Glossary

477 terms you will meet in startup funding, each in plain English with an example.

477 terms

#

$100,000 ISO limitalso ISO $100K limit, $100K rule, ISO limit: Each calendar year, the ISOs that become exercisable for the first time can have a grant-date value of $100,000 or less. The part that is more than $100,000 becomes NSOs.; 240,000 ISOs at a $2.00 strike price vest 60,000 each year, which is $120,000. Each year, 50,000 stay ISOs, and 10,000 become NSOs.; Employee equityLesson ISO NSO
2 and 20also 2/20, two and twenty: A short name for a 2% yearly management fee and 20% carry, the usual economics of a VC fund.; On a $100M fund: a fee of $2M each year, and 20% of the profit after the LPs get their $100M back.; Investors and fundsManagement fee Carried interest
409A safe harboralso safe harbor: An IRS rule that accepts an independent 409A appraisal as reasonable. The appraisal date must be in the last 12 months, and no material event, such as a new round, can occur after it.; A 409A has a date 8 months ago, and a Series A closed after it. The company must get a new 409A before it grants more options.; Employee equity409A valuation Fair market value
409A valuationalso 409A, section 409A, common stock valuation: An independent appraisal of the fair market value of the common stock of a private company. Its name comes from Section 409A of the US tax code.; If the strike price is less than the fair market value, employees can owe income tax at vesting, a 20% penalty tax, and interest.; Employee equityLesson Fair market value 409A safe harbor Strike price Preferred price
83(b) electionalso 83(b), 83b, section 83(b), 83(b) form: A tax election to pay tax on restricted stock when you get it, not when it vests. You must file it within 30 days after the transfer, and you cannot cancel it without IRS consent.; A founder buys 4,000,000 shares at $0.0001, the fair market value, and files an 83(b). Taxable income today is $0. Without it, 1,000,000 shares that vest at $0.50 give $499,900 of income.; Legal and taxLesson Form 15620 Founder stock Early exercise Restricted stock QSBS

A

Accelerationalso vesting acceleration, accelerated vesting: Faster vesting when specified events occur, usually a sale of the company. The two types are single-trigger and double-trigger acceleration.; A buyer purchases the company at month 32. A founder with 4,000,000 shares has 1,333,333 unvested shares that acceleration can make vest immediately.; Equity and sharesLesson Single-trigger acceleration Double-trigger acceleration Vesting
Acceleratoralso startup accelerator, incubator, accelerator program: A program with a fixed length, usually 3 months, that invests a standard amount for a standard stake and gives advice. It ends with a Demo Day.; For Fall 2025 programs and later, Techstars invests $220,000: $20,000 for 5% of common stock and $200,000 on an uncapped MFN SAFE.; Investors and fundsLesson Y Combinator Demo Day YC standard deal Batch
Accredited investoralso accredited, accredited investor rules: A person who passes an SEC test of wealth or knowledge. Examples: income of more than $200,000 ($300,000 joint) in each of the last two years, or net worth of more than $1M without the primary home.; A Series 7, 65, or 82 license also qualifies. On September 30, 2026, the SEC asked for comments on new paths, such as CPA and CFA, but it did not adopt them.; Legal and taxLesson Rule 506(b)Rule 506(c)Angel investor Regulation D
Acquihirealso acqui-hire: A purchase of a startup mostly to hire its team. The buyer often stops the product, and investors often get approximately their money back, or less.; A buyer pays $8M for a company with $10M of preferences. The preferred holders get all $8M, and the founders get jobs and new buyer stock.; ExitsLesson Reverse acquihire M&A Management carve-out
ACValso annual contract value: Annual contract value: the value of one year of one customer contract.; A 3-year contract for $90,000 in total has an ACV of $30,000.; MetricsTCV Bookings ARR
Advance subscription agreementalso ASA, advance subscription: A UK instrument similar to a SAFE: the investor pays today for shares at a later date. For SEIS or EIS tax relief, it has no interest, no refund, and a longstop date.; In October 2026, HMRC guidance expected a longstop date of no more than 6 months after the agreement.; InstrumentsSAFE
Advisoralso adviser, startup advisor, advisory board: An expert who helps the company and usually gets a small equity grant that vests over time. The grant is commonly much less than 1%.; Under the FAST agreement (version 3, July 2026), a standard advisor at seed gets 0.25%, and an expert advisor gets 0.75%.; Company basicsLesson FAST agreement NSO Vesting Equity grant
AI premiumalso AI valuation premium: The higher prices that AI startups get, compared with other startups. Most of the premium goes to foundation-model companies, not to all startups with AI in the pitch.; In Q1 2026, PitchBook gave a median Series A pre-money valuation of $78.0M for AI companies and $42.4M for other companies.; ValuationLesson Valuation Step-up AI-native
AI wrapperalso wrapper, GPT wrapper, thin wrapper: A startup that adds a thin product layer on top of the AI model of a different company. Critics use the term to say that the startup has a weak moat.; News and slangMoat AI-native
AI-nativealso AI native, AI-first: A company that has AI at its core from day one, not as features that it added later.; News and slangAI wrapper AI premium Neolab
Allocation: The part of a round that one investor can buy. Pro rata rights reserve part of the round for current investors, so less is left for the new lead.; Current investors with 30% take their full pro rata of a $20M round: $6M. The new lead can buy only $14M.; Funding stagesLesson Lead investor Pro rata right Oversubscribed
AMTalso alternative minimum tax: Alternative minimum tax: a second, parallel calculation of federal tax. The ISO spread at exercise counts for AMT, so an ISO exercise can cause tax with no sale.; For 2026, the AMT exemption is $90,100 for single filers. The AMT rate is 26%, and 28% on the part of the AMT base that is more than $244,500.; Employee equityLesson ISO Spread Exercise
AMT creditalso minimum tax credit, AMT credit carryforward: A tax credit that you usually get when you pay AMT because of an ISO exercise. It can decrease your regular tax in later years, but it does not help you pay the AMT this year.; Employee equityLesson AMT ISO
AMT-free spreadalso AMT headroom, AMT crossover point: The largest ISO spread that you can exercise in one year before the AMT starts. It depends on your income and your filing status.; In 2026, a single filer with a $150,000 salary and the standard deduction can exercise ISOs with a spread of approximately $35,231 and owe no AMT.; Employee equityLesson AMT ISO Spread Tentative minimum tax
Angel investoralso angel, business angel, angels: A person who invests personal money in early startups, usually $5,000 to $250,000 for each company. An angel makes the decision alone, so an angel can say yes in one day.; In 2024, 445,535 active US angels invested $17.9B in 55,346 companies (CVR).; Investors and fundsLesson Angel round Super angel Syndicate Accredited investor
Angel roundalso angel funding, angel financing: Early money from individual angel investors, often on SAFEs.; Five angels each invest $50K on post-money SAFEs at a $10M cap. Together they own 2.5% before the next priced round.; Funding stagesAngel investor Pre-seed SAFE
Anti-dilution protectionalso anti-dilution, antidilution, price protection: A term that decreases the conversion price of preferred stock if the company later sells shares at a lower price. Thus the investor converts into more common shares.; A down round at $1.00 after a $2.00 Series A. Broad-based weighted average moves the Series A conversion price to $1.7692. Full ratchet moves it to $1.00.; Term sheetsLesson Broad-based weighted average Narrow-based weighted average Full ratchet Down round Conversion price
ARRalso annual recurring revenue: Annual recurring revenue: the yearly value of the recurring contracts that are active today, usually MRR × 12. It does not include one-time fees, and no accounting rule defines it.; $100,000 MRR × 12 = $1.2M ARR. A one-time $600,000 setup project adds $0 of ARR.; MetricsLesson MRR Run rate CARR Vibe revenue Revenue multiple
As-converted basisalso as converted, as-if-converted: A count that treats each preferred share as the common shares that it converts into. Votes and ownership percentages often use this basis.; 2,000,000 Series A shares at a 1:1 ratio count as 2,000,000 common shares on an as-converted basis.; Equity and sharesConversion ratio Fully diluted shares Preferred stock
Assumed par: Gross assets divided by the issued shares. The assumed par value capital method multiplies the authorized shares by this number, or by the par value if that is larger.; $50,000 of assets ÷ 8,000,000 issued shares = $0.00625 assumed par.; Legal and taxLesson Assumed par value capital method Gross assets Par value
Assumed par value capital methodalso APVC, APVC method: The Delaware franchise tax method that uses the gross assets and the issued shares of the company. A typical early startup pays the $400 minimum with it.; Gross assets $3M, 10,000,000 issued shares, and 13,000,000 authorized shares. The tax is $1,600, against $110,665 with the authorized shares method.; Legal and taxLesson Delaware franchise tax Authorized shares method Par value
Authorized sharesalso authorized stock, authorized capital: The maximum number of shares that the charter lets the company issue. Authorized shares give ownership to nobody until the company issues them.; A startup authorizes 10,000,000 shares but issues only 8,000,000 at the start.; Equity and sharesLesson Issued shares Unissued shares Certificate of incorporation Authorized shares method
Authorized shares methodalso Delaware default method: The Delaware franchise tax method that uses only the number of authorized shares. The default Delaware notice uses it, and it gives a very high tax for 10 million shares.; 10,000,000 authorized shares: $250 for the first 10,000 shares, plus $85 for each 10,000 more = $85,165.; Legal and taxLesson Delaware franchise tax Assumed par value capital method Authorized shares

