- Pre-seed
- The first institutional-ish money, usually before meaningful revenue and often before a full team. Typically a few hundred thousand to roughly two million dollars on a SAFE or note, funding the build to a first product and early customer proof rather than to a growth metric.
- Seed
- The round that funds finding product-market fit. Now frequently a priced round rather than a SAFE, often split into an initial seed and a later extension, with a dedicated seed fund leading and taking a board seat. Seed has absorbed much of what used to be called Series A.
- Series A, B and C
- The lettered priced rounds. A funds repeatable go-to-market once fit is demonstrated, B funds scaling a working motion, C and beyond fund market expansion or category consolidation. Each letter is a bar, not a size — investors care what is proven, not what the round is called.
- Bridge and extension rounds
- Additional capital raised between priced rounds, usually from existing investors, to reach the metrics the next lead requires. A bridge implies a defined destination; an extension is often just more seed at similar terms. Both are now routine rather than a distress signal.
- Pre-money vs post-money valuation
- Pre-money is the agreed company value before the new investment; post-money is pre-money plus the round. Investor ownership is round size divided by post-money. The distinction decides dilution, and confusing them is the most common founder error in a first negotiation.
- SAFE (post-money vs pre-money)
- Y Combinator's Simple Agreement for Future Equity — cash now, stock at the next priced round. The 2018 post-money SAFE fixes the investor's percentage of the company at conversion, so all dilution from later SAFEs falls on founders. Pre-money SAFEs shared that dilution; the difference is material once several SAFEs stack.
- Convertible note
- A loan that converts to equity at the next priced round. Unlike a SAFE it carries interest and a maturity date, which gives the holder leverage if no round happens. Still common outside Silicon Valley and in bridge financings where a creditor position matters.
- Discount and valuation cap
- The two ways early money is rewarded for risk. The discount converts at a percentage below the new round price, typically 10 to 25 percent. The cap sets a maximum conversion valuation regardless of the round price. Where both exist the investor converts at whichever is better for them.
- Priced round
- A financing where a per-share price is set and preferred stock issues immediately, rather than deferring the valuation. It requires a term sheet, legal documents, a board approval and a new certificate of incorporation, and it resets the cap table with real numbers.
- Term sheet
- The mostly non-binding summary of a proposed investment, covering economics and control. Binding provisions are usually limited to exclusivity and confidentiality. It is the leverage point — nearly everything is easier to negotiate before signing than after.
- Cap table
- The ledger of who owns what: founders, employees, option pool, converted SAFEs and each preferred series, with the terms attached to each. A clean, current cap table is a diligence prerequisite; a messy one delays or kills rounds more often than bad metrics do.
- Fully diluted
- Ownership calculated as if every option, warrant, convertible instrument and unissued pool share were already exercised into common stock. It is the denominator that matters in a negotiation, and it is always a larger number than the issued-share count.
- Option pool shuffle
- The practice of requiring a new or enlarged option pool to be created in the pre-money, so existing shareholders bear the entire dilution while the incoming investor's percentage is untouched. A 10 percent pre-money pool can cost founders more than a point of valuation.
- Pro rata
- The right to invest enough in future rounds to maintain the same ownership percentage. Standard for major investors, sharply contested at seed. In a hot follow-on round, pro rata is the difference between riding a winner and being diluted out of it.
- Super pro rata
- A right to take more than the ownership-maintaining share of a future round, sometimes a fixed percentage of the next round. Later leads generally resist it because it consumes allocation they want, and it is a signal a founder should price into the seed negotiation.
- Participating vs non-participating preferred
- Non-participating preferred chooses the greater of its preference or its as-converted common value. Participating preferred takes the preference and then also shares in the remainder — 'double dipping'. Participation quietly moves large amounts of value in mid-sized exits.
- Liquidation preference (1x vs multiple)
- How much preferred stock gets back before common sees a dollar. A 1x non-participating preference is the market standard. Multiples of 2x or 3x appear in structured and rescue rounds, and stack across series in seniority order, which can leave common worthless at surprisingly high exit prices.
