The 82 Startup, Venture Capital and Fundraising Terms Every Founder and Investor Should Know

Welcome to Startupland, the world of wild rides, IPOs and exits, heartbreak and highly caffeinated coding frenzies, all while struggling to stay alive, build a business, beat the competition and be able to afford more than Ramen.

Amidst all of this chaos, this is probably your first startup rodeo and you’re learning everything as you race along. Hence this startup glossary, a list of basic startup, fundraising and venture capital terminology designed to help sure up your weak spots and help you hold your own when having high stakes conversations – like speaking to potential investors, acquirers, employees or board members. 

Because you have enough to worry about without also worrying about falling short, looking like a fool or overlooking something critical in your term sheet.

Jump to Business Glossary Terms by Topic:

Startup Ecosystem Support Terms


A startup incubator is an organization (often non-profit) whose job it is to help startup founders turn their business idea into an actual business. This can include everything from providing valuable services like mentoring (like I how I work as a business coach for Venturelab and a mentor for Newchip), business planning and brainstorming and access to other investors and startups to office space and more administrative functions.

In general, an incubator is designed to help early early stage entrepreneurs build, prototype and test their product or service in order to find product-market fit.

Typically, companies participating in incubators have not received any outside funding and do not receive investment from the incubator itself or have to give away any equity.


Top Startup Accelerators

Accelerators, unlike incubators, come further along in a startup’s lifecycle and are typically fixed-term programs that provide early-stage (pre seed or possibly seed stage) startups with coaching, financing, mentorship and other valuable resources to help them grow and scale.

Typically, accelerator-stage companies already have an established business model and revenue and use the accelerator both to further product-market fit/scale up their growth and for the funding they provide and access to investors.

In exchange for the services they provide, most accelerators take a percentage ownership of the company for participation in the program: ±5-7%.

Startup Finance and Accounting Terms


Most startups start out losing money while struggling to find product-market fit. The rate at which you’re losing money before breaking even is often called your burn rate or your burn and reflects the total number of dollars you spend per month. It is important to note, as with most financial metrics there are two types of burn rate: gross burn rate which refers to total spend each month, and net burn rate which refers to the difference between cash in vs cash out.

NOTE: It is critical to always know your burn rate and number of months of runway (see below). When fundraising, it’s generally advised to raise at least 18 months of runway (for more on why, see our Ultimate Guide to Startup Fundraising).


Like a plane preparing for takeoff, your runway is how long your business can continue to sustain itself before running out of money.

To calculate runway, just divide your cash on hand (bank account) by your net burn rate to get the number of months your company can survive at current expense levels before running out of money.


Unlike burn which is money going out, run rate is revenue coming in. Your company’s run rate is defined by the projected (based off of current levels) future revenue, typically referred to on an annual basis. For example, if you had a MRR (monthly recurring revenue) of $100k, your run rate would be $1.2M – i.e., right around the time Series A investors would be interested in possibly investing in your company.

NOTE: For more business development and accounting terminology, refer to the 89 Business and Finance Terms Every CEO Should Know.

Product and Development Terms


This is pretty much exactly what it sounds like, i.e., a process to determine the feasibility and viability of a business or product idea through simple experimentation or testing – again, meant to save time and money with the least amount of effort possible to validate the concept.


Marc Andreessen of the infamous Andreessen Horowitz venture firm and co-founder of Netscape and the Mosaic internet browser first coined the term “Product/market fit,” calling it “being in a good market with a product that can satisfy that market.”

As an addendum to this well-respected definition, I would probably add that Product-Market Fit means having a product that pretty much sells itself. People see it, use it, love it and share it with others… that is product-market fit. It means you’ve built something so beloved by the market, that your job is pretty done.


An alpha test is the very first test phase of a product or service to see how it functions with a very select group of individuals. Often alpha tests are used by dev teams to figure out some of the bugs and to see how potential users react to their initial product/service/app. Once your “app” has been beta tested with a small group and any changes have been made, it is ready for beta testers.


Beta testing is the last “official” phase of product testing in a relatively controlled environment before launching the product “into the wild.” Beta tests are further used to validate the product’s features and functionality, usability, compatibility and to seek out bugs. Dev teams typically solicit feedback from users to help with final adjustments before shipping the product.


