VC Glossary

Every term founders need to know, explained simply.

All Fundraising Legal Metrics Operations

B

Board SeatA position on the company's board of directors, giving the holder voting power on major corporate decisions.Legal

C

CliffA waiting period (typically one year) before any equity begins to vest, protecting the company from short-tenure departures.Legal

D

Drag-Along RightsA provision that allows majority shareholders to force minority shareholders to join in a sale of the company.Legal

I

Information RightsContractual rights entitling investors to receive regular financial and operational reports from the company.Legal IP AssignmentA legal agreement transferring ownership of intellectual property created by founders and employees to the company.Legal

M

Most Favored Nation (MFN)A clause guaranteeing an investor will receive terms at least as favorable as any subsequent investor in the same or similar round.Legal

R

Right of First Offer (ROFO)A contractual right requiring a shareholder to offer their shares to existing investors before selling to outside parties.Legal Right of First Refusal (ROFR)A contractual right allowing existing shareholders to match any outside offer for shares before the sale can proceed.Legal

T

Tag-Along RightsA provision allowing minority shareholders to join in a sale when majority shareholders sell their stake.Legal

V

VestingA schedule by which ownership of shares or options is earned over time, typically four years with a one-year cliff.Legal