Reference

Glossary

Short definitions anyone can skim — with optional nuance, links, and discussion prompts when you want more. Not legal or investment advice; we are a learning tool.

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409A valuationEmployee equityA US tax rules concept: private companies get an independent valuation to set the “fair market value” for stock options so grants have a defensible strike price. Think of it as the paperwork behind option pricing.
AcceleratorProgramsA fixed-term program (often a few months) that gives startups mentoring, cohort peers, and sometimes a small investment in exchange for equity.
Acqui-hireOutcomesWhen a company buys another mostly to hire its team — the product may shut down. Founders and investors may get small payouts; engineers often get retention packages.
Angel investorInvestor typesAn individual who invests personal money in very early companies, often before big funds. They may invest for returns, learning, or wanting to help a space they care about.
Annual recurring revenue (ARR)Revenue metricsRoughly MRR × 12 for subscription businesses — a yearly view of recurring revenue investors love for comparing scale.
Anti-dilution protectionOwnershipClauses that give investors extra shares if a future round prices the company lower than their round — protecting them from a “down round.” Founders and employees often feel more dilution when these trigger.
B2B, B2C, and B2B2CStrategyShorthand for who you sell to: **B2B** sells to businesses, **B2C** sells to consumers, **B2B2C** sells through a business to reach end users (banks offering your app to customers, platforms embedding your product).
Board observerGovernanceSomeone who attends board meetings and sees materials but usually does not vote. Observers let investors stay informed without adding another voting director seat.
Board of directorsGovernanceThe small group legally responsible for big company decisions: hiring/firing the CEO, major deals, and protecting shareholders. Early boards are often founders plus lead investors.
Bookings vs revenueRevenue metricsBookings are commitments (signed contracts, orders) — revenue is recognized when you actually earn it under accounting rules. They can diverge with annual prepay, multi-year deals, or implementation delays.
BootstrappingFundraisingGrowing a company with customer revenue and your own savings instead of raising investor money. You trade slower scale for more control and fewer bosses.
Bridge loanDebtShort-term money to get you from today to a bigger fundraise or revenue milestone. It “bridges” a timing gap — weeks or months, not years.
Bridge roundFundraising roundsA small interim fundraise to extend runway until a larger round or milestone. It signals “we need oxygen,” not always “we are failing.”
Burn rateOperating financeHow much cash the company spends per month **more** than it earns — the speed of the leak. Net burn subtracts revenue from gross spending.
CAC payback periodSales efficiencyHow many months of gross profit it takes to earn back what you spent to acquire a customer. Shorter payback means less cash tied up growing.
Cap tableOwnershipA spreadsheet-style record of who owns what in the company: founders, employees, investors, and option pools. If the company succeeds or sells, the cap table decides who gets paid how.
Churn rateRetentionThe share of customers or revenue you lose in a period. Low churn means people stick around; high churn means a leaky bucket even if sales look good.
Common stockOwnershipThe “regular” equity owners — usually founders and employees. They are last in line if the company sells for less than hoped, but they capture the upside if things go very well.
Convertible noteFundraising instrumentsA loan that is meant to turn into equity later, usually at a discount or with a valuation cap when you raise a proper round. Until then, it behaves like debt.
Corporate venture capital (CVC)Investor typesInvestment arms of large companies that back startups, often for strategic learning, partnerships, or future acquisition — not only for pure financial return.
Customer acquisition cost (CAC)Sales efficiencyHow much you spend on sales and marketing to win one new customer. Lower CAC with healthy retention usually means a more efficient business.
DilutionOwnershipWhen you issue new shares, existing owners’ percent of the company usually shrinks — like slicing the same pizza into more pieces. It is normal when you raise money or hire with equity.
Down roundFundraisingA fundraise where the company’s valuation is **lower** than the last round. It can happen when markets cool or the company misses targets. It is stressful but sometimes necessary to survive.
Drag-along rightsInvestor rightsA clause that lets a majority of certain shareholders force smaller holders to sell in an acquisition everyone approved. It helps buyers get 100% of the company without chasing every tiny holder.
Due diligenceDeal processThe homework investors do before they send money: checking finances, legal docs, customers, and team. Think of it as a trust-building audit, not a personal attack.
Emerging marketMarkets & strategyA country or region where the economy is growing fast, rules are still changing, and global investors often pay less attention than they do to Silicon Valley or Western Europe.
Exclusivity period (no-shop)Deal processA window where you agree not to run a competing fundraising process while one investor diligences you. It focuses energy on closing instead of shopping every term sheet at once.
ExitOutcomesWhen owners turn equity into cash or tradable stock — usually through a sale (M&A) or going public (IPO). Investors talk about exits because that is how they return money to their own backers.
Extension roundFundraising roundsMore capital from mostly existing backers — or a small inside group — on similar terms to the last round, often to buy time to hit milestones. Not always a bridge; sometimes called an “extension” or “insider round.”