- Anti-dilution: full ratchet vs broad-based weighted average
- Protection if a later round prices lower. Broad-based weighted average, the market standard, adjusts the conversion price partially based on how much cheap stock was issued. Full ratchet reprices all earlier shares to the new low price and is punitive enough to reshape a cap table in one round.
- Drag-along and tag-along
- Drag-along lets a defined majority force remaining holders to vote for and join an approved sale, which is what makes a clean acquisition possible. Tag-along lets minority holders join a sale on the same terms when a major holder sells, preventing insiders from exiting alone.
- Right of first refusal (ROFR)
- The company's, and often the investors', right to buy shares a holder proposes to sell to a third party on the same terms. Combined with transfer restrictions and board consent, it is why most secondary sales of private stock require company cooperation.
- Board seat vs observer
- A board seat carries fiduciary duty, a vote and legal exposure. An observer attends and receives materials but does not vote. Boards fill up fast — a seat granted at seed persists through later rounds, so seat allocation deserves more thought than the valuation often gets.
- Protective provisions
- A list of actions requiring preferred-holder consent regardless of board or common vote — selling the company, issuing senior stock, changing the board size, taking on debt above a threshold, amending the charter. This is where real control lives, not in the ownership percentage.
- Information rights
- Contractual entitlement to financial statements, budgets and the cap table on a defined schedule, usually granted to major investors above a share threshold. Failing to deliver is a common quiet default, and reinstating discipline is often the first ask of a new lead.
- 409A valuation
- An independent appraisal of common stock fair market value under IRC Section 409A, which sets the option strike price and gives the board a safe harbor. Typically well below the preferred price because common lacks the preference and protective rights. Refreshed annually or after any material event.
- 83(b) election
- A filing with the IRS, within 30 days of receiving restricted stock, electing to be taxed on the value at grant rather than as it vests. On founder stock granted at near-zero value the tax is negligible; missing the 30-day window can create tax on vesting at later, much higher valuations. The deadline is not extendable.
- ISO vs NSO
- Incentive stock options can qualify for capital-gains treatment if holding periods are met, but the spread at exercise is an alternative minimum tax item and they are employee-only with annual limits. Non-qualified options are taxed as ordinary income on the spread at exercise, with withholding, and can go to advisors and contractors.
- Vesting and cliff
- The schedule on which equity is earned — four years with a one-year cliff is the default, meaning nothing vests until month twelve and then monthly thereafter. Investors normally require founders to re-vest at a financing, and acceleration on a change of control is separately negotiated.
- Secondary sale
- A transfer of existing shares from an employee, founder or early investor to a new buyer, rather than new money into the company. Subject to transfer restrictions, ROFR and board consent, and priced independently of the last round — often at a discount to it.
- Tender offer
- A company-organized liquidity event in which a buyer offers to purchase shares from a defined class of holders at one price for a set window. It is the orderly alternative to ad hoc secondaries, and it sets a market data point that can affect the next 409A.
- Down round
- A financing at a lower per-share price than the previous round. It triggers anti-dilution adjustment, resets the 409A downward, dilutes common heavily and is culturally loaded — but it is usually preferable to a structured flat round with hidden preference stacking.
- Recapitalization and pay-to-play
- A recap restructures the cap table, often converting existing preferred to common and issuing new senior preferred, resetting ownership. Pay-to-play requires existing investors to participate pro rata in the new round or have their preferred converted to common — a mechanism for forcing insiders to support or step aside.
- Bridge-to-nowhere
- Insider capital extended into a company with no credible path to the next round, keeping it alive without changing the outcome. Recognizing one early preserves value for everybody; the discipline is to define what the bridge must prove and act on the answer.
- Runway
- Months of operation remaining at the current net burn, given cash on hand. The practical question is not the number but where the number lands relative to the milestones required for the next round — investors expect a raise to begin with six to nine months of runway left, not two.
