Startup fundraising glossary
The fundraising and venture-capital terms every early-stage founder should know — in plain English. Then find the funds actively investing at your stage.
- Pre-seed
- The earliest institutional funding stage, typically raised before meaningful revenue to build a product and find early traction. Rounds commonly range from a few hundred thousand to ~$1–2M.
- Seed
- The first priced (or larger) round used to prove product-market fit and build an early team. Seed rounds today commonly range from ~$1M to several million dollars.
- Series A
- The round raised once a startup has evidence of product-market fit and repeatable growth, used to scale go-to-market. Typically ~$5M–$20M.
- SAFE
- Simple Agreement for Future Equity — an instrument that lets an investor fund a startup now in exchange for equity that converts at a future priced round. Popularised by Y Combinator; faster and cheaper than a priced round.
- Convertible note
- Debt that converts into equity at a later round, usually with a discount and/or valuation cap. Like a SAFE but structured as a loan with interest and a maturity date.
- Valuation cap
- The maximum company valuation at which a SAFE or convertible note converts into equity — protecting early investors by capping the price they pay if the next round is priced higher.
- Pre-money vs post-money valuation
- Pre-money is the company's value before new investment; post-money is pre-money plus the amount raised. Post-money valuation determines the investor's ownership percentage.
- Dilution
- The reduction in existing shareholders' ownership percentage when a company issues new shares, typically in a funding round or when expanding the option pool.
- Term sheet
- A non-binding document outlining the key terms of an investment — valuation, amount, board seats, liquidation preference and investor rights — before full legal documents are drafted.
- Lead investor
- The investor who sets the terms and commits the largest cheque in a round, often taking a board seat and helping fill out the rest of the round.
- Runway
- How long a company can operate before running out of cash at its current burn rate — usually expressed in months. Rounds are typically sized to reach the next milestone with 18–24 months of runway.
- Liquidation preference
- A term giving investors the right to be paid back first (often 1x their investment) before other shareholders in an exit — protecting downside on their investment.
- Option pool
- Shares set aside to grant to future employees as equity compensation. Investors often require it to be created or expanded before a round, which dilutes founders.
- Dry powder
- Capital a fund has raised but not yet invested — available to deploy into new deals. A fund with fresh dry powder is actively writing cheques.
- Corporate VC (CVC)
- A venture arm of a large corporation that invests in startups for strategic as well as financial returns — often bringing distribution, customers or domain expertise alongside capital.