- Angel investor
- An individual who invests their own money in early-stage startups, typically writing cheques of $10K to $100K at angel or pre-seed stage.
- Angel syndicate
- A group of angels who invest together in one deal, usually led by one experienced angel who negotiates terms for the group.
- Pre-seed round
- The first institutional money into a startup, often $250K to $1.5M, backing the team and insight before meaningful traction.
- Seed round
- A round of typically $1.5M to $4M that funds a startup from early traction to Series A milestones.
- Series A
- The first large priced round, usually led by a venture capital firm once a startup has a repeatable growth engine.
- Venture capital (VC)
- A fund that invests other people's money (from limited partners) into high-growth startups in exchange for equity.
- Lead investor
- The investor who sets the terms of a round, usually writes the largest cheque and often takes a board seat.
- Follow-on investor
- An investor who joins a round on the terms set by the lead.
- SAFE
- Simple Agreement for Future Equity: a contract that converts into shares at a later priced round, usually with a valuation cap and or a discount.
- Convertible note
- A short-term loan that converts into equity at a future round, typically with interest, a cap and a discount.
- Valuation cap
- The maximum valuation at which a SAFE or note converts, protecting early investors if the next round is priced high.
- Pre-money valuation
- The value of a company before new money is invested.
- Post-money valuation
- Pre-money valuation plus the new money raised in the round.
- Dilution
- The reduction in existing shareholders' ownership percentage when new shares are issued.
- Pro rata rights
- An investor's right to invest in future rounds to keep their ownership percentage.
- Term sheet
- A short, mostly non-binding document setting out the key terms of an investment before the legal documents are drafted.
- Due diligence
- The investor's review of a company's financials, legal position, product, market and team before investing.
- Cap table
- A table showing who owns what percentage of the company, including founders, investors and the option pool.
- Option pool
- Shares reserved for future employees, often created or topped up before a priced round.
- Data room
- A shared space with the documents investors need to evaluate and close a deal: deck, financials, contracts and legal documents.
- Warm introduction
- An introduction to an investor from someone they know and trust, such as a founder they backed.
- Cold email
- An email to an investor who does not know you. Short, specific cold emails work well at angel, pre-seed and seed stage.
- Fundraising CRM
- Software for tracking every investor conversation through stages, from first contact to money received.
- Runway
- How many months a startup can operate before running out of cash at its current burn rate.
- Burn rate
- The amount of cash a startup spends each month, net of revenue.
- MRR / ARR
- Monthly or annual recurring revenue, the core traction metric for subscription businesses.
- First close
- The point at which some of the round's money is committed and legally closed, before the round is complete.
- Oversubscribed
- When investors want to put in more money than the round has space for.
Ready to put it into practice? Read how to find investors for your startup.