Startup Fundraising Glossary

An accelerator is a fixed-term, cohort-based startup program that invests capital for equity and provides mentorship, structure, and investor access, typically ending in a demo day. Most programs run about three months and invest between $100K and $500K for 5 to 10 percent equity.

An accredited investor is a person or entity that meets financial thresholds set by securities regulators (in the US: income above $200K, or $300K jointly, or net worth above $1M excluding primary residence) and may therefore invest in private securities like startup equity.

An acquisition is the purchase of one company by another, and the most common exit for venture-backed startups. Consideration can be cash, acquirer stock, or a mix.

Advisory shares are equity granted to startup advisors in exchange for guidance, connections, or credibility, typically 0.1 to 1 percent vesting over one to two years.

An angel investor is an individual who invests personal money in early-stage startups, typically writing checks between $10K and $250K at pre-seed and seed.

An angel syndicate pools money from multiple individual investors behind a lead who sources and manages the deal, allowing many small checks to invest as one entity.

ARR is the annualized value of a company’s recurring subscription revenue, excluding one-time fees and services. It is the headline metric for SaaS fundraising.

An anti-dilution provision protects investors if a company later issues shares at a lower price, by adjusting the earlier investors’ conversion price downward. The two main types are weighted average (standard) and full ratchet (aggressive).

A board seat is a voting position on a company’s board of directors, which governs major decisions like fundraising, executive hiring, and exits. Lead investors in priced rounds typically take one.

Bootstrapping is building a company using personal savings and customer revenue instead of outside investment, keeping full ownership and control.

A bridge round is interim financing, usually on SAFEs or convertible notes, that extends runway between major rounds, often from existing investors.

Burn multiple is net cash burned divided by net new ARR over the same period, measuring how efficiently a startup buys growth. Under 2 is considered fundable in 2026; under 1.5 is strong.

Burn rate is the amount of cash a company spends per month above what it earns. Gross burn is total monthly spending; net burn subtracts revenue.

A capitalization table (cap table) is the ledger of who owns what in a company: founders, investors, employees, and option holders, with share counts and percentages.

A capital call is a fund’s formal request for its limited partners to transfer a portion of their committed capital, made when the fund needs cash for investments or fees.

Carried interest (carry) is the share of a fund’s profits, typically 20 percent, that its managers receive after returning investors’ capital, usually above a hurdle rate.

Churn rate is the percentage of customers or revenue lost over a period. Logo churn counts customers; revenue churn counts dollars.

A cliff is the initial period of a vesting schedule during which no equity vests; if the person leaves before the cliff, they keep nothing. The standard is one year.

A co-investment is when multiple investors join the same round alongside each other, or when a fund’s LPs invest directly in a deal alongside the fund.

Cohort analysis groups customers by their start period and tracks each group’s behavior (retention, spending) over time, revealing whether the product actually keeps users.

A convertible note is a loan that converts into equity at a future priced round, carrying an interest rate (typically 4 to 8 percent) and a maturity date (typically 18 to 24 months), usually with a valuation cap or discount.

Corporate venture capital is startup investing done by large companies, either from the balance sheet or through a dedicated fund, combining financial returns with strategic goals.

Crowdfunding raises money from many small contributors online, in reward-based (pre-orders), equity-based (shares), or debt-based forms.

CAC is the average sales and marketing cost to acquire one customer, calculated as total acquisition spend divided by new customers in the period.

A data room is the organized set of documents investors review during due diligence: financials, metrics, cap table, contracts, and legal records, shared through a structured folder or tracked page.

Deal flow is the stream of investment opportunities an investor sees: the startups pitching, referred, or discovered in a given period.

Demo day is the culminating event of an accelerator batch where startups pitch to an audience of investors, typically in short, highly rehearsed presentations.

Dilution is the reduction of existing shareholders’ ownership percentage when new shares are issued, whether in financings, option grants, or SAFE conversions.