Things NEVER go according to plans. That’s why pivoting has become such a buzzword in the startup world – which essentially means to change the course of your business based on your current traction, market knowledge and future outlook.

NOTE: For more business development and accounting terminology, refer to the 89 Business and Finance Terms Every CEO Should Know.

Ways of Funding Your Startup


If you are not raising money from investors or seeking a loan or line of credit to build your business, you’re bootstrapping – using your own money to get things off the ground and reinvesting profits into growth and expansion. Which is how I’ve built the majority of businesses I’ve run.

Some businesses need venture capital while others are better off being self-funded. Not sure which is right for you? Here’s a guide to help you decide.


With the advent of the internet, it’s become easier than ever to get your product/business in front of potential buyers. Crowdfunding is a way of funding your business where your early adopters (those most interested in trying and using your product) “invest” in your business. 

The earliest examples of this being Kickstarter and Indiegogo, where consumers could “pre-order” the product before companies had even built them, allowing entrepreneurs to get the critical startup capital they needed to finish developing and manufacturing the product.

NOTE: I actually used to run the largest crowdfunding podcast, Art of the Kickstart, and learned firsthand some of the challenges of crowdfunding – both from a creator and a consumer perspective. That said, despite it’s challenges and the fact that crowdfunding is often the last resort for startups looking to raise money (because it sends the worst signals to possible future investors – for more on why, see our Ultimate Guide to Startup Fundraising), crowdfunding still presents a solid funding option for many smaller scale startup companies, especially those focused on consumer products.

Crowdfunding Market
Source: DataIntelo


There is a special subset of crowdfunding where, rather than receiving early product, retail investors contribute startup capital in exchange for share in the business. Examples of this include:, Seedrs, Crowdfunder and numerous others.


Raising money from venture capital firms in exchange for equity in the business.


This is a special type of debt financing instrument specifically designed for early-stage and growth-stage VC-backed startups with 3-4 year term loans to allow the company to grow and scale faster without having to sell more equity and dilute the shareholders.

Typically, most traditional banks avoid lending to startups because of the inherent risk and lack of track record in the business. That’s where venture debt comes in.


Convertible notes are a type of convertible debt instrument often used to fund early-stage and seed-stage startups with the advantage of not having to set a cap/price the round. With a convertible note, an investor loans money to a startup and the note then “converts” (the loan principal plus interest) into equity that the investor receives at the note’s maturity date or triggering event. 

NOTE: Convertibles are often cheaper and simpler than traditional priced rounds, which require more paperwork, set valuations and of course, lawyers and cap table adjustments.

17. SAFE (SImple Agreement for Future Equity)

Popularized by YCombinator, a SAFE is a type of convertible security that, like an option or warrant, allows the investor to buy shares in a future priced round. Many startups prefer SAFEs because, unlike other convertible notes, they are not structured as debt and therefore, don’t have any interest (additional costs) associated.


And then there is mezzanine financing, a combination of the two that mixes debt and equity financing, often in the form of convertible debt or preferred share. Unfortunately, mezzanine loans often have higher interest rates and are thus more expensive for startups.

Types of Investors

NOTE: For more on the pros and cons of working with types of investors, see this post.


An angel investor is a high net worth individual (HNWI) that invests in early-stage startups in exchange for equity ownership. Often, angel investors are ex (or current) operators themselves and like to focus on supporting the startup ecosystem rather than focusing solely on the potential ROI.

For more on the pros and cons of working with angel investors, see this post.

BONUS: Are you an angel investor looking to maximize your returns? Check out our 25 Step Angel Investor Checklist to be sure you never miss a thing when betting on startup companies.

And if you are interested in investing in top tech startups alongside our group of accredited investors, be sure to apply to join our investor group today.


A venture capitalist, or VC, is a professional investor that takes a risk on a startup by providing funding to high-growth startups for an equity stake in the business. Typically, VCs operate on an exponential outlier model and shoot to invest in companies that can 50-100x in size (because of the massive failure rate in startups), thus padding the VC’s “carry” in the investment (for more, read up on how VC economics work).