B

Bad actor disqualificationalso bad actor rule, Rule 506(d): A rule that stops a company from the use of Rule 506 when a person in the deal has a listed securities violation.; Legal and taxRule 506(b)Rule 506(c)
Basic ownershipalso outstanding basis: Your shares divided by the issued and outstanding shares only. It leaves out options, the unissued pool, and SAFEs, so it is higher than fully diluted ownership.; Ada holds 4,000,000 of 8,000,000 issued shares: 50% basic ownership. Count 2,000,000 more shares from options, the pool, and a SAFE, and she owns 40% fully diluted.; Equity and sharesLesson Fully diluted shares Ownership percentage Outstanding shares
Basisalso cost basis, tax basis, adjusted basis: What you paid for an asset, for tax purposes. Your gain on a sale is the sale price minus the basis.; A founder pays $3,000 for 3,000,000 shares and sells them for $40M. The basis is $3,000, and the gain is $39,997,000.; Legal and taxLesson Capital gain QSBS
Batchalso YC batch, accelerator cohort, class: The group of companies that start an accelerator program at the same time.; YC names its batches by season and year: W26 (Winter 2026), P26 (Spring 2026), S26 (Summer 2026), and F26 (Fall 2026).; Investors and fundsLesson Y Combinator Accelerator Demo Day
Billingsalso invoices, billed revenue: The invoices that a company sends in a period. Billings = revenue in the period + the change in deferred revenue.; A company sends a $120,000 invoice on January 1 for a year of service. Q1 billings are $120,000, but Q1 revenue is only $30,000.; MetricsLesson Bookings Revenue Deferred revenue
Billion-dollar roundalso $1B round, billion-dollar raise: A single funding round of $1B or more.; In Q3 2026, a record 27 companies raised rounds of $1B or more. They got approximately one third of global venture dollars (Crunchbase).; News and slangMega-round Hectocorn
Blended valuationalso blended price, blended effective valuation: The average price of a deal that buys at two or more prices: all the cash ÷ all the ownership that the cash buys.; At a $20M next cap, YC's $500K buys 7% + $375K ÷ $20M = 8.875%. $500K ÷ 8.875% = a blended valuation of $5.63M.; ValuationLesson Implied valuation YC standard deal Post-money valuation
Blitzscalingalso blitz scaling: Growth as fast as possible, with speed before efficiency.; News and slangCapital as a weapon Burn multiple
Blue sky lawsalso blue sky, state securities laws, state notice filing: State securities laws. For Rule 506 deals, federal law overrides state registration, but states can still collect notice filings and fees.; California charges a flat $300 fee, and its notice is due within 15 days of the first sale in California.; Legal and taxLesson Form D Regulation D
Board compositionalso board seats, board structure, 2-1 board, 2-2-1 board: Who holds each board seat. The board can fire the CEO, and thus board composition is the most important control term.; A founder-friendly Series A board has 3 seats: 2 common and 1 investor. On a 2-2-1 board, the independent director can vote with the investors and replace the CEO.; Term sheetsLesson Board of directors Independent director Economics and control Protective provisions
Board observeralso observer, observer seat, observer rights: A person who can go to board meetings but cannot vote. Companies often give this right to an investor that does not get a board seat.; Company basicsBoard of directors Board composition
Board of directorsalso board, directors, board seat, director: A group that the shareholders elect to control the company. The board can hire and fire the CEO, and it gives approval for big decisions, such as a sale of the company.; At formation, the board usually has only founders. After a Series A, a usual board has 3 seats: 2 for the common holders and 1 for the lead investor.; Company basicsLesson Board composition Board observer Independent director Officer Protective provisions
Bookface: The private online network of YC founders. YC compares it to "a combination of Facebook, Quora, and LinkedIn."; YC writes that B2B and consumer companies often get their first 40 to 50 paying customers from the YC community.; Investors and fundsLesson Y Combinator Batch
Bookingsalso booking, signed contracts: The value of the contracts that customers signed in a period. The money and the service can start later, and thus a booking is not revenue yet.; A customer signs a 3-year contract at $120,000 each year. The booking is $360,000, but revenue in the first month is $10,000.; MetricsLesson Revenue Billings ACV TCV CARR
Bootstrappingalso bootstrap, bootstrapped, self-funded: A way to pay for the company with savings and customer revenue, not with money from investors. You keep 100% of the company, but revenue limits your speed.; A developer sells a tool for $20,000 each month, and the tool costs $15,000 each month to operate. The $5,000 that stays each month pays for the next hire.; Funding stagesLesson Seed-strapping Friends-and-family round Non-dilutive funding Revenue-based financing
Break-evenalso breakeven, profitability, profitable: The point where revenue pays for all costs, so net burn is zero or less.; Revenue is $400,000 each month, and costs are $400,000 each month. The company is at break-even.; MetricsNet burn Default alive Ramen profitable
Break-even cap: The cap that you must get with an accelerator to sell the same part of the company as without it. The increase over your cap without the program shows the price of its fixed stake.; Without a program, $2.5M at a $15M cap sells 16.67%. With YC, you raise the other $2M, and your cap must be $24.6M to sell the same 16.67%.; ValuationLesson Fixed stake Valuation cap Accelerator
Bridge roundalso bridge, bridge financing, bridge loan, Seed+, Seed-2: Money that a company raises between two primary rounds, often on SAFEs or notes, to get to the next milestone.; In Q2 2025, bridges were 16.6% of all cash raised on Carta, against 11.8% in Q2 2024.; Funding stagesLesson Extension Insider round Convertible note Series A crunch
Broad-based weighted averagealso BBWA, weighted average anti-dilution, weighted average: The standard anti-dilution formula: CP2 = CP1 × (A + B) ÷ (A + C). It gives partial protection, and the size of the lower-priced round sets the amount.; CP1 = $2.00, A = 10,000,000 shares, and a $3M round at $1.00. B = 1,500,000 and C = 3,000,000, so CP2 = $1.7692.; Term sheetsLesson Anti-dilution protection Narrow-based weighted average Full ratchet
Burn multiplealso burn ratio: Net burn ÷ net new ARR in the same period. David Sacks made this metric in April 2020, and a lower number is better.; You burn $2M in a quarter and add $1M of ARR = 2x. Sacks called 2x "reasonable for an early-stage startup" and 5x "terrible."; MetricsLesson Net burn ARR Rule of 40
Business email compromisealso BEC, wire fraud: A fraud in which a criminal sends an email that looks like it comes from a person you trust, often to change wire instructions. In 2025, the FBI received 24,768 complaints about it, with $3.05B in reported losses.; An email "from your lawyer" gives a new bank account for the close. Before anyone sends money, call the lawyer on a number that you already have.; Legal and taxLesson Wire transfer Closing
Buybackalso share buyback, repurchase, stock repurchase: A purchase by the company of its own shares from current holders, for example from employees at the last round price.; The company buys 200,000 shares from a former employee at $3.00, for $600,000.; ExitsTender offer Secondary sale Outstanding shares
Bylawsalso by-laws, corporate bylaws: The internal rules of the company. They tell how the company calls meetings, appoints officers, and counts votes.; Company basicsCertificate of incorporation Board of directors Officer

C

C corporationalso C corp, C-corp, corporation: The standard US corporation, which the government taxes separately from its owners. VC funds want this type, because it can sell preferred stock and its stock can be QSBS.; Northwind Labs, Inc. is a Delaware C corporation. It sells common stock to its founders, Ada and Ben, and Series A preferred stock to investors.; Company basicsLesson Delaware C corp LLC S corporation QSBS Preferred stock
CACalso customer acquisition cost, blended CAC, paid CAC: Customer acquisition cost: sales and marketing costs, with salaries, divided by the number of new customers.; $60,000 of sales and marketing costs in a month ÷ 20 new customers = $3,000 CAC.; MetricsLesson LTV LTV:CAC ratio CAC payback Unit economics
CAC paybackalso payback period, CAC payback period, payback: The number of months of gross profit from one customer that are necessary to pay for its CAC.; $3,000 CAC ÷ ($500 each month × 80% gross margin) = 7.5 months.; MetricsLesson CAC LTV Gross margin
Cap pricealso cap conversion price: The price for each share that a valuation cap gives: the cap ÷ the share count that the note or SAFE defines. The holder converts at the cap price when it is lower than the discount price or the round price.; A note has an $8M pre-money cap, and the company has 8,000,000 shares before the round. The cap price is $8M ÷ 8,000,000 = $1.00.; InstrumentsLesson Valuation cap Discount Price Safe Price Conversion price
Cap tablealso capitalization table, capitalization: The record of who owns which securities in the company, and how many. Each row is a holder, and each column is a type of security.; Rows: Ada, Ben, the SAFE holders, the seed investors, and the option pool. Columns: common, Series Seed Preferred, options, total, and percentage.; Equity and sharesLesson Pro forma cap table Fully diluted shares Ownership percentage Share class
Capital as a weapon: A company raises much more money than is necessary, to spend more than its competitors. This is the idea behind kingmaking.; News and slangKingmaking Blitzscaling
Capital callalso drawdown, capital drawdown: A request from the GP to the LPs to send part of the money that they promised, when the fund must have it.; An LP commits $10M to a fund. The GP calls $2M in year 1 and $3M in year 2.; Investors and fundsLimited partner General partner Dry powder
Capital gainalso capital gains, long-term capital gain, LTCG: The profit when you sell an asset for more than your basis, which is usually the price that you paid. A gain on stock that you hold for more than 1 year is long-term and usually has a lower tax rate.; Without QSBS, the top federal long-term rate is 20% plus 3.8% net investment income tax. On a $10M gain, 23.8% is $2.38M.; Legal and taxOrdinary income Holding period QSBS Qualifying disposition
CARRalso contracted ARR, committed ARR: Contracted ARR: ARR plus the yearly value of contracts that customers signed but that are not live yet. It can be much more than the revenue that customers pay today.; $2M of contracts are live. Customers signed $1.5M more, but the installation is not complete. ARR is $2M, and CARR is $3.5M. A claim of $3.5M "ARR" is 75% too high.; MetricsLesson ARR Bookings Run rate
Carried interestalso carry, the 20, performance fee: The share of the fund's profits that goes to the GP, usually 20%. The GP gets carry only after the LPs get their money back.; A $100M fund gives back $300M. The profit is $200M, and the carry is $40M. The LPs get $260M, which is 2.6x net.; Investors and fundsLesson Management fee 2 and 20 Hurdle Fund waterfall
Cash-Out Amountalso money back, cash-out: The money that the investor paid for a SAFE. In a sale or an IPO before the SAFE converts, the SAFE gets the larger of this amount and its Conversion Amount. In a shutdown, the SAFE can get back at most this amount.; A $1M SAFE has a $10M post-money cap, and the company sells for $5M. The Cash-Out Amount is $1M, and the Conversion Amount is $500K. Thus, the SAFE gets $1M.; InstrumentsLesson Conversion Amount SAFE liquidity event SAFE
Centauralso centaurs: A cloud company with $100M or more of ARR, a term from Bessemer Venture Partners in 2022. It is a revenue milestone, not a valuation.; A company with $100M of ARR is a centaur, also at a valuation of only $500M.; News and slangARR Unicorn
Certificate of incorporationalso charter, certificate, articles of incorporation, Amended and Restated Certificate of Incorporation, restated charter: The first legal document of the company, which the company files with the state. It sets the authorized shares and the rights of each class of stock, such as the liquidation preference of preferred stock.; In a priced round, the company files an Amended and Restated Certificate of Incorporation. The new charter authorizes the Series A preferred stock.; Company basicsLesson Incorporation Bylaws Authorized shares Preferred stock NVCA model documents
Championalso deal partner: The partner at a VC firm who wants to invest in you and brings the deal to the other partners.; The champion writes the investment memo and pitches the company at the investment committee.; Investors and fundsLesson Investment committee Lead investor
Check sizealso check, ticket size: The amount that one investor puts into one company in one round.; CRV says that a lead usually commits 40% to 60% of a round, and that follow checks are usually $50,000 to $500,000.; Investors and fundsLesson Lead investor Follow investor Angel investor
Churnalso churn rate, attrition: The percentage of customers or revenue that you lose in a period. Monthly churn compounds: at 5% each month, approximately 46% of the customers go in one year.; 4 of 200 customers cancel in one month = 2% monthly logo churn.; MetricsLesson Logo churn Revenue churn NRR GRR LTV
Circular dealsalso round-tripping, circular financing, vendor financing: Deals where an investor also sells to the startup, such as cloud services or chips, so part of the money goes back to the investor. Critics say that this can make revenue and valuations look larger.; A cloud company invests $1B, and the startup agrees to buy $800M of cloud services from that company.; News and slangValuation ARR
Clean termsalso clean term sheet, founder-friendly terms, standard terms, clean deal: Terms close to the market standard: a 1x non-participating preference, broad-based weighted average anti-dilution, and a board that the founders do not lose.; A clean seed term sheet has no participation, no cumulative dividends, no redemption rights, and no full ratchet.; Term sheetsLesson Dirty terms Term sheet Non-participating preferred Broad-based weighted average
Cliffalso vesting cliff, 1-year cliff, one-year cliff: A period at the start of vesting when no shares vest. With the standard 1-year cliff, nothing vests for 12 months, then 25% vests at one time.; If you leave at month 11, you get 0 shares. If you leave at month 13, you get 25% plus one month of shares.; Equity and sharesLesson Vesting Reverse vesting
Closingalso close, the close, deal closing: The moment when the parties sign the final documents and the investors send the money. Paul Graham says that a deal is not a deal until the money is in the bank.; A Crowell & Moring guide (read in November 2026) gives approximately 3 to 6 weeks from a signed priced-round term sheet to the wire from the lead.; Funding stagesLesson First close Closing conditions Wire transfer Form D
Closing conditionsalso conditions precedent, conditions to closing: Items that must be true before the money moves, such as legal opinions, signed documents, and complete due diligence.; Term sheetsClosing Due diligence Stock purchase agreement
CMGRalso compound monthly growth rate: Compound monthly growth rate: the constant monthly rate that changes the revenue of the first month into the revenue of the last month. CMGR = (last month ÷ first month)^(1 ÷ months) − 1.; Monthly revenue goes from $20K to $80K in 6 months. CMGR = 4^(1/6) − 1 = 26.0%.; MetricsLesson Growth rate Compound growth
Co-sale rightalso tag-along, tag-along right, co-sale, tag along: The right of investors to sell some of their own shares in the same sale, on the same terms, when a founder sells shares.; A founder agrees to sell 500,000 shares. Investors with 2M shares use co-sale and sell 200,000 of them (2M ÷ 5M = 40%), so the founder sells 300,000.; Term sheetsLesson ROFR Drag-along ROFR and co-sale agreement
Cockroach modealso survival mode: A period of deep cost cuts to stay alive until the market becomes better.; A company with $6M of cash cuts net burn from $500,000 to $150,000 each month. Runway increases from 12 months to 40 months.; News and slangDefault alive Runway Zombie startup
Cohortalso retention curve, cohort analysis, retention cohort: A group of customers or users who started in the same period. A retention curve shows the part of the cohort that stays active each month.; 1,000 users join in January. 45% are active in month 1, 30% in month 3, 27% in month 6, and 26% in month 12. The flat curve is a sign of product-market fit.; MetricsProduct-market fit Churn DAU/MAU
Cold emailalso cold outreach, cold pitch: An email to an investor that you send with no introduction. It gets better results when it is short and specific, and when it shows traction.; "Acme checks dental patients' insurance automatically. 40 clinics pay $300/month, and revenue grew 25% per month for 5 months. We are raising $2.5M. Deck attached."; Funding stagesLesson Warm intro Fundraising pipeline One-liner Traction
Committed capitalalso commitments, fund commitments: The total money that the LPs promise to a fund. The management fee is usually a percentage of it, so the GP gets the fee before the LPs send all the money.; A $100M fund has $100M of committed capital, even when the LPs sent only $20M so far.; Investors and fundsLesson Paid-in capital Capital call Management fee
Common stockalso common, common shares, ordinary shares: The basic class of shares that founders and employees hold. In a sale of the company, common holders get money after the preferred holders.; A founder buys 4,000,000 common shares at $0.00001 each and pays $40.; Equity and sharesLesson Preferred stock Liquidation preference Stock option Share class
Company Capitalization: The share count that a post-money SAFE uses to price its conversion. It counts all shares, options, the old unissued pool, and all SAFEs and notes, but not the pool increase of the round.; Founders 9,000,000 + pool 1,000,000, and one SAFE for 10%. The Company Capitalization is 11,111,111 shares, and the SAFE gets 1,111,111 of them.; InstrumentsLesson Safe Price Post-money SAFE Option pool shuffle
Comparablesalso comps, comparable companies, comparable transactions: A method that values a company from recent deals of similar companies or from public market multiples.; Three similar companies raised at 15x, 18x, and 20x ARR. A company with $4M of ARR can use these comps to ask for a $60M to $80M valuation.; ValuationLesson Revenue multiple Valuation DCF
Compound growthalso compounding: Growth where each period's rate applies to a larger base. Small weekly rates become very large yearly multiples.; 5% growth each week is approximately 23.5% each month and 12.6x each year.; MetricsLesson Growth rate CMGR
Continuation fundalso continuation vehicle, CV: A new vehicle that a GP makes to hold its best companies after the life of the earlier fund ends. The LPs of the earlier fund can take cash or keep their stake in the new vehicle.; Investors and fundsGP-led secondary Fund life
Conversionalso convert, converts, conversion event: The change of a SAFE, a note, or preferred stock into a different security. It usually occurs at a priced round, a sale, or an IPO.; At the Series A, a $1M SAFE with a $10M post-money cap converts into preferred shares equal to 10% of the Company Capitalization.; InstrumentsLesson SAFE Convertible note Conversion price Conversion ratio
Conversion Amount: In a sale or an IPO before a SAFE converts, the value of the shares that the SAFE gets at its cap. For a post-money SAFE, it is amount ÷ cap of the money that goes to the owners.; A $1M SAFE at a $10M post-money cap owns 10%. In a $50M sale with no debt, the Conversion Amount is $5M.; InstrumentsLesson Cash-Out Amount SAFE liquidity event Valuation cap
Conversion pointalso the flip, breakpoint, conversion breakpoint, conversion threshold, indifference point: The exit value at which a non-participating preferred holder gets more from conversion than from its preference. Conversion point = preference ÷ ownership.; $10M preference ÷ 25% = $40M. At an exit of more than $40M, the investor converts to common.; ExitsLesson Non-participating preferred Waterfall Liquidation preference
Conversion pricealso conversion price per share: The price for each share at which a SAFE, a note, or preferred stock converts. For a SAFE or a note, it is the lower of the cap price and the discount price.; Round price $2.50, cap price $1.60, and discount price $2.00. The SAFE converts at $1.60.; InstrumentsLesson Safe Price Discount Price Valuation cap Anti-dilution protection Conversion ratio
Conversion ratioalso conversion rate: The number of common shares that each preferred share converts into. It starts at 1, and anti-dilution can make it higher.; After a down round, broad-based weighted average anti-dilution changes the ratio from 1 to 1.1304. 2,000,000 preferred shares then convert into 2,260,870 common shares.; Equity and sharesConversion Conversion price Anti-dilution protection Preferred stock
Convertible equity agreementalso CEA: The contract for the Techstars fixed stake. Techstars pays $20,000. At a priced round of at least $1M, the agreement converts into common stock equal to 5% of the company.; The 5% applies after all SAFEs convert, like the YC 7%. But it is common stock, not preferred stock.; InstrumentsLesson Fixed stake Common stock Accelerator
Convertible notealso note, convertible, convertible debt, convertible loan note: A loan that converts into shares at the next priced round, usually with a cap and a discount. It is different from a SAFE, because it has interest and a maturity date.; $500,000 at 8% simple interest for 18 months converts as $560,000. At a $1.60 cap price, that buys 350,000 shares.; InstrumentsLesson SAFE Principal Interest Maturity date Qualified financing Valuation cap
Corporate venture capitalalso CVC, corporate VC, corporate investor, strategic investor: The venture unit of a large company. It invests money from the balance sheet of the parent company, for strategy and for returns.; From January to September 2026, corporates invested in 20.7% of US deals by count but 80.1% of deal value (PitchBook-NVCA).; Investors and fundsLesson Family office Strategic buyer Information rights
Cost of revenuealso COGS, cost of goods sold, direct costs: The direct costs to deliver the product that customers pay for, such as hosting, AI inference, payment fees, and customer support. Gross margin subtracts it from revenue.; $1M of revenue with $200K of cost of revenue gives $800K of gross profit, an 80% gross margin.; MetricsLesson Gross margin Unit economics
Court of Chancery: The Delaware business court. It decides disputes about Delaware corporations, and investors and lawyers know its decisions well. This is one reason that startups select Delaware.; Company basicsLesson Delaware C corp
Cramdownalso cram-down, cram down: A down round where the new money causes large dilution to current holders who do not invest.; A new investor buys 60% of the company at a low price. A seed investor who does not invest goes from 10% to 4%.; News and slangLesson Down round Washout round Pay-to-play Recapitalization
Crossover fundalso crossover investor, crossover: A fund that invests in late-stage private companies and in public stocks.; A crossover fund buys $50M of a company's Series E, then buys more shares after the IPO.; Investors and fundsMezzanine round Tourist investor IPO
Crowdfundingalso equity crowdfunding, reward crowdfunding: Money from many members of the public. Reward crowdfunding sells pre-orders, and equity crowdfunding sells securities under Reg CF or Reg A+.; A company sells pre-orders of a $500 device to 2,000 backers. It collects $1M and sells no equity.; InstrumentsLesson Regulation Crowdfunding Regulation A+Non-dilutive funding
Cumulative dividendsalso accruing dividends, cumulative dividend: Dividends that add up each year, even if the company does not pay them. The unpaid total adds to the liquidation preference, so the common holders pay for it in a sale.; $10M with an 8% simple cumulative dividend for 5 years adds $4M. The preference becomes $14M.; Term sheetsLesson Dividends Liquidation preference Dirty terms