The distribution waterfall is the order in which exit proceeds are paid: debt first, then liquidation preferences by seniority, then common shareholders, with participating preferred complicating the flow.

A down round is a financing at a lower valuation than the previous round, diluting existing holders more heavily and often triggering anti-dilution adjustments.

Drag-along rights let a majority of shareholders force minority holders to join an approved sale of the company on the same terms, preventing small holders from blocking an exit.

Dry powder is committed but not yet invested capital that funds have available to deploy.

Due diligence is the investigation investors run before wiring money: verifying financials, metrics, legal standing, contracts, team, and technology claims.

An earnout is a portion of acquisition consideration paid only if the acquired company hits agreed post-close targets, such as revenue or retention milestones.

An elevator pitch is a summary of what a company does, for whom, and why it wins, deliverable in under 30 seconds: customer, problem, mechanism, proof.

Equity is ownership in a company, represented by shares. Startup equity comes mainly as common stock (founders, employees) and preferred stock (investors).

Equity crowdfunding sells actual shares (or share-equivalents) to many small investors through regulated online platforms, under frameworks like US Regulation Crowdfunding.

An exit strategy is how shareholders eventually convert their equity into cash or liquid stock, primarily through acquisition or IPO, occasionally through secondary sales.

A family office is a private organization managing the wealth of one wealthy family (single-family office) or several (multi-family office), often allocating part of it to direct startup investments.

A follow-on investment is additional capital an existing investor puts into a portfolio company in a later round, often using pro rata rights to maintain ownership.

Founder vesting subjects founders’ own shares to a vesting schedule (typically four years with a one-year cliff), so a departing founder keeps only what has vested.

Founder-market fit is the degree to which a founding team has unfair advantages in its specific market: domain expertise, technical depth, distribution access, or lived experience of the problem.

Full ratchet is the aggressive form of anti-dilution protection: in a down round, earlier investors’ conversion price resets entirely to the new lower price, regardless of how few new shares are issued.

Fully diluted shares count all shares outstanding plus everything convertible into shares: options (granted and often the unallocated pool), warrants, SAFEs, and notes.

A fund of funds invests in other investment funds rather than directly in companies, giving its investors diversified exposure to many VC portfolios at once.

A general partner is a manager of a venture fund: GPs raise the fund from limited partners, choose investments, sit on boards, and earn management fees plus carried interest.

A go-to-market strategy is the plan for reaching and converting customers: target segment, positioning, channels, pricing, and sales motion.

Gross margin is revenue minus the direct costs of delivering the product (COGS), expressed as a percentage of revenue. Software typically runs 70 to 90 percent.

Growth equity is capital for established, fast-growing companies past the venture-risk phase, typically large minority checks funding expansion rather than survival.

Hockey stick growth is the pattern of flat or slow progress followed by a sharp upward inflection, resembling the blade and shaft of a hockey stick.

A hurdle rate is the minimum return a fund must deliver to investors before managers earn carried interest, commonly around 8 percent in private funds.

Information rights are contractual guarantees that investors receive regular company information, typically financial statements, budgets, and key metrics on a set cadence.

An IPO is a company’s first sale of shares to the public, listing on a stock exchange and converting private equity into liquid, tradable stock.

An institutional investor is a professional organization investing pooled money: venture funds, pension funds, endowments, sovereign wealth funds, and insurance companies.

IRR is the annualized rate of return an investment produces, accounting for the timing of cash flows. It is one of the two headline metrics funds report to LPs, alongside MOIC.

An investment thesis is a fund’s articulated belief about where returns will come from: stages, sectors, geographies, and the specific changes in the world it wants to back.

An investor update is a periodic email founders send investors covering metrics, progress, cash position, and asks, typically monthly or quarterly.

The J-curve describes a venture fund’s returns over time: negative in early years as fees and losses land first, then rising as winners mature, tracing the letter J.

A KPI is a metric chosen to represent progress toward a goal: revenue growth, retention, activation rate, burn multiple, or whatever the stage demands.