A syndicate is a group of investors that agree to invest together in a company. Often, these are run via SPVs (special purpose vehicles) to make cap table management easier and simplify the investing process.

NOTE: I used to run a podcast and investment syndicate (The Syndicate) focused on investing in promising early-stage tech startups. If you are an accredited investor (net worth > $1M or yearly income > $200k) interested in joining our current angel group and getting access to great startups to invest in, apply here.


Some are born to lead and others are born to follow. And until one investor steps up to anchor (or the lead) the round and organize the terms, many angels and VCs are hesitant about committing to invest.


A micro VC is a smaller venture fund (generally a first time fund/fund manager) that invests very early with smaller ticket sizes – think $25-100k – much less than traditional VC.


Limited partnerships are typically created when investors (i.e. general partners) raise venture funds from other larger sources: pension funds, UHNWI, sovereign wealth funds, other VCs…

These limited partners provide the majority of the capital, have limited voting rights and are only liable for a business’s debt up to the amount they invest in any given startup.

In the case of SPVS, outside of the syndicate lead, all other participating investors would be classified as limited partners.

Types of Funding Rounds


When you need money, who is the first person you go to… mom or dad. That’s what friends and family (and fools) rounds typically consist of – raising a small pool of cash from those closest to you to get your startup off the ground.

While raising from your network is quite common, it comes with certain pitfalls unlike other sources of funding. So, keep in mind how much your loved ones can actually afford to lose before taking that $200k check from Aunt Gerdy.


A company is considered pre-seed when it has moved beyond the napkin sketch business plan into actual execution and creation – although often still pre-revenue. Pre-seed investing is almost exclusively based on trust, charisma and the founder’s ability to sell a grand vision of the company and rarely exceeds $1-2M in funding. 


Seed funding is usually the first “official” equity round into the company. Your business is growing and expanding, you’ve got some customers and traction (probably ±$10k in monthly revenue) and need cash to fuel your growth, build your team, push for product-market fit and scale. 

NOTE: Oftentimes, startups opt for a SAFE or convertible note instead of a priced round to simplify the fundraise and reduce the cost and legal complexity of taking on investors and divvying up shares.

Startup Fundraising Rounds


Series A is the first big funding round for startups that have a real product and real evidence of traction (typically $100k+ of MRR – monthly recurring revenue). In the Series A round, startups generally raise $2M-15M  to scale their go-to-market strategy, grow into new geographies and product categories and help grow their team and revenue into that of a more mature business.

NOTE: Series A is often the first priced round a company will undergo, i.e., with a set valuation as opposed to cap-based convertible note or SAFE and often requires a bit more due diligence and to give up board seats to the lead investor.

29. SERIES B FUNDING and Beyond

Companies still on the massive growth path focused more on scale than pure profitability often raise additional funding after the Series A to expand further and scale up sales, operations, markets, or even to acquire other companies. ,

Companies may go for Series B funding if they’ve already developed a solid product and user base and they want more capital to scale up. This round is harder than Series A funding since investors will be looking at your company’s growth rate and performance.

Your average Series B is about $30M while your average Series C is $50M+ with a valuation greater than $100M+ and may include not just VCs, but also private equity, hedge funds and other growth stage VC investors looking to get in before the IPO.


Flat rounds occur when a startup fails to make sufficient progress from the previous round or, as the result of fluctuations in the market or the company’s need for cash, is forced to raise money at the same valuation as the previous round of funding. Venture investors particularly hate flat and down rounds as they can dramatically impact a fund’s numbers/paper returns and make things more challenging for them to raise their next fund (for more on the economics of the venture industry and VCs in general, see this post).


The only thing worse than a flat round is a down round  – when the company is forced to raise a valuation lower than their previous round.


