset beats a shutdown.
What happens to founders in a recap?
New investors typically re-up active founders with fresh equity and vesting, since the business needs them motivated.
Related terms
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