The lead investor sets a round’s terms, writes the largest check, runs diligence, and typically takes the board seat; other investors follow on the lead’s terms.

A letter of intent is a mostly non-binding document expressing serious interest in a transaction (usually an acquisition) and sketching key terms before full negotiation.

LTV is the total gross profit a customer generates over their entire relationship with the company, driven by revenue per customer, gross margin, and retention.

Limited partners are the investors in a venture fund: endowments, pensions, funds of funds, family offices, and wealthy individuals who supply capital but stay passive.

A liquidation preference guarantees preferred shareholders get paid a set amount (usually 1x their investment) before common shareholders in an exit or wind-down.

A liquidity event is any transaction converting illiquid shares into cash or tradable stock: acquisition, IPO, or a significant secondary sale.

An MFN clause in a SAFE or note lets the investor adopt the better terms of any later instrument the company issues before conversion.

A micro VC is a small venture fund, typically under $50M, writing first checks of $100K to $1M at pre-seed and seed, often run by one or two partners.

Milestone-based financing releases capital in tranches tied to agreed achievements, such as clinical results, product launches, or revenue targets.

An MVP is the smallest version of a product that tests the core value hypothesis with real users, built to learn rather than to scale.

MOIC measures how many times an investment multiplied: total value returned divided by capital invested, ignoring time.

MRR is the recurring subscription revenue a company earns per month, excluding one-time fees. ARR is MRR times twelve.

NRR measures how revenue from an existing customer cohort changes over a year, including expansion, contraction, and churn. Above 100 percent means the base grows by itself.

A no-shop clause in a term sheet forbids the company from soliciting or negotiating competing offers for a set period, typically 30 to 60 days, while the investor completes diligence.

Non-dilutive funding is capital that does not take equity: grants, revenue-based financing, venture debt (mostly), tax credits, and customer prepayments.

An option pool is equity reserved for employee compensation, typically 10 to 20 percent of the company, refreshed at financing rounds.

A round is oversubscribed when committed investor demand exceeds the amount the company planned to raise.

Pari passu (Latin for “on equal footing”) means securities rank equally: holders share proceeds proportionally with no seniority between them.

Participating preferred stock takes its liquidation preference first and then also shares pro rata in the remaining proceeds, the so-called double dip.

A pay-to-play provision penalizes investors who do not participate in a future financing, typically converting their preferred stock to common or stripping protections.

A pitch deck is the 10 to 12 slide presentation founders use to raise capital: problem, solution, why now, market, traction, model, competition, team, and ask.

A pivot is a deliberate change in a startup’s core strategy: new customer, new product, or new business model, while retaining the team and learning.

A portfolio company is any startup a fund has invested in; collectively they form the fund’s portfolio.

Post-money valuation is the company’s value immediately after new investment: pre-money valuation plus the money raised.

Pre-money valuation is the negotiated value of a company before new investment is added.

Pre-seed is the first outside capital, typically $250K to $1M raised on SAFEs at $3M to $8M caps, funding a team from prototype toward seed-grade traction.

Preferred stock is the share class investors receive in priced rounds, carrying rights common stock lacks: liquidation preference, anti-dilution, and often board or veto rights.

Pro rata rights let an investor maintain their ownership percentage by investing in future rounds, buying enough of each new round to avoid dilution.

Product-market fit is the point where a product satisfies real market demand: retention flattens instead of decaying, growth compounds organically, and demand starts pulling.

A proof of concept demonstrates that an approach works technically, typically a prototype or pilot validating feasibility rather than market demand.

A qualified financing is the priced round, defined by a minimum size in a SAFE or note, that triggers automatic conversion of the instrument into equity.

A recapitalization restructures a company’s ownership and preference stack, often wiping or converting old preferred stock so new money can come in clean.

A revenue multiple values a company as a multiple of its revenue or ARR, the dominant valuation shorthand for growth-stage software.

