Fundraising terms
Comprehensive glossary of venture capital and startup terminology for founders and investors alike.
Funding Rounds
Pre-Seed Round
The earliest stage of funding, typically used to develop a prototype or minimum viable product before seeking more substantial investment.
Seed Round
Early-stage funding used to support initial market research, product development, and establishing a founding team.
Series A
First significant round of venture capital financing, typically sought after achieving product-market fit and demonstrating growth potential.
Series B
Funding round focused on scaling the business, expanding market reach, and growing the team after demonstrating successful execution.
Series C and Beyond
Later-stage funding rounds aimed at accelerating growth, entering new markets, or preparing for an IPO or acquisition.
Bridge Round
Short-term funding to 'bridge' the gap between major financing rounds, often used when a startup needs additional capital before securing its next planned round.
Valuation Terms
Pre-money Valuation
The valuation of a company before it receives the latest round of funding.
Post-money Valuation
The valuation of a company after it receives the latest round of funding (pre-money + new investment).
Cap Table
Short for 'capitalization table', a spreadsheet showing the equity ownership stakes in a startup, including all shareholders and their respective ownership percentages.
Unicorn
A privately held startup company valued at over $1 billion.
Decacorn
A privately held startup company valued at over $10 billion.
Dilution
The reduction in ownership percentage of existing shareholders when new shares are issued during a funding round.
Investment Structures
Convertible Note
A short-term debt instrument that converts into equity at a future financing round, typically with a discount and/or valuation cap.
SAFE (Simple Agreement for Future Equity)
An investment instrument created by Y Combinator that gives the investor the right to receive equity in a future funding round without being debt.
Equity Financing
Raising capital by selling shares in a company, typically with specific rights, preferences, and privileges.
Preferred Shares
A class of stock that has priority over common stock in dividend payments and assets in case of liquidation, often with additional rights and privileges.
Term Sheet
A non-binding document outlining the basic terms and conditions of an investment, which serves as a template for more detailed legal documents.
Investor Types
Angel Investor
An individual who invests their personal capital in early-stage startups, often providing mentorship and connections in addition to funding.
Venture Capital (VC)
Professional investment firms that manage pooled funds from limited partners to invest in high-growth potential startups.
Lead Investor
The investor who sets the terms and often contributes the largest amount in a funding round, typically taking a more active role in the company.
Strategic Investor
A corporate entity that invests in startups that align with their strategic interests, often providing industry expertise and market access.
Family Office
Private wealth management advisory firms that serve ultra-high-net-worth individuals or families by investing their money, including in startups.
Exit Strategies
IPO (Initial Public Offering)
The process of offering shares of a private company to the public in a new stock issuance, allowing a company to raise capital from public investors.
M&A (Mergers and Acquisitions)
The consolidation of companies through various financial transactions, including mergers, acquisitions, and takeovers.
Acquihire
The process of acquiring a company primarily for its talent rather than its products or services.
Secondary Market
The buying and selling of existing shares of private companies by investors, employees, or founders, providing liquidity without a public offering.
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