Common Terms

Common Fund Terms

• Angel Investor: A high-net-worth individual who invests in early-stage startups.

• Accredited Investor: A person or entity meeting specific criteria defined by financial regulators.

• Deal Flow: The rate at which an investor receives investment proposals.

• Due Diligence: A thorough investigation of a potential investment to evaluate its merits and risks.

• Valuation: The estimated worth of a company.

• Pre-money Valuation: The company's valuation before investment.

• Post-money Valuation: The company's valuation after investment.

• Equity: Ownership in a company, typically represented by shares.

• Convertible Note: A short-term debt instrument that converts into equity at a later date.

• SAFE (Simple Agreement for Future Equity): An agreement that provides investors with the right to receive equity at a future date.

• Cap Table: A table displaying the equity ownership of a company's shareholders.

• Dilution: A reduction in the ownership percentage of a shareholder due to the issuance of new shares.

• Pro-rata Rights: The right of an investor to maintain their ownership percentage in future funding rounds.

• Liquidation Preference: The priority order in which investors receive payouts in case of a company's liquidation.

• Term Sheet: A non-binding document outlining the terms and conditions of a proposed investment.

• Board of Directors: A group of individuals elected to represent shareholders and make decisions on their behalf.

• Vesting: The process by which an employee or founder earns the right to own shares over time.

• Cliff: A period of time before any vesting occurs.

• Exit Strategy: The plan for an investor to realize returns on their investment, e.g., through an IPO or acquisition.

• IPO (Initial Public Offering): The process of offering shares of a private company to the public in a new stock issuance.

• M&A (Mergers and Acquisitions): The consolidation of companies or assets through various types of transactions.

• ROI (Return on Investment): The financial gain an investor receives from an investment.

• IRR (Internal Rate of Return): The annualized rate of return on an investment.

• Burn Rate: The rate at which a company spends its cash reserves.

• Runway: The amount of time a company has before running out of cash, based on its burn rate.

• Traction: Evidence that a startup's product or service is gaining market acceptance.

• MVP (Minimum Viable Product): A product with enough features to attract early users and validate the product's concept.

• Bootstrapping: Financing a company through personal savings or revenue from the business itself.

• Syndicate: A group of investors who pool their resources to invest in a startup.

• Lead Investor: The investor who plays a prominent role in a funding round, typically contributing the largest amount and helping to set the terms.

• Portfolio: A collection of investments held by an investor.

• Diversification: The strategy of spreading investments across multiple startups to reduce risk.

• SaaS (Software as a Service): A software licensing and delivery model where software is provided over the Internet.

• B2B (Business-to-Business): A company that sells products or services to other businesses.

• B2C (Business-to-Consumer): A company that sells products or services directly to consumers.

• CAC (Customer Acquisition Cost): The cost associated with acquiring a new customer.

• LTV (Lifetime Value): The total revenue a company can expect to receive from a single