A ROFR gives the company or investors the right to buy shares a holder wants to sell, on the same terms as the outside offer, before the sale can proceed.

A roadshow is a concentrated series of investor meetings marketing a financing, classically the pre-IPO tour, and by extension any founder’s batched fundraising sprint.

Runway is how long a company can operate before cash runs out: cash balance divided by net monthly burn.

A SAFE is a contract where an investor pays now and receives shares later, when a priced round converts it at its valuation cap or discount. It carries no interest and no maturity date.

A secondary sale is the sale of existing shares by current holders (founders, employees, early investors) to new buyers, as opposed to a primary issuance where the company sells new shares.

Seed funding is the first substantial round, typically $1M to $4M at $10M to $25M valuations in 2026, led by a seed fund and aimed at building a repeatable growth engine.

Series A is the first large institutional round, typically $8M to $15M at $30M to $60M post-money in 2026, usually the first fully priced round with a formal board.

Series B is the scaling round after Series A, typically $20M to $40M, funding expansion of a go-to-market machine that already works.

Series C and later rounds fund market leadership: new geographies, product lines, and acquisitions, with growth equity and crossover investors joining the cap table.

A shareholder agreement is the contract among a company’s owners governing share transfers, voting, board composition, and protective rights.

Signaling risk is the negative inference the market draws when an existing investor with information declines to follow on, most acutely when a large fund seed-invests but skips the Series A.

A strategic investor invests for business synergies (partnerships, product integration, eventual acquisition) in addition to financial return, typically a corporation or its venture arm.

Sweat equity is ownership earned through work rather than cash: founders, early employees, and sometimes advisors or contractors compensated in shares for below-market pay.

A term sheet is the mostly non-binding summary of a proposed investment: valuation, round size, liquidation preference, board composition, and key rights, negotiated before final documents.

TAM is the total revenue opportunity if a product captured its entire market; SAM (serviceable addressable) narrows to the reachable segment, and SOM (serviceable obtainable) to a realistic share.

Traction is measurable evidence of demand: revenue, usage growth, retention, waitlists, or paid pilots, scaled to the company’s stage.

A tranche is one portion of a financing released separately, usually against milestones, so “tranched” rounds deliver capital in stages rather than all at once.

An uncapped SAFE has no valuation cap: it converts at the next round’s price (sometimes with a discount), usually paired with an MFN clause protecting the investor from worse positioning.

A unicorn is a private startup valued at $1 billion or more, a term coined in 2013 when such companies were rare.

Unit economics are the revenues and costs of one unit of the business (a customer, order, or seat), revealing whether the model earns money at the atomic level.

A startup valuation is the negotiated price of the company at a financing, set by stage norms, comparables, revenue multiples where metrics exist, and competition for the deal.

A valuation cap is the maximum company valuation at which a SAFE or note converts, guaranteeing early investors a minimum ownership regardless of how high the priced round lands.

Venture capital is institutional investment in high-growth private companies, structured as funds raised from limited partners and deployed by general partners for equity stakes.

Venture debt is a loan to a venture-backed startup, typically sized against the last equity round and repaid over three to four years, usually with small equity warrants attached.

A venture studio creates startups internally: generating ideas, building initial products, recruiting founding teams, and taking large equity stakes (often 30 percent or more) as the institutional co-founder.

Vesting is earning equity over time or milestones; unvested shares are forfeited on departure. The startup standard is four years with a one-year cliff.

A warm introduction is a referral to an investor from someone they trust, typically a portfolio founder or co-investor, usually via a forwardable email.

A warrant is the right to buy shares at a fixed price in the future, commonly granted to lenders in venture debt deals or partners in commercial agreements.

A washout round is a financing at a valuation so low it massively dilutes existing shareholders, often part of a recapitalization where new investors take control.

A zombie startup earns enough to survive but not enough to grow into venture outcomes, leaving investors stuck and founders grinding without a path to exit or scale.