When it comes to developing a tech startup, founders quickly encounter a maze of unfamiliar jargon - and this only intensifies when raising equity investment. Our research with founders, investors, and the wider ecosystem revealed that this knowledge gap can leave early-stage founders feeling on the back foot, particularly those fundraising for the first time.
Fundraising is a complex and technical process that involves building investor relationships, negotiating legal agreements, and making strategic decisions that shape your company’s future. Knowing the key terms will help you to build credibility and avoid costly misunderstandings.
How to use this glossary
It can feel overwhelming to enter a world full of jargon and investor-speak. But understanding the language of fundraising empowers you to communicate clearly, negotiate confidently, and make informed decisions.
This A-Z glossary aims to demystify many of the most commonly used terms and will help you feel more confident when engaging with investors, advisors, and partners. However, it’s not exhaustive. If you come across unfamiliar terminology not listed here, or if you're unsure how a term applies in a legal or financial context, don’t hesitate to seek advice from a trusted advisor, accountant, or lawyer.
Glossary of startup terms (A-Z)
Accelerator
A programme that supports startups with mentorship, resources, and sometimes funding to help them grow rapidly and prepare for investment.
Angel investor
An individual who invests their own money in early-stage startups, often providing sector specialisms, mentorship, advice, and valuable connections.
Angel syndicate
A group of angel investors who pool their resources to invest together in a business.
Anti-dilution rights
Contractual protections for investors that reduce the impact of dilution if the company issues new shares at a lower valuation than previous rounds.
Board of directors
A group that oversees company strategy and governance. Directors have a legal duty to act in the best interests of the company and ensure proper governance.
Board advisor
A board advisor provides informal guidance but has no voting rights or legal responsibilities.
Board observer
Board observers are typically appointed under investment agreements by specific investors or shareholder groups. They have the right to attend board meetings and receive board-related information but do not have voting rights.
Bootstrapping
Growing a business using internal resources and revenue, without external investment.
Burn rate
The rate at which a company spends cash. It’s used to calculate how long the business can operate before needing more funding.
Business model
The way a company generates revenue and delivers value to customers. It includes pricing, distribution, and customer acquisition strategies.
Cap table (capitalisation table)
A table showing the ownership structure of a company, including shares held by founders, investors, and employees. It’s used to track who owns what shares.
Churn rate
The percentage of customers who stop using your product or service during a given time period.
Cliff
The initial period in a vesting schedule (see below) during which no equity is earned. After the cliff (often 12 months), a portion of equity vests, followed by gradual vesting thereafter. (See definition of ‘vesting’ below.)
Comparable / multiples
A valuation method that compares a startup’s metrics (like revenue) to similar companies to estimate value.
Convertible note
A loan that can convert into equity in the future. The trigger for conversion can vary but will often be another funding round or after a set period of time.
Copyright
A legal right that protects original works such as novels, songs, and journalism from being copied or used without permission.
Crowdfunding (equity crowdfunding)
Raising money from a large number of small investors via an online platform in exchange for equity in the business. Read our crowdfunding article to learn more.
Customer acquisition cost (CAC)
The total cost of acquiring a new customer, including marketing, sales, and onboarding expenses.
Data room
A secure online repository used to share key business documents with investors during due diligence.
Dilution
The reduction in ownership percentage that all existing shareholders experience when new shares are issued, typically during fundraising rounds.
Disruptive
A description of a product or technology that significantly changes or creates new markets, often displacing established competitors.
Discounted cash flow (DCF)
A valuation method that estimates the present value of future cash flows, adjusted for risk using a discount rate.
Down round
A funding round where shares are sold at a lower valuation than in previous rounds. This is usually an indicator that things have not gone as well as expected.
Drag-along rights
These allow majority shareholders to force minority shareholders to sell their shares alongside them if the company is being sold.
Due diligence
The process investors use to verify a company’s financial, legal, and operational health before making an investment.
Earn-out
A deal structure where part of the sale price is paid over time, based on the company hitting agreed performance targets.
Elevator pitch
A short, compelling summary of your business that can be delivered in under a minute – ideal for networking or investor introductions.
Equity
Ownership in a company, usually in the form of shares.
Equity fundraising
The process of raising money by selling shares in your business to investors. Find out more about how equity finance and fundraising work with our article.
Exit strategy
A plan for how founders and investors will realise the value of the business, such as through a sale, IPO (see below), or merger.