Venture funding typically occurs every 18 months (as advised in our Ultimate Guide to Startup Fundraising). But sometimes, companies fall off track, either taking more time or money to reach their next milestones as they had originally planned for. In these instances (often in preparing for the Series A), companies will often take a small bridge financing round to hold them over until their next big round – which can take the form of either debt or equity financing


Many smaller investors and VCs are entering the market every day. And many of them, rather than being able/willing to come large bundles of cash and serious time to due diligence are instead participating in what are known as “party rounds,” i.e., investing small amounts alongside established firms (like the Sequoias, Benchmarks and Andreessen Horowitzs of the world) once the company has found their lead investor. It’s a bit like the people too afraid to use the crosswalk when it red until someone else goes first… then everyone follows along. That’s a party round.

Stock and Equity Terms


Equity is just your percent ownership in a business i.e., the number of shares you own. Typically founders and early employees all receive equity/shares in a business (in the form of common stock and/or options) and then sell additional shares to investors and VCs in exchange for a cash injection.


As you may have guessed, common stock is the most “common” type of stock that people invest in and founders and early employees receive. Unlike preferred shares, common shares represent ownership while also giving shareholders voting rights proportional to their ownership percentage.


Unlike common stock, preferred shares don’t come with voting rights, but instead, with special terms and privileges to minimize their risk in case the investment goes south. (See more on these terms in the Investor Rights and Protections section below).


Stock options are a contract that allows the buyer (often early startup employees) the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific time period.

In finance, there are actually two types of stock options: calls and puts. A stock call lets the buyer buy stock that increases in value with share price rises while put options let the buyer sell a stock short, which increases in value when the stock price decreases.

So if you are long Tesla, you are betting the value will go up over time. And if you are short, you are betting it is overpriced and will drop in value over time.


A vesting schedule determines how and when shares will be distributed over a period of time, so that founders and early employees don’t receive all of their ownership/stock in a business without “working for it.” Typically, vesting lasts at least 2 years, during which startup employees “earn” their equity in the business and, should they decide to leave before the vesting period is ended, allow the company to buy back the shares.


Because, again, startups don’t want to go handing out equity to anyone, there is typically a 6-12 month cliff on vested employee shares. This means, if as employee #1 at Google, you were to receive 4% of the company vested over four years with a 1-year cliff, that for the first 12 months, you’d have nothing. Then, at month 13, you’d receive that first year’s worth of equity, i.e., ¼ of 4%, or 1%, and then receive 0.0833% every month until you reach your full 4% stake in the company.


A pool of stock options reserved as motivation and incentivization for future employees that join the company.


Stock options usually come with an exercise price, i.e., how much you’d need to pay to redeem them, which is typically priced at the Fair Market Value price from the day they are issued. 

That means, if the company’s worth $10M and has 100M shares, each share would have a strike price of $0.10, thus incentivizing employees to grow the company and share value so that their stock options became more valuable so that, let’s say at IPO shares were priced at $10/share. Then, the employee would earn the difference on every share they “owned,” i.e., $9.90/share.


Private company shares are illiquid and generally not transferable (except in the situation of secondary sales). Because of this, VCs are incentivized to “get liquid,” or find a way to be able to sell their shares so they can pay back their LPs, which generally means an IPO (initial public offering) or being acquired by another company.


The Fair Market Value is whatever investors/companies/the market are willing to pay for a said asset or stock. For instance, if you just raised $2M at a $10M pre-money valuation, your Fair Market Value would be your post-money valuation – $12M.


A spreadsheet or document listing all of your company’s securities (stocks, SAFEs, convertible notes, etc…) and who owns them – i.e., who owns the company.


Dilution is when your ownership in a business decreases as the company issues new shares and is most common during funding rounds, where startups generally sell ±10-25% of the company in exchange for a cash infusion to fuel the business (for more, see this post).

NOTE: Were you looking for more business finance and marketing terminology? Then be sure to see this post instead.

Fundraising and Term Sheet Terms

46. CAP

Convertible notes usually come with a Cap, or maximum valuation at which the note can convert into equity, which means these earlier investors usually pay a lower price per share than investors in a priced round.


What your company is worth, or what investors are willing to “value” your company at in anticipation of future upside.


How much your startup is worth prior to funding.


How much your startup is worth after funding: pre-money valuation + funding amount.


