Deal Terms
Tranche
A portion of a larger investment, released upon meeting specific milestones — used in milestone-based financing to reduce investor risk.
A tranche is a portion of a larger investment delivered in stages, typically tied to milestone achievement. Example: a $2M seed investment structured as three tranches — $500K at signing, $750K upon product launch, $750K upon reaching $50K MRR. Tranched investments give investors protection: if milestones are missed, they aren't obligated to provide subsequent tranches. For founders, tranched deals reduce initial dilution (they only sell equity for money received) but create ongoing fundraising pressure and potential leverage for investors to renegotiate. Tranching is more common in seed deals with angel investors than in institutional VC (VCs typically prefer to invest the full amount at once and provide capital without strings). They're also common in biotech, where milestone achievement genuinely de-risks subsequent investments.