Founder vesting
A vesting (see below) schedule applied to founders to ensure they earn their equity over time. It protects the company if a founder leaves early.
Fully diluted shares
The total number of shares that would exist if all options, warrants, and convertible securities were exercised.
Go-to-market strategy
A plan for how a company will promote and sell its product to customers, including sales channels, marketing tactics, and pricing.
Governance
The systems and processes used to manage a company’s operations, decision-making, and compliance with legal obligations.
Incubator
An organisation that supports early-stage startups by providing workspace, mentorship, and resources.
Initial public offering (IPO)
Listing a company’s shares on a public stock exchange, allowing them to be bought and sold by the public.
Intellectual property (IP)
Creations of the mind - such as inventions, designs, or artistic works - that can be legally protected through intellectual property rights (IPRs), including patents, trademarks, and copyright. See our guide to intellectual property.
IP assignment
The formal transfer of intellectual property ownership from an individual (such as the founder or contractor) to the company.
Key performance indicator (KPI)
A measurable value that shows how effectively a company is achieving its business objectives.
Lead investor
The main investor in a funding round, often responsible for negotiating terms and coordinating other investors.
Liquidation event
A sale, merger, or IPO that triggers the distribution of proceeds to shareholders.
Liquidation preference
A clause that determines the order and amount investors are paid back before other shareholders in a sale or liquidation, often giving preference over common shareholders.
Lifetime value (LTV)
The total revenue a business expects to earn from a customer over the entire relationship.
Market size (TAM, SAM, SOM)
TAM: Total addressable market – the full market demand for your product.
SAM: Serviceable available market – the portion of TAM you can serve.
SOM: Serviceable obtainable market – the realistic share you can capture.
These are used to estimate the scale of opportunity for a product.
Minimum viable product (MVP)
The simplest version of a product that solves a core problem and can be used to test market demand and gather feedback.
Non-disclosure agreement (NDA)
A legal contract that protects confidential information shared between parties from being disclosed or used improperly.
Option pool
A portion of company shares set aside for future employees, advisors, or consultants - often created during fundraising rounds.
Patents
Legal rights granted for inventions, giving the holder exclusive control over how the invention is used or commercialised for a set period.
Pitch deck
A short presentation (usually 10–15 slides) that outlines your business for potential investors. Read our pitch deck article to learn more.
Post-money valuation
The company’s valuation after new investment is added. It equals pre-money valuation plus the amount raised.
Pre-emption rights
Give existing shareholders the right to buy new shares before they’re offered to others, helping them maintain their ownership percentage.
Preference shares
Shares that give investors priority over ordinary shareholders when it comes to dividends and repayment in a liquidation event. They may also carry additional rights depending on the deal terms.
Pre-money valuation
The value of a company before new investment is added.
Runway
The amount of time a company can operate before running out of cash, based on its current burn rate.
SAFE (simple agreement for future equity)
An agreement that allows investors to convert their investment into equity at a later date, sometimes used in early-stage fundraising.
Seed funding / seed round
The first formal round of investment used to launch a product, acquire early customers, and validate the business model.
Series A/B/C
Subsequent funding rounds that support different stages of growth, from scaling operations to expanding into new markets.
Shareholder agreement
A legal document outlining the rights and responsibilities of a company’s shareholders and the company itself.
Strategic sale / trade sale
Selling your company to another business, often a competitor or strategic partner, to realise value and exit. – link to exit article
Sweat equity
Ownership earned by contributing work, time, expertise rather than investing cash.
Tag-along rights
These allow minority shareholders to join in a sale if majority shareholders sell their stake.
Term sheet
A non-binding document outlining the key terms and conditions of an investment deal before legal contracts are drafted.
Trade mark
A sign (such as a word, logo, or slogan) that distinguishes your goods or services from competitors and can be legally protected.
Traction
Evidence that your product is gaining market adoption, such as user growth, revenue, or engagement.
Valuation cap
In convertible notes or SAFEs, the maximum company valuation at which the investment will convert to equity.
Venture capital (VC)
Professional investors who manage pooled funds and invest in high-growth startups, typically in exchange for equity and board involvement. See our guide to venture capital.
Vesting
The process by which employees or founders earn their shares or options over time, often tied to continued involvement in the company.
Waterfall
The order in which proceeds are distributed to shareholders in a liquidation or exit event, often based on share class and preference.
