Fundraising Glossary

41 terms founders meet while raising, explained without jargon.

• 409A Valuation — An independent appraisal of a private company's common stock, used to set the strike price for employee options.
• 83(b) Election — A filing that lets a founder pay tax on restricted shares at grant, when they are worth almost nothing, rather than as they vest.
• Angel Investor — An individual investing personal money into early-stage startups.
• ARR (Annual Recurring Revenue) — The annualised value of a subscription business's recurring revenue, excluding one-off fees.
• Burn Multiple — Net burn divided by net new ARR — how much cash is consumed per unit of growth.
• Burn Rate — How much cash a company consumes each month.
• CAC (Customer Acquisition Cost) — The total cost of acquiring one new customer, including sales and marketing.
• CAC Payback Period — How many months of gross profit it takes to recover the cost of acquiring a customer.
• Cap Table — The record of who owns what in a company, including shares, options and convertible instruments.
• Churn Rate — The percentage of customers or revenue lost in a period.
• Cliff — An initial period during which no equity vests, usually one year.
• Convertible Note — A loan that converts into equity at a later priced round instead of being repaid in cash.
• Data Room — The organised set of documents an investor reviews during diligence.
• Default Alive — Whether a company would reach profitability on current revenue growth before running out of money.
• Dilution — The reduction in existing shareholders' ownership percentage when new shares are issued.
• Due Diligence — The investigation an investor runs before finalising an investment.
• General Partner (GP) — A partner at a venture fund who makes investment decisions and sits on boards.
• Gross Margin — Revenue minus the direct cost of delivering it, as a percentage of revenue.
• Lead Investor — The investor who sets the terms and takes the largest share of a round.
• Limited Partner (LP) — An investor in a venture fund, as distinct from the fund managers who deploy the capital.
• Liquidation Preference — The investor's right to be paid back first on an exit, before common shareholders.
• LTV (Customer Lifetime Value) — The total gross profit expected from a customer over their lifetime.
• LTV/CAC Ratio — Lifetime value divided by acquisition cost — the headline test of whether growth is economically sound.
• MRR (Monthly Recurring Revenue) — Predictable subscription revenue in a given month, the monthly counterpart to ARR.
• Net Revenue Retention (NRR) — Revenue from an existing cohort after upgrades, downgrades and churn, expressed as a percentage.
• Option Pool — Shares reserved for future employee equity grants, usually 10–20% of the cap table.
• Post-Money Valuation — A company's valuation immediately after new investment, equal to pre-money plus the amount raised.
• Pre-Money Valuation — What a company is deemed to be worth immediately before new investment arrives.
• Pre-Seed — The earliest institutional round, usually before meaningful revenue.
• Pro-Rata Rights — An investor's right to invest again in later rounds to maintain their ownership percentage.
• Product-Market Fit — The point at which a product satisfies strong market demand, visible in retention rather than growth.
• Retention — The proportion of customers or revenue that remains over time — the clearest evidence of product-market fit.
• Runway — How many months a company can operate before it runs out of cash.
• SAFE (Simple Agreement for Future Equity) — An instrument that converts to equity at a future priced round, without being debt.
• Seed Round — The round that funds finding product-market fit, typically $500k to $3M.
• Series A — The first large priced round, funding the scaling of a proven model.
• Term Sheet — A mostly non-binding outline of the terms on which an investor proposes to invest.
• Unit Economics — The revenue and cost of a single customer or transaction, showing whether the business works at scale.
• Valuation Cap — The maximum valuation at which a SAFE or note converts, protecting early investors from a high priced round.
• Venture Capital — Professionally managed funds investing other people's money into high-growth startups.
• Vesting — The schedule over which equity is genuinely earned, typically four years with a one-year cliff.