D

Data roomalso virtual data room, VDR: An online folder of company documents that investors examine before they invest. At seed, it holds the charter, the cap table, the SAFEs, IP assignments, and primary contracts.; An investor finds that a contractor wrote the core code with no IP assignment. A signature today prevents a delay of weeks in due diligence.; Company basicsLesson Due diligence IP assignment Cap table
DAU/MAUalso DAU, MAU, stickiness, daily active users, monthly active users: Daily active users ÷ monthly active users. It shows how often users come back.; 300,000 DAU ÷ 1,000,000 MAU = 30%. In 2023, a16z called 25% OK, 40% good, and 50% great for social apps.; MetricsCohort Traction
DCFalso discounted cash flow: Discounted cash flow: a method that values future cash flows in the dollars of today. It is rarely useful for early startups, because nobody knows their future cash flows.; ValuationComparables Valuation
Dead equity: Shares that a founder who left the company still holds. Investors do not like it, because those shares get value but do no more work for the company.; Without vesting, a co-founder who leaves at month 18 keeps 50% of the company.; Equity and sharesLesson Reverse vesting Vesting Equity split
Decacornalso decacorns: A private company with a valuation of $10B or more.; News and slangUnicorn Hectocorn
Deemed liquidation eventalso DLE, liquidation event: A sale, a merger, or a sale of almost all assets that the charter treats like a liquidation. It starts the liquidation preference, the same as a shutdown.; Under the NVCA model, a merger in which the current stockholders lose majority control is a deemed liquidation event.; Term sheetsLesson Liquidation preference Waterfall M&A
Default alivealso default dead, default alive or default dead: A company that gets to profitability before its cash is gone, if expenses stay flat and revenue keeps its recent growth rate. Paul Graham named the test in 2015, and a company that does not pass it is default dead.; Cash $3.6M, expenses $400,000 each month, and revenue of $100,000 that increases 10% each month. Profit comes in month 16 with approximately $777,000 left. At 5% growth, the cash is gone in month 14.; MetricsLesson Runway Net burn Fatal pinch Break-even
Deferred revenuealso unearned revenue: Cash that a customer paid for a service that the company did not supply yet. Accountants record it as a liability, and it becomes revenue month by month.; A $1,200 annual prepayment in January gives $100 of revenue and $1,100 of deferred revenue at the end of January.; MetricsLesson Revenue Billings
Delaware C corpalso Delaware corporation, DE C-corp, Delaware C-corp: A C corporation that uses Delaware corporate law. Most venture-backed US startups select it, because investors know Delaware law and the standard NVCA documents are for Delaware corporations.; The Delaware 2025 annual report says that more than two-thirds of the Fortune 500 are Delaware companies.; Company basicsLesson C corporation Delaware flip Delaware franchise tax NVCA model documents
Delaware flipalso flip, US flip, Delaware holding company: A change of structure that puts a new Delaware parent company above a company from a different country. The shareholders get the same percentage of the new parent for their local shares.; UK Ltd has two founders with 50 shares each. They make Newco Inc. in Delaware and get 4,000,000 Newco shares each. Each founder still owns 50%.; Company basicsLesson Delaware C corp Incorporation
Delaware franchise taxalso franchise tax, Delaware annual report: The yearly tax and annual report that each Delaware corporation must file by March 1. Delaware gives two calculation methods, and you can use the one with the lower tax.; A startup with 10,000,000 authorized shares gets a default notice for $85,165. With the assumed par value capital method, it usually pays the $400 minimum plus the $50 fee.; Legal and taxLesson Authorized shares method Assumed par value capital method Delaware C corp
Demo Dayalso demo days: The event at the end of an accelerator batch, when each company pitches to many invited investors at the same time.; The YC Fall 2026 Demo Day is on December 2, 2026, in San Francisco. The YC Demo Day page gives approximately 1,500 investors and media.; Investors and fundsLesson Accelerator Batch Y Combinator
Dilutionalso diluted, dilute, ownership dilution: The decrease in your ownership percentage when the company issues new shares. You keep the same number of shares, but they are a smaller part of a larger total.; You hold 1,000,000 of 4,000,000 shares (25%). The company issues 1,000,000 new shares to an investor. Your 1,000,000 shares are then 20% of 5,000,000.; Equity and sharesLesson Post-money valuation Ownership percentage Primary shares Option pool shuffle Pro rata right
Dilution per roundalso median dilution, round dilution: The part of the company that new investors buy in one round: new money ÷ post-money valuation. Benchmarks such as the Carta medians count only this part, not the SAFE conversions or the pool top-ups of the round.; In Q2 2026, the median seed round on Carta sold 19.4% of the company.; ValuationLesson Dilution Post-money valuation Pool top-up
Direct listing: A company lists its current shares on an exchange, without an underwritten sale of new shares. Current shareholders sell their shares directly to the market.; WilmerHale counted nine direct listings in 2025, against one in 2024.; ExitsLesson IPO Lockup
Dirty termsalso dirty term sheet, structured terms, investor-friendly terms: Terms that give investors more than the market standard, such as participating preferred, a preference of more than 1x, or full ratchet.; A $1.2B post-money valuation with a 2x participating preference gives a higher headline, but with dirtier terms.; Term sheetsLesson Clean terms Participating preferred Full ratchet Headline valuation
Discountalso discount rate, conversion discount, SAFE discount: A SAFE or note term that lets the investor convert at a price lower than the round price. YC says that discounts are commonly 10% to 20%.; Series A price $2.00 with a 20% discount → the SAFE converts at $1.60. The YC form calls this an 80% "Discount Rate."; InstrumentsLesson Valuation cap Discount Price Conversion price Convertible note
Discount Pricealso discounted price: The price at which a SAFE converts through its discount: the lowest price of the new preferred stock × the Discount Rate.; Series A price $2.00 × an 80% Discount Rate = a $1.60 Discount Price.; InstrumentsLesson Discount Safe Price Conversion price
Dissolution eventalso SAFE dissolution: A shutdown of the company before a SAFE converts. After the creditors, SAFE holders and preferred holders divide the cash that stays, before common holders get money.; $300,000 stays after the creditors. Two SAFEs have claims of $500,000 and $1,000,000, so they get $100,000 and $200,000. Common holders get nothing.; InstrumentsLesson SAFE liquidity event Shutdown SAFE
Distribution in kindalso in-kind distribution, stock distribution: A payment from a fund to its LPs in shares, not in cash, often after an IPO.; ExitsDPI Limited partner IPO
Dividendsalso cumulative dividends, accruing dividends, non-cumulative dividends, dividend preference: Cash payments to shareholders. Cumulative dividends increase each year and add to the preference, but the company pays non-cumulative dividends only if the board declares them.; $10M with an 8% cumulative simple dividend for 5 years: the preference increases from $10M to $14M. In Q2 2026, 3% of Cooley deals had cumulative dividends.; Term sheetsLiquidation preference Dirty terms
Double-trigger accelerationalso double trigger, double-trigger: Acceleration that occurs only after two events: a sale of the company, and then a termination without cause in a set period.; Cooley says that the period is usually 9 to 18 months after the closing. If the buyer terminates a founder in that period, the unvested shares vest immediately.; Equity and sharesLesson Acceleration Single-trigger acceleration Double-trigger RSU
Double-trigger RSUalso private company RSU, double-trigger RSUs: An RSU with two conditions before you get shares and pay tax: time-based vesting and a liquidity event, such as an IPO or a sale.; You complete 4 years of RSU vesting, but you get no shares and pay no tax until the company has its IPO in year 5.; Employee equityRSU Exit Double-trigger acceleration
Down roundalso downround, down: A round at a lower price for each share than the previous round. It can start anti-dilution protection, which gives earlier investors more shares.; The last round price was $2.00, and the new round sells shares at $1.50. In Q2 2026, Cooley counted 12.1% of its deals as down rounds.; ValuationLesson Up round Anti-dilution protection Pay-to-play Recapitalization Cramdown
DPIalso distributions to paid-in, distributed to paid-in, cash-on-cash: Distributions to paid-in capital: the cash that a fund gave back to its LPs ÷ the cash that the LPs paid in. It is the "real money" metric.; LPs paid in $80M, and the fund gave back $40M in cash. DPI = 0.5x.; Investors and fundsLesson TVPI RVPI DPI drought Paper gains
DPI droughtalso liquidity drought: Years of little cash back to LPs, but high paper values.; As of Q1 2026, the median fund of the 2021 vintage had a DPI near 0 (Carta data, through a secondary summary).; News and slangDPI Paper gains IPO window
Drag-alongalso drag-along right, drag along, drag rights: A promise that, if the board and set majorities give approval for a sale, all other holders vote for it and sell their shares too.; A buyer offers $28M, and the preferences total $30M, so common holders get $0. With a drag-along, the founders must still vote yes.; Term sheetsLesson Co-sale right Voting agreement M&A
Dry powderalso uninvested capital, undeployed capital: Money that LPs committed to funds, but that the funds did not invest yet.; PitchBook data in the NVCA 2026 Yearbook puts US VC dry powder at approximately $300B at the end of 2025.; Investors and fundsCapital call Reserves
Dual-class sharesalso super-voting shares, dual-class stock, multiple-vote shares: A structure with a class of shares that has more votes for each share, for example 10 votes. With these shares, founders can keep control when they own less than half of the company.; A founder holds 20% of the shares, all with 10 votes each. The other holders have 1 vote for each share, so the founder has approximately 71% of the votes.; Equity and sharesCommon stock Share class IPO
Due diligencealso diligence, DD: The checks that an investor does before it invests: legal, financial, technical, and reference checks.; In a survey of 885 VCs from 2015 and 2016, the average firm used 118 hours on due diligence for each deal.; Company basicsLesson Data room Closing conditions Term sheet Reference check

