Venture Capital Glossary
Master the language of startup fundraising. Understand the terms investors use to negotiate deals, value companies, and structure funding rounds.
ARR (Annual Recurring Revenue)
A metric used by SaaS companies to measure the predictable and recurring revenue component...
Angel Investor
A high-net-worth individual who provides financial backing for small startups or entrepren...
Board Observer
A person who attends board meetings and participates in discussions, but does not have a f...
Board Seat
A position on a company's Board of Directors. Lead investors in Series A and beyond usuall...
Bootstrapping
Building a company from the ground up with nothing but personal savings and the cash gener...
Bridge Loan
A short-term loan used by a company until it secures long-term financing or goes public. S...
Burn Rate
The rate at which a company is spending its capital to finance overhead before generating...
CAC (Customer Acquisition Cost)
The total cost of sales and marketing efforts that are needed to acquire a new customer.
Cap Table (Capitalization Table)
A spreadsheet or document that details who owns what in a startup. It lists all the founde...
Capital Call
When a venture capital firm legally requests that its Limited Partners transfer committed...
Carried Interest (Carry)
The share of profits that the General Partners of venture capital funds receive as compens...
Churn Rate
The percentage of customers or subscribers who stop using a product or service during a gi...
Cliff
A period of time during which an employee or founder earns no equity, after which a large...
Convertible Note
A form of short-term debt that converts into equity, typically in conjunction with a futur...
Data Room
A secure, digital repository where a startup stores all sensitive corporate documents (fin...
Decacorn
A privately held startup company valued at over $10 billion.
Dilution
The decrease in existing shareholders' ownership percentage of a company as a result of th...
Discount Rate
A percentage discount offered to early investors in a SAFE or Convertible Note when their...
Down Round
A funding round where the pre-money valuation of the company is lower than the post-money...
Dry Powder
Cash reserves or highly liquid assets kept on hand by a venture capital firm to cover futu...
Due Diligence
The comprehensive appraisal of a business undertaken by a prospective investor to establis...
Flat Round
A funding round where the valuation of the company remains exactly the same as the previou...
General Partner (GP)
The managing partners of a venture capital firm. They make the investment decisions, sit o...
LTV (Lifetime Value)
The estimated total revenue a business expects to earn from a single customer throughout t...
Lead Investor
The investor who issues the term sheet, negotiates the valuation, and takes the largest ch...
Limited Partner (LP)
Institutional or high-net-worth investors who provide the capital for venture capital fund...
Liquidation Preference
A clause in a venture contract that dictates the payout order in case of a corporate liqui...
MRR (Monthly Recurring Revenue)
The predictable total revenue generated by a subscription business in a single month. It i...
Management Fee
An annual fee (typically 2%) paid by LPs to the GP to cover the operational costs of runni...
Moat
A distinct, hard-to-copy advantage that protects a company's market share and profitabilit...
Pivot
A fundamental shift in a startup's business strategy, product, or target market after real...
Post-Money Valuation
The value of a company immediately after an investment round closes. It is calculated simp...
Pre-Money Valuation
The value of a startup before it receives outside financing. This determines how much equi...
Pre-Seed
The earliest stage of funding a new company comes to, so early it is often not even consid...
Pro-Rata Right
The right of an investor to maintain their initial percentage of ownership in a company du...
Product-Market Fit (PMF)
The degree to which a product satisfies strong market demand. It is the primary goal of se...
ROI (Return on Investment)
A performance measure used to evaluate the efficiency or profitability of an investment. I...
Runway
The amount of time a startup has before it runs out of cash, assuming current income and e...
SAFE (Simple Agreement for Future Equity)
A financing contract used by startups to raise capital in their seed rounds. Developed by...
SPV (Special Purpose Vehicle)
A legal entity (usually an LLC) created for the sole purpose of pooling money from multipl...
Seed Round
The first official equity funding stage. It typically represents the first institutional m...
Series A
A company's first significant round of venture capital financing. Series A rounds are rais...
Syndicate
A group of angel investors who pool their capital together to invest in a startup, usually...
Term Sheet
A non-binding document outlining the basic terms and conditions under which an investment...
Unicorn
A privately held startup company valued at over $1 billion.
Valuation Cap
A term in a SAFE or Convertible Note that sets the maximum valuation at which the investor...
Venture Capitalist (VC)
An investor who provides capital to startups exhibiting high growth potential in exchange...
Vesting
The process of earning equity over time. Founders and employees typically have a 4-year ve...