Fundraising glossary: the terms investors use, in plain English

An independent appraisal of common stock used to set option strike prices in the US.

Faster vesting on an exit. Single trigger needs only a sale; double trigger needs a sale plus termination.

A fixed-term program that gives a cohort of startups money, mentoring and a demo day, usually for equity.

The UK equivalent of a SAFE, with a long-stop date for conversion.

An individual who invests their own money in early-stage companies.

An adjustment that gives investors more shares if a later round is priced lower.

A position on the board of directors, which hires and fires the CEO and approves major decisions.

A small raise, usually from existing investors, to reach the next milestone or round.

The net cash the company loses each month.

Customer acquisition cost: sales and marketing spend divided by new customers won.

The table of who owns what: shares, options, SAFEs and their percentages.

The share of customers or revenue lost in a period.

The period, usually one year, before any shares vest.

A loan that converts into shares at the next round, usually with interest, a cap and a maturity date.

A shared folder with the documents investors review in diligence.

The event at the end of an accelerator where startups pitch to investors.

The reduction in an existing shareholder’s percentage when new shares are issued.

A percentage reduction on the next round’s price for a SAFE or note investor.

A round at a lower valuation than the previous one.

A clause forcing all shareholders to join a sale approved by the required majorities.

The investor’s review of the company before closing: legal, financial, technical and commercial.

The harshest anti-dilution formula: earlier investors reprice fully to the down-round price.

Ownership calculated as if every option, warrant and convertible had become shares.

The investor’s right to receive financial statements and other company information.

The investor who sets the terms, does the diligence and usually takes the largest share of the round.

The right of preferred shareholders to be paid first when the company is sold or wound up.

Lifetime value: the gross profit a customer generates before churning.

Most favoured nation: a SAFE investor can adopt the better terms of any later SAFE.

Monthly and annual recurring revenue from subscriptions.

Revenue from last year’s customers today, including expansion and churn, as a percentage.

A binding promise not to seek other investors for a period after signing a term sheet.

Shares reserved for future employees, usually 8 to 15 percent after a seed round.

Creating or expanding the option pool pre-money so that the valuation is effectively lower.

Preferred stock that takes its preference and then also shares in the remaining proceeds.

Months it takes for a customer’s gross profit to repay the cost of acquiring them.

The current YC SAFE, where the investor’s percentage is fixed at amount divided by cap before the priced round.

The company’s value immediately after the round: pre-money plus the money raised.

What the company is worth before the new money comes in.

The class of shares investors receive in a priced round, with rights common stock does not have.

Pre-money valuation divided by the fully diluted shares before the round.

An equity round where investors buy shares at a negotiated price per share.

The right to invest in future rounds to keep the same ownership percentage.

Decisions that need the approval of preferred shareholders.

Capital repaid as a fixed percentage of monthly revenue until a cap is reached.

The company’s and investors’ right to buy shares a founder wants to sell before anyone else.

How many months the company can operate before cash runs out.

A Simple Agreement for Future Equity: money now, shares later, at the next priced round.

Selling existing shares, often founders’ shares, to investors instead of issuing new ones.

A separate agreement that gives an investor rights beyond the standard document.

Co-sale rights: if a founder sells shares, investors can sell alongside on the same terms.

Total, serviceable and obtainable market: the sizing framework investors expect.

A short, mostly non-binding summary of the proposed investment terms.

The maximum valuation at which a SAFE or note converts into shares.

A loan to a venture-backed company, usually alongside or after an equity round.

Earning shares over time; unvested shares are forfeited if the holder leaves.

An introduction to an investor by someone they know and trust, usually a founder they backed.