E

Early exercisealso exercise before vesting, early exercise option: The exercise of options before they vest, if the plan lets you. Usually you also file an 83(b) election, to start the capital gains clock and the QSBS clock early.; You exercise 100,000 options at $0.10 on the first day and pay $10,000. The spread is $0, so the tax from the 83(b) election is $0.; Employee equityLesson 83(b) election Restricted stock QSBS Exercise
Earnoutalso earn-out, contingent consideration: Part of the sale price that the buyer pays later, only if the company gets to targets. Earnouts often pay much less than the maximum.; A deal pays $100M at closing plus a maximum of $20M for revenue targets. For deals after 2020, SRS Acquiom found that buyers paid 21% of the total maximum earnout dollars.; ExitsLesson Escrow M&A Headline valuation
EBITDAalso earnings before interest, taxes, depreciation, and amortization: Earnings before interest, taxes, depreciation, and amortization. It is an approximate measure of operating profit.; $10M of revenue and $8M of costs without depreciation and amortization give $2M of EBITDA, a 20% EBITDA margin.; MetricsRule of 40 Enterprise value Break-even
Economics and controlalso economic terms, control terms, Venture Deals: The two kinds of terms that are most important in a term sheet, from the book Venture Deals. Economics decides who gets the money, and control decides who makes the decisions.; Two offers have the same $40M valuation. Offer A gets 1 of 3 board seats. Offer B gets 2 of 3 seats and a veto on the budget. The economics are the same, but the control is not.; Term sheetsLesson Term sheet Liquidation preference Board composition Protective provisions
Effective discount: How much less a SAFE or note holder really pays than the new investors: 1 − conversion price ÷ round price. When the cap applies, it is often much larger than the discount in the document.; The Series A pays $2.00 a share, and a note converts at its $1.00 cap price. The effective discount is 1 − $1.00 ÷ $2.00 = 50%, though the note says 20%.; InstrumentsLesson Discount Cap price Conversion price
Effective pre-money valuationalso effective pre-money, true pre-money, real pre-money: The pre-money valuation that the current holders really get, after you subtract the value of the new option pool in the pre-money.; A $20M pre-money valuation includes a pool increase with a value of $769,231. The effective pre-money valuation is approximately $19.23M.; ValuationLesson Option pool shuffle Pre-money valuation Pool top-up
EIN: Employer Identification Number: the federal tax number of a US company. The company gets it from the IRS after incorporation and uses it for bank accounts, payroll, and tax returns.; Company basicsLesson Incorporation
Emerging manageralso emerging VC, new manager: A newer VC firm, usually on one of its first funds.; From January to September 2026, only 211 emerging firms closed a fund, against 927 in 2022 (PitchBook-NVCA).; Investors and fundsFirst-time fund Micro-VC
Enterprise valuealso EV: The value of the business itself, without its cash and its debt. Equity value = enterprise value + cash − debt.; $100M enterprise value + $10M cash − $20M debt = $90M equity value.; ValuationEquity value EBITDA
Equityalso ownership, stake: Ownership in a company. Shares are the units of equity.; If you own 1,000,000 of 10,000,000 shares, you own 10% of the equity.; Equity and sharesLesson Share Ownership percentage Cap table
Equity grantalso grant, option grant, equity award, stock grant: An award of stock options, restricted stock, or RSUs that the board gives to an employee, an advisor, or a director.; An engineer gets a grant of 40,000 options that vest over 4 years with a 1-year cliff.; Employee equityLesson Stock option RSU Refresh grant Vesting Option pool
Equity splitalso founder split, cofounder split, founder equity split: The division of the founder shares between the co-founders. YC recommends an equal split, or a split that is almost equal, because almost all the work is still in the future.; Two founders split 8,000,000 shares. A 50/50 split gives each founder 4,000,000 shares. A 55/45 split gives 4,400,000 and 3,600,000 shares.; Company basicsLesson Founder Founder stock Vesting Dead equity
Equity valuealso equity valuation, market cap, market capitalization: The value of the company for its shareholders: enterprise value plus cash minus debt.; $100M enterprise value + $10M cash − $20M debt = $90M equity value.; ValuationEnterprise value Valuation
Escrowalso holdback, indemnity escrow, escrow holdback: Part of the sale price that a third party or the buyer holds for some months. It pays for problems that the buyer finds after closing.; A $100M deal with a 10% escrow pays $90M at closing and up to $10M approximately 12 months later. In 2025 deals with a general escrow, the SRS Acquiom median was 10%.; ExitsLesson Earnout M&A
Exempt offeringalso private placement, private offering: A sale of securities that the company does not have to register with the SEC, because an exemption applies. Almost all startup rounds are exempt offerings.; Legal and taxRegulation D Rule 506(b)Rule 506(c)Registration
Exercisealso exercise options, option exercise: The purchase of shares at the strike price of your options. After exercise, you own the shares and can vote them.; You exercise 50,000 vested options at a $2 strike price and pay $100,000.; Employee equityLesson Stock option Strike price Early exercise Net exercise Post-termination exercise period
Exitalso liquidity event, exit event: An event that lets shareholders change their shares into cash: a sale, an IPO, or sometimes a large secondary sale.; You own 46% of a company that sells for $120M. After the preferences, you get approximately $49M, not $55M.; ExitsLesson M&A IPO Waterfall Secondary sale
Expansion revenuealso expansion, upsell, upgrades: More recurring revenue from customers that you already have: upgrades, more seats, more usage, or higher prices. NRR counts it, and GRR does not.; Last year's customers paid $100K MRR. This year they upgrade by $20K, so expansion revenue is $20K MRR.; MetricsLesson NRR GRR Churn
Expected value of an investoralso EV, investor expected value: The chance that an investor says yes, multiplied by how good a yes from that investor is. Paul Graham tells founders to put their time into investors in order of expected value.; A famous fund with a 10% chance and a value of 10 has an expected value of 1.0. A seed fund with a 30% chance and a value of 6 has 1.8, so it deserves more time.; Funding stagesLesson Fundraising pipeline Lead investor
Exploding offeralso exploding term sheet, exploding deadline: A term sheet with a very short deadline, such as 48 hours. Its purpose is to stop the founder before other offers come in.; In 2013, Paul Graham called a deadline of three business days acceptable. He said that a shorter one is a sign of a sketchy investor.; Term sheetsTerm sheet No-shop
Extensionalso round extension, seed extension, Series A-1, A-prime: More money added to the last round on the same terms or similar terms.; A company that raised a $4M seed round adds $1.5M a year later as a "seed extension."; Funding stagesLesson Bridge round Insider round

