What does a soft commit refer to in investment terms?

A soft commit in investment terms is characterized by a verbal indication of investment interest. This means that an investor expresses preliminary support or willingness to invest but has not yet formalized that commitment through a legally binding agreement. This stage often involves discussions and negotiations, allowing both parties to gauge interest and alignment before moving forward with a more formal agreement. It's an important step in the investment process, as it can reflect a strong potential for actual funding, but it remains non-binding.

In contrast, a legally binding investment agreement signifies that all terms have been negotiated and agreed upon, making it a much firmer commitment. A confirmed funding round indicates that funds have been secured and the investment is finalized. A rejected investment proposal indicates that an investor has chosen not to pursue the opportunity, which is a definitive end to that potential funding relationship. Through understanding these distinctions, one sees clearly how a soft commit serves as an initial, non-binding expression of interest in the investment process.