VC Glossary

Every term founders need to know, explained simply.

All Fundraising Legal Metrics Operations

A

Anti-DilutionA protection mechanism that adjusts an investor's conversion price downward if the company later raises at a lower valuation.Fundraising

B

Bridge RoundA smaller fundraise designed to extend a company's runway until it can raise a larger round on better terms.Fundraising

C

Cap TableA spreadsheet showing who owns what percentage of a company, including all shareholders, option holders, and convertible instruments.Fundraising Convertible NoteA short-term loan that converts into equity at a future financing round, typically with a discount and/or valuation cap.Fundraising

D

DilutionThe reduction in existing shareholders' ownership percentage when new shares are issued in a fundraising round.Fundraising Down RoundA funding round where the company raises money at a lower valuation than its previous round, signaling setbacks.Fundraising

L

Lead InvestorThe investor who sets the terms for a fundraising round, typically writing the largest check and often taking a board seat.Fundraising Liquidation PreferenceA term that determines how proceeds are distributed when a company is sold, ensuring investors get paid before common shareholders.Fundraising

P

Post-Money ValuationThe value of a company immediately after a new investment, calculated as pre-money valuation plus the amount raised.Fundraising Pre-Money ValuationThe value of a company immediately before a new investment, used to calculate how much equity investors receive.Fundraising Priced RoundA fundraising event where the company sells shares at a specific price per share, establishing an explicit valuation.Fundraising Pro Rata RightsAn investor's contractual right to participate in future funding rounds to maintain their ownership percentage.Fundraising

R

RunwayThe number of months a startup can operate before running out of cash, calculated from current cash balance and monthly burn rate.Fundraising

S

SAFE NoteA Simple Agreement for Future Equity that lets startups raise money without setting a valuation upfront.Fundraising

T

Term SheetA non-binding document outlining the key terms of an investment, serving as the basis for negotiation before legal drafting.Fundraising