- Burn multiple
- Net burn divided by net new ARR over the same period. It answers how many dollars are consumed to add a dollar of recurring revenue. Below 1 is exceptional, 1 to 2 is good, above 3 signals an efficiency problem no growth rate will excuse in the current market.
- Net dollar retention
- Revenue from an existing customer cohort a year later, including expansion and net of churn and contraction, expressed as a percentage. Above 120 percent means the installed base grows without new logos. It is the single most diligenced SaaS metric at Series B and beyond.
- Rule of 40
- Revenue growth rate plus profit margin should exceed 40. A shorthand for trading growth against efficiency that lets investors compare a fast-burning company with a slower profitable one. Definitional care matters — which margin, which growth period — because the rule is easy to flatter.
- ARR quality
- Whether reported annual recurring revenue is genuinely recurring, contracted, live and collectible. Pilots, non-renewing annual deals, usage-based revenue counted at peak, services billed as software and related-party contracts all get stripped out in diligence — often shrinking a headline number by double digits.
- TAM, SAM and SOM
- Total addressable market, serviceable addressable market and serviceable obtainable market. Investors discount top-down TAM claims almost automatically; the credible version is bottom-up — number of reachable accounts times realistic annual contract value, with the reachable definition defended.
- Limited partner (LP)
- The investor in a venture fund — endowments, foundations, pensions, insurers, funds of funds, family offices, sovereign wealth funds and high-net-worth individuals. LPs commit capital that is drawn down over time and have no role in investment decisions, only in whether to re-up next fund.
- General partner (GP)
- The manager of the fund, making investment decisions, sitting on boards and bearing the fiduciary duty to LPs. GPs commit their own capital alongside the fund, typically 1 to 5 percent, so the incentive is not purely fee-driven.
- Carried interest
- The GP's share of fund profits, conventionally 20 percent and rising to 25 or 30 percent for top-tier firms. Usually paid only after LPs receive their capital back, and often subject to a clawback if later losses undo earlier gains. It is where the real money in the asset class is made.
- Management fee
- An annual fee on committed capital, conventionally 2 percent during the investment period and stepping down thereafter, funding salaries and operations. Over a fund's life fees consume a meaningful share of committed capital, which is why fund size is a strategic decision rather than a vanity one.
- Hurdle rate
- A preferred return LPs must receive before the GP takes carry, common in private equity and growth funds at around 8 percent. Traditional early-stage venture funds often have no hurdle, reflecting the different return distribution and the historical bargaining position of top managers.
- DPI and TVPI
- Distributions to paid-in capital measures cash actually returned relative to cash drawn — the only number that cannot be marked. Total value to paid-in adds unrealized holdings at carrying value. A high TVPI with a low DPI describes a fund whose returns are still on paper, which is exactly the position much of the 2019-2021 vintage is in.
- IRR
- The annualized internal rate of return on fund cash flows. Extremely sensitive to timing, so early-life IRR can be flattered by one quick markup and is close to meaningless before year five. LPs increasingly treat IRR as secondary to DPI when deciding whether to re-up.
- Vintage year and dry powder
- Vintage year is the year a fund starts investing, and it is a dominant driver of returns because it sets the prices paid — the 2021 vintage deployed into peak valuations, the 2009 vintage into a trough. Dry powder is committed but undeployed capital, which sustains deal activity long after fundraising slows.
- Fund of funds
- A vehicle that invests in other venture funds rather than directly in companies, giving smaller institutions access to managers they cannot reach and diversification across vintages and stages, at the cost of a second layer of fees and a longer path to distributions.
- QSBS
- Qualified Small Business Stock under IRC Section 1202 — the largest tax break in US startup investing, excluding gain on qualifying C-corporation stock held long enough. The 2025 tax law expanded it: a higher gross-asset ceiling, a higher per-issuer exclusion cap, and tiered partial exclusions starting at three years for stock issued after July 4, 2025, instead of an all-or-nothing five-year hold.