F

Fair market valuealso FMV: The value of common stock for tax purposes. For a US private company, a 409A valuation sets it.; Series A investors pay $2.73 a share, but the 409A valuation sets the fair market value of the common stock at $0.80.; Employee equityLesson 409A valuation Strike price Spread
Family officealso single-family office, family offices: A private firm that manages the money of one wealthy family. It can invest in startups directly or as an LP in VC funds.; PwC found that venture capital was 31% of family-office investments in H1 2025, against a peak of 38% in H1 2022.; Investors and fundsLesson Limited partner Corporate venture capital
FAST agreementalso FAST, Founder/Advisor Standard Template, advisor agreement: A free template from the Founder Institute for advisor equity, which sets the grant by company stage and advisor work. Version 3 (July 2026) vests over 2 years with a 3-month cliff.; Under FAST version 3, a standard advisor gets 0.50% at pre-seed, 0.25% at seed, and 0.10% at Series A.; Employee equityLesson Advisor NSO Vesting
Fatal pinchalso the fatal pinch: Paul Graham's name for this trap: "default dead + slow growth + not enough time to fix it."; MetricsDefault alive Runway
Fiduciary dutyalso fiduciary duties, duty of loyalty, duty of care: The legal duty of directors to act for the company and all its shareholders. It is important in insider rounds and down rounds.; Legal and taxBoard of directors Insider round Down round
Financial buyeralso financial sponsor, private equity buyer, PE buyer: A buyer, usually a private equity firm, that buys a company for an investment return.; ExitsStrategic buyer M&A
Finderalso unregistered broker, finder's fee: A person who gets a success fee to raise money but who is not an SEC-registered broker-dealer. If you pay one, the round can have legal problems.; Legal and taxRule 506(b)Exempt offering
First closealso initial closing, additional closing, second close, subsequent closing: The first closing of a priced round, with the investors who are ready. More investors can buy at later closings, at the same price and terms, for a set period.; The lead and two funds send $8M at the first close on March 1. An angel and a corporate investor buy $2M more at a later closing on April 15.; Funding stagesLesson Closing Rolling close Priced round
First-time fundalso fund I, debut fund: The first fund of a VC firm.; From January to September 2026, first-time funds raised $4.9B across 81 funds (PitchBook-NVCA).; Investors and fundsEmerging manager
Fixed stakealso fixed part, fixed percentage: An ownership percentage that an accelerator buys for a set amount of cash. Your next round does not change it, but later rounds dilute it.; YC's $125K buys a fixed 7%. Techstars' $20K buys a fixed 5% of common stock.; Investors and fundsLesson Accelerator YC standard deal Implied valuation Uncapped SAFE
Flat roundalso flat: A round at the same price for each share as the previous round.; In Q2 2026, Cooley counted 4.3% of its deals as flat rounds.; ValuationUp round Down round
Flip pricealso per-share flip: The value of one common share above which a non-participating preferred series converts. For a 1x preference, it is the price that the series paid for each share.; Series A paid $5.00 a share. When the sale price gives each common share more than $5.00, the Series A converts.; ExitsLesson Conversion point Non-participating preferred Waterfall
Follow investoralso follower, follow-on investor, participant, co-investor: An investor who invests on the terms that the lead investor set, usually with a smaller check. Paul Graham calls an investor who invests only after others "worthless initially."; CRV (page read in November 2026) gives $50,000 to $500,000 as the usual range for checks from follow investors.; Funding stagesLead investor Party round Syndicate
Follow-on investmentalso follow-on, follow-on check: More money from a current investor in a later round. It buys at the price of that round, the same price as the new investors pay.; South Park Commons invests $400K for 7%, and it guarantees $600K more in the company's next outside round.; Funding stagesLesson Pro rata right Accelerator Fixed stake
FOMOalso fear of missing out: "Fear of missing out." This investor emotion causes hot rounds and preemptive rounds.; In 2013, Paul Graham wrote that if you want $500K, it is better to say first that you want $250K. At $150K, you then look more than half done.; News and slangHot round Preemptive round Oversubscribed
Foreign qualification: The registration of a company in a state other than its state of incorporation, so that it can do business there. The company then pays that state's taxes too.; A Delaware corporation with its office in California registers in California and pays California's $800 minimum franchise tax.; Company basicsLesson Delaware C corp Delaware franchise tax
Form 15620also IRS Form 15620, 83(b) form 15620: The IRS form for an 83(b) election. Its use is voluntary, because a written statement that obeys Treasury Regulation 1.83-2 is also valid.; From July 2025, you can also file Form 15620 online through an IRS online account.; Legal and taxLesson 83(b) election
Form Calso Reg CF filing: The SEC filing for a Regulation Crowdfunding offering. By the size of the raise, the CEO certifies its financial statements, or an independent accountant reviews or audits them.; A count of SEC data shows 1,043 new Form C filings in 2025, against 1,441 in 2024.; Legal and taxLesson Regulation Crowdfunding Funding portal
Form Dalso Form D filing: A short public notice that the company files with the SEC no later than 15 days after the first sale in a Regulation D offering. The SEC charges no fee.; An angel signs a SAFE on Wednesday. That is the first sale, so the Form D deadline is 15 days later.; Legal and taxLesson Regulation D Blue sky laws
Founderalso co-founder, cofounder, founding team: A person who starts the company. Founders usually get the first shares, and they own most of the company until it sells shares to investors.; Two co-founders divide 10,000,000 founder shares 50/50. Each founder holds 5,000,000 shares.; Company basicsLesson Solo founder Equity split Founder stock Vesting
Founder preferred stockalso founder preferred, Series FF, FF preferred: A special class of stock that lets founders sell some shares in a later round with a better tax result.; Fenwick and Aumni found founder preferred stock in nearly 11% of the companies with priced equity deals in H1 2025.; Term sheetsSecondary sale Preferred stock
Founder re-vestingalso re-vesting, revesting, founder vesting reset: A term that puts some of the vested founder shares back on a vesting schedule.; A founder is 2 years into a 4-year schedule. The Series A gives 25% credit: 1M shares vest at closing, and 3M vest over 36 months.; Term sheetsLesson Vesting Reverse vesting
Founder stockalso founder shares, founders' stock: Common shares that founders buy at a very low price when they form the company. Usually these shares vest, and the company can repurchase the unvested shares.; Ada buys 4,000,000 founder shares at $0.00001 each and pays $40. She files an 83(b) election within 30 days.; Equity and sharesLesson Restricted stock Restricted stock purchase agreement Reverse vesting 83(b) election Par value
Friends-and-family roundalso friends and family, F&F round, F&F: Very early money from persons that the founder knows, often before the product exists. Securities law still applies to the sale.; An uncle invests $50K on a SAFE with an $8M post-money cap. He gets 0.625% of the company before the next priced round.; Funding stagesLesson Angel round Pre-seed Accredited investor SAFE
Full ratchetalso ratchet, full ratchet anti-dilution: The strongest anti-dilution. The conversion price decreases to the new lower price, even if the new round is very small.; An investor paid $5.00 a share for 2M shares. A new round sells shares at $2.50, so the investor converts into 4M shares. In Q1 2026, Wilson Sonsini found ratchets in approximately 0% to 1% of deals.; Term sheetsLesson Anti-dilution protection Broad-based weighted average Dirty terms
Fully diluted sharesalso fully diluted, FD, fully diluted basis, fully diluted capitalization, fully-diluted: All outstanding shares plus all shares that options, warrants, convertible instruments, and the unissued option pool can become. Venture deals usually state ownership on this basis.; 8M common + 1M granted options + 1M unissued pool = 10M fully diluted shares. A founder with 4M shares owns 40% fully diluted.; Equity and sharesLesson Outstanding shares Option pool Ownership percentage As-converted basis
Fund lifealso fund term, fund lifetime, 10-year fund: The time that a fund exists, by design approximately 10 years plus extensions. The fund makes new investments in approximately the first 5 years.; In Adams Street data that the NVCA published in 2013, the median fund took a little more than 14 years to end.; Investors and fundsLesson Vintage year Reserves Continuation fund
Fund returneralso returns the fund, return the fund: One company whose sale alone gives back the full fund. The necessary exit value = fund size ÷ the fund's ownership at exit.; A $100M fund owns 10% at exit, so the company must sell for $1B. At 20% ownership, a $500M sale is sufficient.; Investors and fundsLesson Power law Ownership percentage
Fund waterfallalso European waterfall, American waterfall, whole-fund waterfall, deal-by-deal waterfall: The order in which a fund pays the LPs and the GP. A European waterfall gives the LPs all their money before carry, but an American waterfall pays carry deal by deal.; A $100M fund gives back $300M. In a European waterfall, the LPs first get $100M, then the GP gets 20% of the $200M profit, which is $40M.; Investors and fundsCarried interest Hurdle Waterfall
Funding portalalso crowdfunding portal, Reg CF portal: An SEC-registered website through which the public invests in a Regulation Crowdfunding offering. A Reg CF offering must go through a funding portal or a broker-dealer.; Legal and taxLesson Regulation Crowdfunding Crowdfunding Form C
Funding roundalso round, raise, financing, fundraise, financing round: One fundraising event in which the company sells part of the company to investors for cash. All investors in the round sign the same documents, or almost the same documents.; A company raises $3M. One fund puts in $1.5M, two funds put in $500K each, and six angels put in approximately $83K each.; Funding stagesLesson Pre-seed Seed round Series A Priced round Lead investor
Fundraising pipelinealso pipeline, investor pipeline, target list, fundraising funnel, investor CRM: A list of target investors that you manage like a sales funnel, with the status and the next step for each investor.; A 2026 guide recommends 60 to 120 names: 10 to 15 preferred leads, 30 to 50 strong participants, and angels to fill the round.; Funding stagesLesson Warm intro Cold email Lead investor

G

General partneralso GP, general partners, fund manager: The manager of a VC fund. The GP selects the investments, sits on boards, and gets the management fee and the carry.; A GP raises a $100M fund, invests it in 25 startups, and gets 20% of the profit.; Investors and fundsLesson Limited partner Management fee Carried interest GP commit
General solicitationalso general advertising, public solicitation: Public advertisement of an offering. Rule 506(c) lets you do it, but Rule 506(b) does not.; During a 506(b) raise, a founder posts "Raising a $2M SAFE at a $15M cap" on LinkedIn. That post is general solicitation.; Legal and taxLesson Rule 506(b)Rule 506(c)
GMValso gross merchandise value, GOV, gross bookings, transaction volume: Gross merchandise value: the total value of the goods that buyers buy through a marketplace. The revenue of the marketplace is only its cut, the take rate.; $10M GMV at a 15% take rate = $1.5M of revenue.; MetricsLesson Take rate Revenue
GP commitalso GP commitment, GP contribution: The GP's own money in the fund. It aligns the interests of the GPs and the LPs.; In Carta's 2025 fund data, the median GP commit was 1.7% of the fund: $1.7M in a $100M fund.; Investors and fundsGeneral partner Limited partner
GP-led secondaryalso GP-led deal, GP-led transaction: A sale of fund assets that the GP arranges, often into a continuation fund.; ExitsContinuation fund LP-led secondary
Graduation ratealso seed to Series A rate, graduation: The percentage of companies at one stage that raise the next round in a specified time.; Carta data (cited in March 2026) shows that only 14% to 17% of recent seed cohorts raised a Series A within two years.; Funding stagesLesson Series A crunch Cohort Bridge round
Grant datealso date of grant: The day when the board gives its approval for an option grant. The strike price and the ISO holding period start on that day.; Employee equityStrike price Equity grant Qualifying disposition
Gross assets: The total assets of the company, as its federal tax return shows them. The assumed par value capital method of the Delaware franchise tax uses this number.; Legal and taxLesson Assumed par value capital method Assumed par
Gross assets testalso QSBS asset test, $75M gross assets test: A QSBS condition: the gross assets of the company must be $75M or less at all times before it issues the stock and immediately after. For stock issued on or before July 4, 2025, the limit was $50M.; A company with $60M of gross assets raises $30M. Immediately after, it has $90M, so the new shares are not QSBS.; Legal and taxLesson QSBS
Gross burnalso gross burn rate: All the cash that a company spends each month.; A company spends $250,000 each month and collects $100,000. Gross burn is $250,000.; MetricsLesson Net burn Runway
Gross marginalso GM, gross profit margin: The part of each revenue dollar that stays after you pay the direct costs of the product, such as hosting, AI inference, and customer service. Gross margin = (revenue − direct costs) ÷ revenue.; $1M of revenue with $200K of direct costs gives an 80% gross margin. ICONIQ reports that AI products had an average gross margin of 45% in 2025.; MetricsLesson Unit economics LTV CAC payback
Growth equityalso growth equity fund, growth investor, growth-stage fund: Money from funds that invest in large, late-stage private companies with proven revenue, usually at Series C and later.; At Series C, growth equity funds, crossover funds, sovereign funds, and corporate investors come into the rounds.; Investors and fundsLesson Crossover fund Series C and later Sovereign wealth fund
Growth ratealso MoM, YoY, WoW, month over month, year over year, week over week, growth: The percentage change from one period to the next: week over week (WoW), month over month (MoM), or year over year (YoY). Rates compound, so 10% each month is 3.14x in a year, not 2.2x.; $100,000 → $110,000 MRR is 10% MoM. In 2012, Paul Graham called 5% to 7% each week a good rate for a YC company.; MetricsLesson Compound growth CMGR T2D3 Default alive
GRRalso gross revenue retention, gross dollar retention, GDR: Gross revenue retention: the same as NRR, but it does not count upgrades. Thus it cannot be more than 100%.; Start at $100K MRR. Cancellations −$5K and downgrades −$3K. GRR = 92%.; MetricsLesson NRR Churn Revenue churn

H

Handshake dealalso handshake, verbal commit, handshake deal protocol: A clear verbal commitment from an investor: an amount plus a cap or a valuation, with no conditions. In the 2013 protocol of Paul Graham, you confirm it by email on the same day.; An angel says that she is in for $50K at a $15M post-money cap. You confirm the offer by email, and she replies yes.; Funding stagesLesson Soft circle Rolling close Closing
Headline valuationalso effective valuation, headline price, real valuation: The post-money valuation in the news. Large preferences, ratchets, or the option pool shuffle can make the value of common shares much less than this number.; $100M at a $1.2B post-money valuation with a 2x participating preference gives founders $83.7M in a $400M sale. $100M at $880M with a 1x non-participating preference gives them $138.5M.; ValuationLesson Valuation Liquidation preference Participating preferred Effective pre-money valuation
Hectocornalso hectocorns: A private company with a valuation of $100B or more.; In March 2026, OpenAI raised $122B at an $852B post-money valuation. KPMG calls it the largest VC round on record.; News and slangUnicorn Decacorn Billion-dollar round
Hiring plan: A list of the hires that a company plans before its next round, with the equity grant for each. Founders use it to show investors how large the option pool must be.; Northwind plans six hires before its next round. Their grants add up to 8% of the fully diluted shares, so Northwind proposes 8%, and the two sides agree on a 10% pool, not 20%.; Equity and sharesLesson Option pool Option pool shuffle Pool top-up Equity grant
Holding periodalso holding clock: The time that you own an asset before you sell it. Tax rules use it for long-term capital gains, ISO sales, QSBS, and Rule 144.; Without an 83(b) election, the QSBS holding period of unvested shares starts at each vesting date.; Legal and taxCapital gain QSBS Rule 144 Qualifying disposition
Hot roundalso hot deal, competitive round: A round with many investors who compete. The competition usually increases the price and removes terms that are bad for founders.; News and slangOversubscribed Preemptive round FOMO
Hurdlealso hurdle rate, preferred return, pref: A minimum return that LPs must get before carry starts. It is less common in VC than in private equity.; In Carta's 2025 fund data, only 9.5% of $1M to $10M funds and 12.4% of funds of more than $100M had a hurdle.; Investors and fundsCarried interest Fund waterfall