Depending on whether or not you are in the startup world, a deck is either a) just another name for a Powerpoint presentation or b) a presentation geared at pitching investors to raise outside funding. For more on pitch decks and pitching investors, see my 5-part series: The Ultimate Guide to Startup Fundraising here.

the pitch deck vcs cant ignore



The term sheet is a formal (but non-binding) investment agreement between the startup and investors that lays out the terms and conditions for the investment. As a startup founder, the more term sheets you can get, the better because you will have more leverage when negotiating valuations and terms (but make sure you avoid the biggest fundraising mistakes as well).


The stock purchase agreement is the legally binding agreement to sell shares/equity to an investor or group of investors.


Liquidation means turning the company’s assets and inventory into cash i.e., selling off everything the company owns.


Liquidation preferences are a special contract clause that gives investors first dibs, i.e., the right to get their money back before all other shareholders in a liquidity event like a sale of the company.

Liquidation preferences are expressed as a multiple of the initial investment – a 2x liquidation preference means they get at least twice their full amount back before anyone else gets paid (which can really screw founders if you’re not careful – for more, see this post).


An SPV or special purpose vehicle is used to pool capital amongst investors, allowing more capital to be deployed without adding as many individual shareholders/entities to the company’s cap table. SPVs are typically used in angel syndicates (like mine, which you can apply to join here) and simplify things for both investors and startups.


Also known as bully rights, a drag-along provision states that in the event of a sale or company merger, majority shareholders can force minority shareholders to allow the sale to go through.


Profit distributions from a company to its shareholders, typically associated with public market companies.


Tradable debt or equity financial instruments that have some monetary value, most notably, stocks.


A no shop clause is pretty standard in term sheets and prohibits founders from sharing the term sheet with other investors to get a competing (or better) offer.


After terms have been agreed upon, most serious investors will conduct an audit and review of the business’s financial records, IP, claims etc.. before making an investment.

Investor Rights and Protection


Pro rata allows individual investors the chance to maintain their ownership percentage percentage ownership in a company by being allowed to participate in future funding rounds.


Entitle an investor with restricted stock to force the company to list the shares publicly (i.e. IPO) so that the investor can sell their shares.


A contractual provision that forces company insiders to hold their shares for a specified period of time after the company goes public (IPO).


Information rights force a company to provide investors with financial statements (typically quarterly and annually) and other company information


A right for existing investors to buy shares in future financing rounds


Details the percentage of overall stock that is reserved for employees (existing and new hires) and how the vesting schedules of said shares will be structured.


Allow preferred shareholders to veto or block specific company actions and protect minority shareholders in case there is a disagreement on the best course of action for the company.


VCs ensure themselves from being significantly diluted away in future funding rounds. Be sure to look into what is standard/fair before signing anything!


A standard term sheet condition that startups don’t talk to other investors for a specific period while the investor is in due diligence: ±30-45 days.


Basically says that investors have the right to purchase stock on the same terms as other investors in future rounds and is meant to enable investors to maintain their pro rata percentage ownership of the company.


Says that the lead investor (largest investor) gets all the added benefits of any side letters the company has with individual investors/LPs.


Protects investors from a down-round by adjusting the investors ownership/stock conversion to some predetermined level. Be VERY careful about ratchet terms as they basically guarantee the investor wins, whether or not the startup and founders do.

Exit and IPO Terms


Venture capitalists are primarily incentivized by what is known as “carry” – i.e., the difference between their original fund size and how much they are able to return to investors (for more on VC fund dynamics, see this post). That’s why, if you take a VCs money, the exit strategy will always be a hot topic, because VCs need to be able to pay back their LPs and get paid themselves. This process of “cashing out” during an exit (typically an IPO, acquisition or management buyout) is what’s known in the business as your exit strategy.


When a private company joins the stock market and offers shares to the public – i.e., becomes a public company which allows them to raise money from public investors like any publicly traded company on the NYSE etc…

NOTE: There are a ton of requirements from the Securities and Exchange Commission (SEC) before holding an IPO and afterward in terms of company reporting and governance, hence why many successful startups have opted to stay private for so long and fund themselves exclusively through private market investors.



