VC & PE Glossary
What Is Recap?
Updated
Definition
A recap (recapitalization) restructures a company's ownership and debt — often bringing in new investors, refinancing debt, or resetting valuations — without necessarily selling the whole business to an outside buyer.
Useful for: Founders, Investors
A recap is shorthand for recapitalization — restructuring equity and/or debt so the company’s capital base matches current reality and forward plan.
How it works
In venture, a recap often means a down round with pay-to-play, ratchet adjustments, or a new lead taking control — wiping or cramming down prior rounds. In PE, a dividend recap adds debt and pays shareholders; a sponsor recap injects equity to pay down debt or fund growth. Founders may roll equity, leave, or reset vesting. Legal steps include charter amendments, new stock classes, and investor consents.
Recaps differ from full acquisitions: the same operating company often continues under a new cap table. Distressed recaps pair with covenant resets and management changes.
Why it matters
- Founders: A recap can extend runway with painful dilution — better than shutdown if the business still has a path.
- Investors: Prior rounds choose between participating, taking structure, or writing off.
- Employees: Options may be repriced, cancelled, or replaced — communication matters.
Common mistake
Using “recap” in a deck to mean a quarterly business summary. In finance it always implies capital-structure change.
Related ideas
/glossary/recapitalization, /glossary/down-round, pay-to-play, and restructuring.
Related terms
- Down Round — A down round is a financing where a company raises capital at a lower valuation per share than its previous round—diluting existing shareholders and often triggering protective provisions.
- Recapitalization — Recapitalization is a financial restructuring that materially changes a company's mix of debt and equity — issuing new shares, repurchasing stock, refinancing loans, or bringing in sponsors — to stabilize, grow, or extract value while the business continues operating.
Common questions
Short answers for founders, LPs, and operators