I

Implied valuationalso implied post-money, implied value: A valuation that you calculate from an amount and a stake, or from a price for each share. Implied post-money valuation = investment ÷ ownership.; YC gets 7% for $125,000: $125,000 ÷ 0.07 = $1,785,714, an implied post-money valuation of approximately $1.79M.; ValuationLesson Post-money valuation YC standard deal
Incorporationalso incorporate, company formation, formation: The legal step that makes a company. The founders file a certificate of incorporation with a state, and the state records a new legal entity.; From August 1, 2026, the Delaware state fee for a basic stock corporation starts at $109.; Company basicsLesson Certificate of incorporation Delaware C corp Bylaws IP assignment
Independent directoralso independent board member, independent: A board member who is not a founder, an employee, or an investor in the company. The founders and the investors usually select this person together.; On a 2-2-1 board, the independent director can break a tie between 2 founder seats and 2 investor seats.; Company basicsLesson Board of directors Board composition
Information rightsalso info rights, reporting rights: The right of an investor to get financial statements and budgets on a schedule.; Under the NVCA model, Major Investors get annual and quarterly statements, and a budget 30 days before the end of each fiscal year.; Term sheetsLesson Major investor Management rights letter
Insider roundalso inside round, insider-led round, insider bridge: A round that current investors fund, mostly or fully. No new outside investor confirms the price.; The seed and Series A investors put in $3M at the last price, with no new lead investor.; Funding stagesLesson Bridge round Extension Fiduciary duty
Interestalso interest rate, note interest, simple interest: The amount that a loan increases by each year, as a percentage of the principal. Startups usually add note interest to the principal, and it converts into more shares.; In Q1 2026, the median interest rate on post-seed notes in Wilson Sonsini deals was 8%.; InstrumentsLesson Convertible note Principal Venture debt
Inventions assignment agreementalso CIIAA, PIIA, PIIAA, CIIA: An agreement that each founder and employee signs. It keeps company information confidential and gives the company the work that the person makes for it in the future. Law firms call it a CIIAA, PIIA, or PIIAA.; Company basicsLesson IP assignment Due diligence
Investment committeealso IC, partner meeting, partnership meeting: The meeting where the partners of a VC firm make the final decision on a deal. Most firms have this meeting each week.; A partner who likes the company writes a memo and brings the founders to the Monday partner meeting.; Investors and fundsLesson Champion Due diligence Term sheet
Investment periodalso commitment period: The years in which a fund makes new investments, usually the first 5 years of its life. After that, it invests only in the companies that it already holds.; On Carta, the median investment period is 5 years, and 81.9% of funds lower the management fee after it.; Investors and fundsLesson Fund life Management fee Reserves
Investor directoralso preferred director, Series A director: A board member that the preferred holders elect. Some term sheets also give this director a personal veto on decisions such as loans, executive hires, or the budget.; The board votes 2 to 1 to hire a VP of Sales. The term sheet says that the investor director must approve executive hires, so one no vote stops the hire.; Term sheetsLesson Board of directors Board composition Independent director Protective provisions
Investor updatealso monthly update, investor email, investor newsletter: A short regular email to investors with the primary metrics, the cash and the burn, and your requests for help.; Subject line: "Northwind, May: $42K MRR (+11%), 26 months runway, 2 asks."; Company basicsRunway Net burn MRR
Investors' rights agreementalso IRA, investor rights agreement: The document that gives investors information rights, registration rights, and the right to buy into future rounds.; Legal and taxLesson Information rights Registration rights Pro rata right NVCA model documents
IP assignmentalso PIIA, CIIA, CIIAA, PIIAA, technology assignment, invention assignment: An agreement that makes the company the owner of all the work of its founders and employees. Investors examine it in due diligence.; A founder wrote 30,000 lines of code before incorporation and signed no assignment. The Series A stops until the founder signs.; Legal and taxLesson Due diligence Data room Incorporation
IPOalso initial public offering, go public, public offering, qualified IPO: Initial public offering: a company sells new shares to the public and lists on a stock exchange. Under the NVCA model charter, all preferred stock converts to common at a qualified IPO.; Your 6 million shares have a value of $180M at a $30 IPO price. After the 180-day lockup, the price is $18, so the shares have a value of $108M.; ExitsLesson S-1 Underwriter Lockup Direct listing SPAC IPO window
IPO popalso first-day pop, first-day return: The increase in the share price on the first day, more than the IPO price.; An IPO prices at $20 a share, and the shares close the first day at $25. The pop is 25%.; ExitsIPO
IPO windowalso window, IPO market: The market conditions that let companies do IPOs at good prices. "The window is open" tells you that many companies can list at this time.; PitchBook-NVCA wrote that the SpaceX IPO "did not open the IPO window." Only 18 VC-backed companies had a US IPO in Q3 2026.; News and slangIPO DPI drought
IRRalso internal rate of return: Internal rate of return: a yearly return that counts when each cash movement occurs. The same 3x gives a much higher IRR over 4 years than over 12 years.; 3x in 4 years is an IRR of approximately 32%. 3x in 12 years is an IRR of approximately 9.6%.; Investors and fundsLesson TVPI DPI MOIC J-curve
ISOalso incentive stock option, ISOs, qualified stock option: Incentive stock option: an option for employees with special tax treatment. If you obey the rules, exercise causes no regular income tax, but the spread counts for AMT.; If you hold the shares for more than 2 years from grant and 1 year from exercise, all the gain is long-term capital gain.; Employee equityLesson NSO AMT Qualifying disposition $100,000 ISO limit Post-termination exercise period
Issued sharesalso issued stock: Shares that the company gave or sold to a holder.; The company issues 4,000,000 shares to each of its two founders. Thus the company has 8,000,000 issued shares.; Equity and sharesLesson Authorized shares Outstanding shares Unissued shares

J

J-curvealso J curve: The shape of fund returns over time. They are negative in the first years because of fees, and they increase later when the winners get higher valuations.; In year 2, a $100M fund paid $4M of fees, and its $30M of investments still show $30M. TVPI = 30 ÷ 34 = 0.88x.; Investors and fundsTVPI Management fee IRR
Jumbo roundalso jumbo seed, jumbo Series A, mega-seed: A very large early round, such as a seed or a Series A of $10M or more.; boldstart data shows that in 2026, almost 40% of US AI priced first rounds were $10M or more, against 11% in 2023.; News and slangMega-round Seed round Kingmaking

K

Kingmakingalso kingmaker, king-making: VCs put very large amounts into one early startup, to make it the winner of its category and to take money away from its competitors.; In December 2025, TechCrunch reported a $90M Series A at a $415M valuation for a one-year-old AI accounting startup.; News and slangCapital as a weapon Jumbo round Mega-round
KISSalso Keep It Simple Security: Keep It Simple Security: an alternative to the SAFE that 500 Startups released in 2014. Founders use it much less than the SAFE.; InstrumentsSAFE Convertible note

L

Layered SPValso multi-layer SPV, SPV of SPVs: An SPV that invests in a different SPV. Each layer adds fees, and each layer puts the buyer at a larger distance from the real shares.; News and slangSPV Transfer restrictions Tokenized shares
Lead investoralso lead, lead VC, led by: The investor who sets the terms of a round, usually writes the largest check, and often takes a board seat. "Series A led by X" tells you that X is the lead.; A seed fund leads a $3M round with $1.5M and takes a board seat. Angels and two smaller funds put in the other $1.5M.; Funding stagesLesson Follow investor Term sheet Party round Board composition
Limited partneralso LP, limited partners, fund investor: An investor in a VC fund, such as a pension, an endowment, a foundation, a family office, or a sovereign fund. LPs supply almost all the money but do not select investments.; In Carta data, the median VC fund of the 2025 vintage had only 23 LPs.; Investors and fundsLesson General partner Capital call DPI TVPI
Liquidation preferencealso liq pref, preference, liquidation pref, 1x preference: The right of preferred holders to get their money back, or a multiple of it, before common holders. It applies in a sale of the company or a shutdown.; An investor puts in $10M with a 1x preference. If the company sells for $8M, the investor gets all $8M. In Q2 2026, 95.8% of Cooley deals had a 1x preference.; Term sheetsLesson Non-participating preferred Participating preferred Seniority Preference stack Waterfall
LLCalso limited liability company, pass-through entity: Limited liability company: a flexible company type whose profits and losses go to the personal tax returns of its owners. Most VC funds do not invest in LLCs.; A founder who plans to raise money from VC funds usually starts a Delaware C corp, not an LLC.; Company basicsLesson C corporation S corporation
Lockupalso lock-up, lockup period, lock-up period: A period after an IPO, commonly 180 days, when insiders agree not to sell their shares.; The WilmerHale 2026 IPO Report says that SPAC deals usually have 365-day lockups, and direct listings usually have no lockup or a flexible one.; ExitsIPO Registration rights
Logo churnalso customer churn, logo retention: The percentage of customers that cancel in a period. Each customer counts the same, small or large.; 100 customers start the year, and 10 cancel. Logo churn is 10%.; MetricsLesson Churn Revenue churn
LOIalso letter of intent, non-binding LOI: Letter of intent: a written statement that a customer plans to buy, with no legal obligation to pay. An LOI is not a booking and not revenue.; The YC revenue ladder of April 2026 puts "$100K in non-binding LOIs" at the bottom, below GMV, bookings, run rate, and ARR.; MetricsLesson Bookings ARR Run rate
Loss ratioalso loss rate, write-off rate: The share of a fund's investments that return less than their cost. In venture capital, it is usually more than half.; In Correlation Ventures data on more than 21,000 financings from 2004 to 2013, 65% returned less than 1x.; Investors and fundsLesson Power law Fund returner
LP-led secondaryalso LP secondary, LP stake sale: A sale by an LP of its stake in a VC fund to a different investor.; ExitsGP-led secondary Limited partner
LTValso lifetime value, customer lifetime value, CLV, CLTV: Lifetime value: the gross profit that you get from one customer for the full relationship. A simple formula is monthly revenue × gross margin ÷ monthly churn.; $500 each month × 80% ÷ 2% monthly churn = $20,000 LTV.; MetricsLesson CAC LTV:CAC ratio Churn Gross margin
LTV:CAC ratioalso LTV:CAC, LTV to CAC, LTV/CAC: Lifetime value divided by customer acquisition cost. The rule of thumb from David Skok (2010) is that LTV must be at least 3 times CAC.; $20,000 LTV ÷ $6,000 CAC = 3.3.; MetricsLesson LTV CAC CAC payback