Founder vestingEmployee equityFounders earn their shares over time, like employees. It protects the team if a cofounder leaves early — their unvested shares can return to the company.
Frontier marketMarkets & strategyA step beyond “emerging”: smaller or less liquid capital markets, often with harder access to banking and venture money, but sometimes with very fast growth.
Fully diluted ownershipOwnershipOwnership calculated as if every promised slice of the pie counted today: exercised and unexercised options, the full option pool, and sometimes converting SAFEs and notes. It answers “what percent is this really?”
Fundability scoreStartup AtlasA simple score on a Startup Atlas memo that summarizes how ready a startup looks for early investment, based on the memo’s analysis. It is a label, not a verdict on you as a founder.
Holding company vs operating companyMarkets & strategyA **holding company** owns stakes in other companies; an **operating company** runs day-to-day business. Startups sometimes separate them for tax, liability, or cross-border structure — especially when investors want a familiar topco.
IncubatorProgramsA longer, softer support environment for very early ideas — office space, advice, sometimes university ties — often without a sharp demo day deadline.
Information rightsDeal processContract terms that let investors receive periodic updates: financials, KPIs, and sometimes board materials. They help backers track health without running the company day to day.
Initial public offering (IPO)OutcomesSelling shares to the public on a stock exchange for the first time. It turns private shares into liquid stock millions can trade — with heavy rules and ongoing reporting.
Investment memoStartup AtlasA short written brief that explains what a company does, why it might win, and what could go wrong. Investors use memos to decide if a first meeting is worth their time.
Lead investorDeal processThe investor who anchors a round: often sets terms, does heavy diligence, and signals confidence so others follow. Not every small check has a formal lead.
Lifetime value (LTV)Sales efficiencyHow much gross profit a typical customer brings over their whole relationship with you. It answers whether spending to acquire them makes sense.
Liquidation preferenceOwnershipA rule that says certain investors get their money back (sometimes a multiple) before common shareholders split what is left — usually when the company is sold or shuts down.
LTV:CAC ratioSales efficiencyLifetime value divided by customer acquisition cost — a shorthand for whether you earn enough from a customer to justify what you spent to win them. Many teams want this well above 1×; “how much above” depends on payback, margins, and growth goals.
Marketplace (take rate)StrategyA business that matches supply and demand — riders and drivers, hosts and guests, buyers and sellers — and usually earns a **take rate**: a percent or fee on each transaction.
Mezzanine financingDebtHybrid financing — riskier than a bank loan, cheaper than pure equity — often used late-stage before an IPO or buyout. It can convert or come with warrants.
MFN clause (most favored nation)Fundraising instrumentsA promise that if you give a **better** deal to someone else later (lower valuation cap, bigger discount, etc.), this investor can ask to match those sweeter terms.
Minimum viable product (MVP)ProductThe smallest version of your product that still lets you learn from real users. It is not an excuse for broken junk — it is a focused experiment.
Monthly recurring revenue (MRR)Revenue metricsSubscription revenue you expect every month, annualized mentally by ×12 for ARR. It shows predictable income, not one-off sales spikes.
Net revenue retention (NRR)Revenue metricsFor a cohort of existing customers, how recurring revenue changes over a period after churn, downgrades, and expansions. NRR above 100% means expansions beat losses — a hallmark of strong B2B SaaS retention.
Option poolEmployee equityA chunk of shares set aside to hire people with stock options. Investors often want a pool created or enlarged before they invest so future hires do not dilute only them.
Participating preferredOwnershipPreferred shares that first take their liquidation preference, then also share in leftover proceeds like common — “double dipping.” Less founder-friendly than non-participating preferred.
Party roundFundraising roundsA round with many small checks and sometimes no single strong lead. Fast to raise from friends and angels; harder when you need someone to price terms, do diligence, and support you in tough moments.
Pitch deckFundraisingA slide deck that tells your company story: problem, product, market, team, and how you will use money. It is a map for a live conversation, not a novel.
Post-money SAFEFundraising instrumentsA version of the SAFE where ownership is calculated after the new money is counted. It makes “who owns what percent” easier to see than older pre-money versions.
Post-money valuationValuationCompany value **after** the round’s cash is counted. Owning “10% post” means you have one-tenth of the company once that round closes.
Post-termination exerciseEmployee equityAfter someone leaves, they usually have a limited window to exercise vested options (pay the strike and turn options into shares). If the window passes, unexercised options typically expire.
Pre-money valuationValuationWhat investors agree the company is worth **before** their new money hits the bank. It sets the baseline for price per share in a priced round.
Pre-seedFundraising roundsThe earliest institutional-style checks before a classic seed: often angels, micro-funds, or small SAFEs to build the first product and team. Labels blur by city — focus on what milestone the money buys, not the name.
Preferred stockOwnershipA class of shares investors usually buy in priced rounds. It often comes with extra protections — like getting money back first in a sale — compared to common stock.