Like an IPO without a road show, a private placement involves directly selling shares to a limited number of qualified buyers, like accredited and institutional investors. Private placements are typically less expensive/cumbersome than full-on IPOs and according to Bill Gurley, much more advantageous for startups as they capture a much larger percentage of the overall value of the company – because they don’t necessitate pricing low so that IPO investors can get a “pop” in the stock price when trading begins.


M&A occurs when one company buys another. Mergers specifically refer to two independent companies deciding to combine forces into one larger entity, but in the modern era of mega corporations and antitrust action, mergers of equals are rare.

Instead, most of the M&A action occurs on the acquisition side of things with large corporates (and tech giants like Facebook, Google and Amazon) acquiring smaller, innovative startups to bolster their overall business and remain more “agile”.


One specific type of acquisition quite common in the startup world is the acqui-hire, acquiring a company more so for its talent and people rather than its technology or business fundamentals. This is quite common in Silicon Valley, especially amongst AI talent, although probably the best example of all time was Apple buying NeXT Computer to bring Steve Jobs back to Apple. 


Like an acqui-hire, but acquiring a competitor in order to kill off the competition – which is technically illegal and against antitrust laws, but happens all the time.


A buyout is like an acquisition (one company buying controlling interest in another company), but typically used when taking a public company private.


Restructuring a company’s debt and equity to stabilize its capital structure. It involves trading out one type of financing for another, like issuing debt to buy back equity etc…


A lock-up is a specified period of time before shareholders can sell or transfer a security, most often associated with a lock-up following a successful IPO done to ensure market price stability and confidence in the company’s future outlook.


Secondaries occur when an existing stockholder (often the founders who’ve been surviving on little more than Ramen and are suddenly worth a lot “on paper”) sell shares to a 3rd party. Because secondary sales are private in nature, secondaries (as they are currently constructed) are almost exclusively limited to accredited investors (rich people) and investing institutions like venture firms, pension funds etc…

NOTE: Founders will typically seek board approval after completing a Series B (or so) to take a little it of money off the table, buy themselves a house and sure up their finances a little so they are not “belly up” if their startup (currently valued at $50M+) crashes and burns. Secondary sales are often controversial among investors as many believe it removes some of the “fire” from the founder’s belly. On the flip side, founders can be much more aggressive and really “go big or go home” if they’ve taken a little off the table and are playing with house money, so to speak…

Closing Thoughts

Congrats, you made it to the end of our fundraising and venture capital glossary. 

The good news, you probably have a better idea of what all raising a round means and how to avoid getting screwed on term sheet terms or making a mistake that could handicap your company.

The bad news, it is just the beginning. You still need to execute. You still need to build your business, build your pitch deck, build your investor list and then actually raise the money.

And 99.9% of startups fail to ever raise money.

Hence why I created the Ultimate Guide to Startup Fundraising. The 5-part series walks you through the ins and outs of all things raising: how to structure your fundraise, how to craft your elevator pitch and pitch deck, how to find your ideal investors and of course, how to avoid the big mistakes that could cripple your fundraise.

The Ultimate Guide to Startup Fundraising

Part 1: Understanding Investors 101: The Pros and Cons of Angel Investors, VCs, Syndicates and Venture Debt

Part 2: The Memorable Elevator Pitch that VCs Can’t Ignore

Part 3: The Killer Startup Pitch Deck VCs Can’t Ignore!

Part 4: The 13 Biggest Fundraising Mistakes Startups Make

Part 5: Structure Your Fundraise to Close Your Round Faster

I highly recommend you check all of that out and want to wish you the best of luck with your fundraise.

And if you need more help perfecting your pitch and pitch deck, finding investors and closing your round faster, I’d love to help. Just apply here to get started.

And investors, if you’re interested in more quality deal flow and having the chance to invest alongside us in some of the most promising startup companies, be sure to apply to join our investor group today. Free for a certain time, space is limited.

PS. Wondering why I took so long to write such a boring article?

Well, how did you find this article? Probably Googling some obscure business finance or marketing term, right? Talk about easy SEO hacks…

And that is the kind of thing I help companies with – building their organic growth, marketing and viral flywheels by identifying simple, unique, powerful ways to grow their business. If you’d like to explore your own growth hacks and scale your startup/business faster, I’d love to work chat.



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