M

M&Aalso acquisition, merger, sale of the company, acquired, trade sale: Mergers and acquisitions: one company buys a different company with cash, with its own stock, or with a mix of the two.; In 2025 private-company deals that SRS Acquiom tracked, approximately 72% paid only cash at closing.; ExitsLesson Strategic buyer Financial buyer Earnout Escrow Acquihire Waterfall
Magic numberalso SaaS magic number, sales efficiency: A measure of sales efficiency: (this quarter's revenue − last quarter's revenue) × 4 ÷ last quarter's sales and marketing costs. More than 0.75 is a sign to spend more on sales.; Revenue increases from $2.0M to $2.3M in a quarter, and sales and marketing cost $1.5M in the quarter before. (0.3 × 4) ÷ 1.5 = 0.8.; MetricsCAC Burn multiple
Major investoralso major holder, Major Investor threshold: An investor that holds more than a set amount of the company's stock. Major investors get more rights, such as information rights and pro rata rights.; The Major Investor threshold is $1M. An angel with $100K gets no monthly reports, but the $8M lead gets them.; Term sheetsLesson Information rights Pro rata right
Management carve-outalso carve-out, management incentive plan, MIP, carveout: A part of the sale proceeds set aside for management and key employees when the preferences leave little or nothing for common holders.; A $36M sale gives founders $0 through the waterfall. A 10% carve-out sets aside $3.6M for management. In 2025, 4.3% of private-company deals in SRS Acquiom data had one.; ExitsLesson Preference overhang Waterfall Acquihire
Management feealso the 2, management fees, annual fee: A yearly fee that the LPs pay to the GP to operate the fund, usually a percentage of the committed money. The GP gets it with or without a profit.; A $100M fund with a 2% fee pays $2M each year. Over 10 years with no step-downs, that is $20M.; Investors and fundsLesson Carried interest 2 and 20 General partner
Management rights letteralso VCOC letter, management rights: A short letter that gives a fund the right to speak to management and to see information. Many funds must have it for US pension law (ERISA).; Legal and taxInformation rights NVCA model documents
Management rolloveralso rollover, equity rollover: In a sale, managers put part of their proceeds back into the buyer as equity, so that they keep a stake after the sale.; In the 2025 private-company deals in SRS Acquiom data, 21% paid cash plus a management rollover.; ExitsLesson M&A Financial buyer
Mark-to-marketalso MTM, fair value accounting: A method where a fund values each holding at its current fair value each period, not at its cost. In private markets, the "market" is often only the last round price plus the judgment of the fund.; ValuationThe mark Markup Markdown
Markdownalso write-down, mark down, writedown: A decrease in the value at which a fund reports a holding, for example after a down round or bad results.; A fund reports a stake at $6M. After a down round at half the price, it reports the stake at $3M.; ValuationMarkup The mark Down round
Markupalso mark up, marked up, write-up: An increase in the value at which a fund reports a holding, usually after the company raises money at a higher price. It is a paper gain, not cash.; A fund paid $2M for 10%. The next round prices the company 3x higher, so the fund reports the stake at $6M. No cash moved.; ValuationMarkdown The mark Paper gains TVPI
Material event: An event that changes the value of a company so much that the IRS no longer accepts an earlier 409A valuation as reasonable. A new priced round is the usual example.; Northwind closes its Series A five months after its last 409A valuation. It gets a new 409A valuation before it grants more options, so that the IRS continues to accept the strike price.; Employee equityLesson 409A valuation 409A safe harbor Strike price
Maturity datealso maturity, note term, note maturity: The date when a convertible note is due if it did not convert. In practice, the parties usually extend the note or convert it.; A $500,000 note has 7% simple interest and a 24-month term. If no priced round occurs, the company owes $570,000 at maturity.; InstrumentsLesson Convertible note Interest
Medianalso middle value: The middle value when you put all values in order. One very large deal can change the average a lot, but the median almost does not change.; Five seed rounds: $2M, $2.5M, $3M, $3.5M, and $100M. The median is $3M, but the average is $22.2M.; MetricsSeed round Mega-round
Mega-roundalso megaround, mega round, $100M+ round: A single funding round of $100M or more.; In Q3 2026, deals of $100M or more were approximately 5% of US deals but 75% of deal value (PitchBook-NVCA).; News and slangBillion-dollar round Jumbo round Median Sovereign wealth fund
Mezzanine roundalso pre-IPO round, mezzanine, mezz round, pre-IPO: A late round that has the objective to take a company to its IPO.; Funding stagesSeries C and later IPO Crossover fund
MFN clausealso MFN, most favored nation, MFN provision, MFN SAFE: Most favored nation: if the company later gives better terms to other investors, the MFN holder can take those terms too. Under the YC form, the company sends a notice, and the holder has 10 days to select the new terms.; Sam invests $100,000 on an MFN SAFE in January. In March, the company issues a SAFE with a $12M cap. Sam selects that cap and owns 0.833%.; InstrumentsLesson Uncapped SAFE Side letter YC standard deal
MFN start date: The date, near the start of the batch, from which YC's MFN SAFE counts other SAFEs. The MFN SAFE takes the lowest cap of the SAFEs from this date to the priced round.; A founder signs a $10M-cap SAFE one month before the batch, and $3M of SAFEs at a $30M cap after Demo Day. The MFN SAFE takes the $30M cap.; InstrumentsLesson MFN clause YC standard deal Uncapped SAFE
Micro-VCalso micro VC, seed fund, seed VC, pre-seed fund: A small venture fund that invests at pre-seed and seed. One to three partners usually manage it.; The median US VC fund that closed from January to September 2026 was only $10M, but the average was $165.4M.; Investors and fundsLesson Solo GP Multistage fund Emerging manager
Milestonealso milestones, next milestone: A measurable result that a round must pay for, such as revenue, users, or a product launch. The next investors pay a higher price only if the company gets to its milestones.; A $4.5M seed round with $150,000 of net burn each month lasts 30 months. In that time, the company must show the progress that Series A investors want.; Funding stagesLesson Runway Bridge round Tranched round
Moatalso competitive moat, defensibility: A long-term advantage that makes it hard for competitors to copy you. Examples are network effects, data that only you have, and high switching costs.; Company basicsAI wrapper Startup
MOICalso multiple on invested capital, gross multiple: Multiple on invested capital: total value ÷ money invested, for one deal or a full fund.; $1M becomes $8M → 8x MOIC.; Investors and fundsTVPI DPI IRR
MRRalso monthly recurring revenue: Monthly recurring revenue: subscription or contract revenue that occurs again each month. It does not include one-time fees, such as setup fees or hardware sales.; 200 customers × $500 each month = $100,000 MRR.; MetricsLesson ARR Run rate Churn NRR
Multistage fundalso multi-stage fund, megafund, mega-fund, multistage firm: A large firm that invests at all stages, from seed to the last round before an IPO. Its small seed check is often an option to buy a much larger stake later.; In 2026 through Q3, funds of $500M or more got 78.1% of US VC fundraising. They were only 6.0% of the funds that closed.; Investors and fundsLesson Signaling risk Micro-VC Crossover fund
MVPalso minimum viable product: Minimum viable product: the simplest version of a product that lets you learn if persons want it.; A team makes a sign-up page and does the service by hand for 20 users before it writes the full software.; Company basicsProduct-market fit Pre-seed Pivot

N

Narrow-based weighted averagealso NBWA, narrow-based anti-dilution: The weighted average formula with a smaller A, usually only outstanding shares, without options, warrants, or the unissued pool. The investor gets more protection than with the broad-based formula.; A Series A paid $5.00, and a $5M round sells shares at $2.50. Broad-based gives $4.58, but narrow-based gives $4.55.; Term sheetsLesson Broad-based weighted average Anti-dilution protection
Neolabalso neo-lab, AI lab: An AI startup that puts research first. Well-known researchers often start it, and it raises very large amounts before it has a product.; In June 2026, Radical Ventures counted more than 40 such labs, which raised more than $40B from 2024.; News and slangAI-native Mega-round
Net burnalso burn rate, burn, monthly burn, net burn rate, cash burn: The cash that a company spends each month minus the cash that comes in. It is the amount by which the bank balance decreases each month.; $400,000 spent − $100,000 of revenue = $300,000 of net burn.; MetricsLesson Gross burn Runway Burn multiple Default alive
Net exercisealso cashless exercise: An exercise without cash. The company keeps some of the shares to pay the strike price.; You exercise 1,000 options at a $2 strike price when the stock is $10. The company keeps 200 shares for the $2,000 strike, and you get 800 shares.; Employee equityExercise Strike price
Net investment income taxalso NIIT, 3.8% tax, Medicare surtax: A 3.8% US federal tax on investment income, such as capital gains, of taxpayers with high income. It comes on top of the capital gains rate.; The top federal rate on a long-term gain is 20% + 3.8% = 23.8%. On QSBS gain that is not excluded, it is 28% + 3.8% = 31.8%.; Legal and taxLesson Capital gain QSBS
Net multiplealso net return, net TVPI: What the LPs get back ÷ what they paid in, after fees and carry. The gross multiple is the same ratio before fees and carry.; To give the LPs 3x net, a $100M fund that put $80M into companies must get back $350M, a gross multiple of 4.38x on the money invested.; Investors and fundsLesson MOIC TVPI Carried interest Management fee
Net proceedsalso sale proceeds, exit proceeds, proceeds: The part of a sale price that the shareholders divide. Before the waterfall, the price pays the company's debt, the deal fees, and any management carve-out. The buyer can also hold back part of the price in an escrow, which the shareholders get later, minus claims.; A $100M price with $5M of debt and $3M of fees gives $92M of net proceeds. With a $10M escrow, the shareholders divide $82M at the closing and up to $10M approximately one year later.; ExitsLesson Waterfall Escrow Management carve-out Liquidation preference
No-shopalso exclusivity, no-shop clause, no shop: A binding promise that the company does not look for other investors or a buyer for a set period after it signs a term sheet.; A term sheet has a 45-day no-shop. A second VC sends a better offer on day 10, but the founder cannot negotiate with it until day 46.; Term sheetsLesson Term sheet Exploding offer
Non-dilutive fundingalso non-dilutive financing, non-dilutive capital: Money that does not cost equity. Examples are government grants, customer prepayments, and loans.; From October 16, 2026, an SBIR Phase I award can give up to $335,937. The cap table does not change.; InstrumentsLesson SBIR and STTR grants Venture debt Revenue-based financing Bootstrapping
Non-participating preferredalso 1x non-participating, non-participating, straight preferred, convertible preferred: The standard preference. At a sale, the investor takes the larger of its money back or its as-converted share of the price, not the two.; $10M for 25%. At a $20M sale, the investor takes $10M. At a $100M sale, it converts and takes $25M. In Q2 2026, 96.4% of Cooley deals were non-participating.; Term sheetsLesson Liquidation preference Participating preferred Conversion point
Normalized gainalso Hake gain, learning gain: The part of the points that a learner did not have before a course that the learner gets after it: (after − before) ÷ (100% − before). It lets you compare learners who start at different scores. Richard Hake used it in 1998 for 62 physics courses.; A pretest of 40% and a final exam of 70% give (70% − 40%) ÷ (100% − 40%) = 0.5.; LearningLesson Retrieval practice Spaced repetition
NRRalso net revenue retention, NDR, net dollar retention, negative churn: Net revenue retention: revenue this year from last year's customers ÷ their revenue last year, with upgrades, downgrades, and cancellations. More than 100% means that current customers alone make revenue larger.; Start at $100K MRR. Cancellations −$5K, downgrades −$3K, and upgrades +$20K. NRR = 112%.; MetricsLesson GRR Churn Revenue churn
NSOalso NQSO, non-qualified stock option, nonqualified stock option, NQO: Non-qualified stock option: an option without ISO tax status. At exercise, the spread is ordinary income, and advisors and contractors can get only this type.; You exercise 10,000 NSOs at a $1 strike price when the fair market value is $11. You have $100,000 of ordinary income this year.; Employee equityLesson ISO Spread Ordinary income Advisor
NVCA model documentsalso NVCA documents, NVCA forms, NVCA model docs, NVCA: Free standard documents for VC deals from the National Venture Capital Association: term sheet, charter, stock purchase agreement, investors' rights, voting, and ROFR and co-sale.; On October 2, 2025, the NVCA updated five documents. The updates added tranche mechanics and statements on national-security rules.; Legal and taxLesson Stock purchase agreement Investors' rights agreement Voting agreement Series Seed documents Term sheet

O

Office hoursalso OH, group office hours: Meetings between founders and the partners of an accelerator. YC partners hold group office hours every two weeks and one-on-one office hours when founders want them.; Investors and fundsLesson Y Combinator Batch
Officeralso corporate officer, executive officer, CEO, CFO: An executive that the board appoints, such as the CEO or the CFO. Officers operate the company each day.; Company basicsBoard of directors Bylaws
One-lineralso elevator pitch, company description, one-line description: One or two plain sentences that tell what the company does, with a specific example if possible. Sequoia tells founders to define the company in a single declarative sentence.; Weak: "An AI-native orchestration layer for healthcare revenue cycle." Strong: "We check dental patients' insurance before appointments. 40 clinics pay us $300 a month."; Company basicsLesson Pitch deck Warm intro Cold email
Option poolalso employee option pool, ESOP, equity incentive plan, stock option pool, pool: Shares that the company keeps for future grants to employees, advisors, and directors. Investors usually want the pool in the pre-money valuation.; A 10% pool in a company with 10,000,000 fully diluted shares is 1,000,000 shares.; Equity and sharesLesson Option pool shuffle Unissued option pool Pool top-up Stock option Fully diluted shares
Option pool shufflealso pool shuffle, the shuffle: A term that puts a new or larger option pool in the pre-money valuation. Thus the pool dilutes only the current holders, and the founders get a lower effective price.; An $8M pre-money valuation with 6,000,000 founder shares looks like $1.33 a share. A 20% post-money pool in the pre-money adds 2,000,000 shares, and the price becomes $1.00.; Equity and sharesLesson Option pool Pool top-up Effective pre-money valuation Pre-money valuation
Ordinary incomealso wage income, regular income: Income that the government taxes at the regular rates, the same as salary. NSO spreads, RSU settlements, and vesting without an 83(b) election give ordinary income.; An NSO spread of $100,000 is ordinary income, the same as $100,000 of salary.; Legal and taxCapital gain NSO 83(b) election
Original issuealso original issuance: Stock that you get directly from the company, for money, property, or work. QSBS must be acquired at original issue.; Founder shares and shares that an investor buys in a priced round are original issue. Shares that you buy from a different shareholder in a secondary sale are not.; Legal and taxLesson QSBS Secondary sale
Original issue pricealso original purchase price, OIP: The price for each share that investors paid for a series of preferred stock. The liquidation preference and the first conversion price start from this price.; A Series A that pays $10M for 2,000,000 shares has an original issue price of $5.00. Its 1x preference is $5.00 for each share.; Term sheetsLesson Preferred stock Liquidation preference Conversion price
Outbound investment rulesalso OISP, CFIUS, Outbound Investment Security Program, national security rules: US national-security rules for some investments into and out of the US, especially in AI, chips, and quantum. The 2025 NVCA updates added statements on OISP and the Data Security Program.; Legal and taxNVCA model documents
Outstanding sharesalso issued and outstanding shares, shares outstanding, outstanding stock: Issued shares that holders still hold. Shares that the company bought back are not outstanding.; A company issued 8,200,000 shares and bought back 200,000. Thus 8,000,000 shares are outstanding.; Equity and sharesLesson Issued shares Fully diluted shares Buyback
Over-allotment: In the NVCA model, the right of a major investor to buy the part of a round that other investors with pro rata rights do not take.; Term sheetsLesson Pro rata right Major investor Super pro rata
Oversubscribedalso oversubscription, oversubscribed round: A round in which investors offer more money than the company planned to raise. The company can make the round larger, raise the price, or give smaller allocations.; A company targets $2M at a $16M cap and gets $4M of interest. It can raise $3M at the same cap, for 18.75% dilution, not 12.5%.; Funding stagesLesson Hot round FOMO Preemptive round
Ownership percentagealso percentage ownership, ownership stake, percent owned: Your shares divided by the total shares, usually on a fully diluted basis.; 2,500,000 shares ÷ 12,500,000 shares = 20%.; Equity and sharesLesson Fully diluted shares Dilution Cap table
Ownership targetalso target ownership, ownership goal: The stake that a fund wants in each company. With the fund size, it sets the exit that a company must reach to return the fund.; To own 10% at the Q2 2026 median seed post-money valuation of $23.9M on Carta, a fund must invest $2.39M.; Investors and fundsLesson Fund returner Reserves Check size