Priced roundFundraising instrumentsA fundraise where you sell shares at a specific company valuation today. Everyone knows the price per share — unlike most SAFEs and notes before they convert.
Pro rata rightsInvestor rightsThe option for an existing investor to invest their share of a new round so they stay roughly the same percent owner. It keeps winners from being washed out without paying more.
Product–market fit (PMF)StrategyThe moment when people really want what you built — retention is strong, growth feels pulled not pushed, and customers would miss you if you disappeared. It is fuzzy but recognizable.
Protective provisionsInvestor rightsClauses that require investor approval — or a class vote — before the company does certain big things: selling the company, issuing new stock, changing the charter, or taking on large debt.
Restricted stockEmployee equityActual shares awarded upfront that usually come with restrictions and a vesting schedule. Common for very early employees and founders; tax timing is different from options — worth professional advice.
Restricted stock units (RSUs)Employee equityA promise to deliver shares later when restrictions lift — usually vesting milestones or time. RSUs show up more in late-stage private companies and public firms than in tiny two-person startups.
Revenue-based financingAlternative financingCapital you pay back as a share of revenue over time instead of giving up equity right away. It can fit businesses with steady sales but uneven venture fit.
Reverse vestingEmployee equityFounders already own shares, but the company can buy back unvested shares for a token price if someone leaves early. It is vesting logic applied to shares you already hold — common in early startup formations.
Right of first refusalInvestor rightsIf a shareholder wants to sell shares to an outsider, ROFR lets the company or existing investors buy those shares first on the same terms — before the outsider can.
RunwayOperating financeHow many months your company can keep operating at the current burn rate before cash runs out. Longer runway usually means more time to fix product or raise.
SAFEFundraising instrumentsSAFE stands for Simple Agreement for Future Equity. It is a short contract where an investor gives cash now and gets shares later, usually when you raise a priced round.
SAFE discountFundraising instrumentsA percent off the price per share that early SAFE holders pay when their SAFE converts — another way to thank people who invested before the priced round.
SAM (serviceable addressable market)Market sizingThe slice of TAM you could serve with your current product and business model — realistic geography, segments, and price points included.
Secondary saleLiquidityWhen existing shareholders sell stock to someone else **before** a big IPO or acquisition — early employees or angels cashing out a slice to buy a house, for example.
Seed roundFundraising roundsEarly institutional or semi-institutional funding to find product–market fit and build the first real team. Size and shape vary wildly by city and year.
Series AFundraising roundsUsually the first big venture round after seed, meant to scale something that already works — repeat customers, a repeatable sales motion, or clear usage growth.
Series BFundraising roundsGrowth-stage funding after Series A — typically to pour fuel on a model that is working: sales, expansion, or product depth.
SOM (serviceable obtainable market)Market sizingThe part of SAM you can realistically win in the next few years given competition, sales capacity, and brand starting from zero.
Special purpose vehicle (SPV)Fundraising instrumentsA separate legal entity set up for one job — hold one investment, run a syndicate, or isolate risk. Angels and funds sometimes invest through SPVs to pool checks into a single line on your cap table.
Stock optionsEmployee equityThe right to buy company shares later at a fixed “strike” price, usually as a reward for joining early. They often vest over four years so people earn them while they stay.
Tag-along rightsInvestor rightsIf some shareholders sell control or a large block, tag-along lets smaller holders join the sale on the same price and terms so they are not left behind in a private company.
TAM (total addressable market)Market sizingIf everyone who could possibly buy your product did, how big could revenue be? It is a ceiling thought experiment, not a sales forecast.
Term sheetDeal processA short outline of the main deal terms before lawyers write the long contracts. It covers money, ownership, and key rights — not every detail.
UnicornEcosystem labelsStartup slang for a private company valued at $1 billion or more. It is a headline label — not proof of a great business or a sure exit.
Usage-based pricingRevenue metricsCustomers pay based on how much they consume — API calls, seats active, gigabytes, orders processed — instead of a flat subscription. Revenue can grow with customer success without constant renegotiation.
Valuation capFundraising instrumentsA ceiling on the company value used to calculate how many shares an early SAFE or note holder gets when it converts. It rewards people who took risk early.
Venture capital (VC)Investor typesProfessional money managers who raise funds from others (LPs) and invest in startups for high risk / high return. They usually focus on companies that can grow very large.
Venture debtDebtLoans aimed at venture-backed startups, often after a priced round. Lenders bet you will keep raising or become profitable enough to repay.
Vesting accelerationEmployee equitySpeeding up how fast shares or options vest when something big happens. Single trigger often ties to one event (like a sale); double trigger usually needs a sale **and** being fired or demoted without cause.
Vesting cliffEmployee equityA period at the start of a vesting schedule — often one year — where nothing vests until the cliff date hits, then a chunk vests at once. After that, vesting usually continues monthly or quarterly.
WarrantDebtA contract that gives someone the right to buy shares later at a set price, often bundled with loans. Lenders use warrants for extra upside if the company does well.