P

Paid-in capitalalso called capital, contributed capital: The money that the LPs actually sent to a fund up to a date. DPI, RVPI, and TVPI divide by it.; The LPs committed $100M, and the GP called $60M in the first three years. The paid-in capital is $60M.; Investors and fundsLesson Committed capital Capital call DPI TVPI
Paper gainsalso paper value, paper valuation, unrealized gains: Value that shows in reports, but that no sale or IPO changed into cash yet.; A founder owns 40% of a company with a $20M post-money valuation. The paper value is $8M, but the founder has $0 of cash from it.; ValuationLesson Markup DPI TVPI Preferred price
Paper valuealso paper stake, value on paper: The value of a stake at the last round price: shares × price per share. No sale changed it into cash, and common stock is usually worth less than the preferred price.; Ada and Ben hold 10,000,000 shares. At the Series B price of $4.0406, their paper value is $40.41M.; ValuationLesson Paper gains Price per share Preferred price Liquidation preference
Par valuealso par, nominal value: A very small nominal price for each share, such as $0.00001, that the charter sets. It is a legal formality, not the real value.; A founder buys 4,250,000 shares at a par value of $0.00001 and pays $42.50.; Equity and sharesLesson Founder stock Delaware franchise tax Assumed par value capital method
Pari passualso equal rank, equal seniority: "On equal footing." The series divide the money in proportion to their preferences, and no series comes first.; Seed $3M and Series A $12M, and a $10M sale. The Series A gets 12 ÷ 15 × $10M = $8M, and the seed gets $2M.; Term sheetsLesson Seniority Preference stack
Participating preferredalso participating, double dip, full participation: A preference where the investor gets its money back and then also its percentage of the money that stays. Founders call it the "double dip."; $10M for 25% at a $100M sale: $10M + 25% × $90M = $32.5M. A non-participating investor gets $25M.; Term sheetsLesson Non-participating preferred Participation cap Liquidation preference Dirty terms
Participation capalso capped participation, participation ceiling: A maximum on the total payout of participating preferred, often a multiple of the investment, such as 3x. If the as-converted share is more than the cap, the investor converts.; $10M for 20% with a 3x cap: the payout stops at $30M when the sale price gets to $110M. At more than $150M, conversion gives the investor more.; Term sheetsLesson Participating preferred Liquidation preference
Party roundalso party: A round with many small checks and no lead investor. It closes fast, but nobody owns sufficient stock to lead a later bridge or to act as a champion on the board.; Ten angels invest $100K each, and a $1M party round closes in two weeks. In month 14, no angel owns sufficient stock to lead a bridge round.; Funding stagesLesson Lead investor Follow investor Champion
Pattern matchingalso pattern-matching, pattern match: A bias where investors select founders who look like past winners, for example by school or by employer.; News and slangDue diligence
Pay-to-playalso pay to play, pay-to-play provision: A term that makes current investors buy their part of a new round. If an investor does not buy, it loses rights, often because its preferred stock converts to common.; Fund Y holds $5M of Series A and does not buy its $1.5M part of a rescue round. Its preferred converts to common. In Q2 2026, 8.4% of Cooley deals had pay-to-play.; Term sheetsLesson Down round Recapitalization Cramdown
Percentilealso 90th percentile, top decile: A value with a given percentage of all values below it. The 25th percentile has 25% of the values below it, and the median is the 50th percentile.; For SAFE rounds of $1M to $2.4M on Carta from Q1 2025 to Q2 2026, the 25th percentile cap was $10M and the 75th percentile cap was $25M.; MetricsLesson Median
Phantom stockalso SARs, stock appreciation rights, phantom equity: A right to cash or shares equal to the increase in the stock value, without real shares. Some companies outside the US, and some LLCs, use it.; Employee equityRSU Stock option
Pitch deckalso deck, pitch, investor deck, slide deck: A short set of slides that explains the company to investors. A YC seed deck can be 8 to 10 slides.; The YC seed deck: title and one-liner, problem, solution, traction, unique insight, business model, market, team, and the ask.; Company basicsLesson One-liner Data room TAM, SAM, and SOM
Pivotalso pivoted: A change to the core product, the customer, or the business model after the team finds that the first plan is not successful.; A team that makes a photo app for consumers changes to sell its image-search engine to retailers.; Company basicsProduct-market fit MVP
Pool top-upalso pool increase, option pool increase, pool refresh, top-up: An increase of the option pool as part of a new round. The term sheet usually puts the increase in the pre-money valuation, and thus the current holders pay for it.; The Series A wants an unissued pool of 10% after the round. The company adds pool shares in the pre-money valuation until the pool is 10% of the post-money shares.; Equity and sharesLesson Option pool Option pool shuffle Effective pre-money valuation
Post-money option pool: An option pool that the company makes after the new money comes in, so that it dilutes every holder, the new investors too. Investors rarely accept it, and most term sheets put the pool in the pre-money.; $2M at $8M pre-money on 6,000,000 shares, with a 20% pool after the money: the founders own 64% and the investors 16%. With the pool in the pre-money, they own 60% and 20%.; Equity and sharesLesson Option pool Option pool shuffle Effective pre-money valuation
Post-money SAFEalso post money SAFE: The standard YC SAFE from 2018. Its cap includes all SAFE money, and thus the investor owns investment ÷ cap just before the priced round.; $1M at a $10M post-money cap = 10%. In Q1 2026, 90% of the SAFEs in Wilson Sonsini deals used a post-money cap.; InstrumentsLesson SAFE Pre-money SAFE Valuation cap SAFE stacking Company Capitalization
Post-money valuationalso post-money, post, post-money value: The value of the company just after the new money comes in. Post-money valuation = pre-money valuation + new money.; Raise $1M at a $15M post-money valuation, and the investors own $1M ÷ $15M = 6.67%.; ValuationLesson Pre-money valuation Dilution Valuation Price per share
Post-termination exercise periodalso PTEP, 90-day window, exercise window, extended exercise window, PTE period: The time that you have after you leave to exercise vested options. 90 days is common, because ISO rules make you exercise within 3 months after you leave.; You leave with 50,000 vested options at a $2 strike price. To keep them, you must pay $100,000 within 90 days. Some companies give a longer window, and the options then become NSOs.; Employee equityLesson Exercise ISO NSO
Power lawalso power-law returns, power law distribution: A small number of investments make most of the returns. Thus a VC wants each investment to have a real chance to be a fund returner.; In Horsley Bridge data from 1985 to 2014, approximately 6% of deals made approximately 60% of all returns.; Investors and fundsLesson Fund returner Spray and pray Venture capital
Pre-money SAFEalso original safe, pre money SAFE: The original SAFE from 2013. Its cap does not include the SAFE money, so later SAFEs dilute earlier SAFEs, and nobody knows the exact ownership until the priced round.; Two investors each put $1M on SAFEs at a $4M cap. Pre-money SAFEs give each investor 16.67%. Post-money SAFEs give each investor 25%.; InstrumentsLesson Post-money SAFE SAFE Valuation cap
Pre-money valuationalso pre-money, pre, pre-money value: The value of the company just before the new money comes in. Pre-money valuation = post-money valuation − new money.; A round raises $1M at a $15M post-money valuation. The pre-money valuation is $14M.; ValuationLesson Post-money valuation Price per share Option pool shuffle Effective pre-money valuation
Pre-seedalso pre-seed round, preseed: The first round of outside money, usually to make the first product and get the first users. Almost all pre-seed rounds use SAFEs.; In Q2 2026, the average pre-seed instrument on Carta (a SAFE or a note) was $276,000, the highest in more than four years. In Q1 2026, notes were only 7% of pre-seed rounds.; Funding stagesLesson Seed round SAFE Friends-and-family round Angel round
Preemptive roundalso preempt, pre-emptive round, preemption: An offer of money before the company starts a formal raise, usually at a higher price, that stops a competitive process.; News and slangHot round FOMO Oversubscribed
Preference multiplealso liquidation multiple, 2x preference, multiple preference: The number of times its investment that a preferred holder gets before common holders. The standard is 1x, and 2x or 3x is a dirty term.; $10M at a 2x non-participating preference, and a $20M sale. The investor gets all $20M, and the founders get $0.; Term sheetsLesson Liquidation preference Dirty terms
Preference overhangalso overhang, liquidation overhang: A preference stack that is large compared with the possible sale price. Founders and employees then get little from a sale.; A company raised $142M of preferred stock. In a $150M sale, founders who own 40.9% get only 4.4% of the money, $6.7M.; ExitsLesson Preference stack Management carve-out Recapitalization Zombie startup
Preference stackalso stack, liquidation stack, pref stack: The total of all liquidation preferences, in the order of seniority. Common holders get nothing until the company pays the full stack.; $3M seed + $12M Series A = a $15M stack. A $12M sale pays common holders $0.; Term sheetsLesson Preference overhang Seniority Pari passu Waterfall
Preferred pricealso last round price, preferred share price: The price for each share that investors paid in the last priced round. It is usually much higher than the 409A price of common stock.; The Series A paid $2.73 for each share. The 409A sets common stock at $0.80, so new options get a $0.80 strike price.; ValuationLesson Price per share 409A valuation Paper gains
Preferred stockalso preferred, preferred shares, preference shares: The class of shares that investors buy in priced rounds. It has more rights than common stock, such as a liquidation preference, anti-dilution protection, and some vetoes.; Series A investors pay $2.73 for each preferred share. At the same time, the 409A valuation sets common stock at approximately $0.80.; Equity and sharesLesson Common stock Series Liquidation preference Anti-dilution protection Protective provisions
Price per sharealso PPS, share price, round price, issue price, original purchase price: The price that investors pay for each new share in a priced round. Price per share = pre-money valuation ÷ pre-money fully diluted shares.; $20M pre-money valuation ÷ 10,000,000 shares = $2.00. A $5M investment buys 2,500,000 new shares.; ValuationLesson Pre-money valuation Fully diluted shares Priced round Preferred price
Priced roundalso equity round, preferred round, priced equity round: A round that sells shares at an agreed price for each share, and thus sets a valuation. A SAFE round or a note round sets the price later.; Pre-money valuation $12M ÷ 10,000,000 fully diluted shares = $1.20 a share. A $3M investment buys 2,500,000 new shares.; Funding stagesLesson Price per share Preferred stock Term sheet SAFE Convertible note
Priced seed roundalso Series Seed, priced seed, Series Seed preferred, seed preferred: A small priced round that sells Series Seed preferred stock on short, simple documents, not SAFEs.; In Q1 2026, the median SAFE raise in Wilson Sonsini deals decreased to $0.55M. Wilson Sonsini gives more priced seed rounds as one possible cause.; InstrumentsLesson Series Seed documents Priced round SAFE Seed round
Primary roundalso primary financing: The first equity round in a series, such as the first Series A. Carta calls a later round in the same series a bridge.; A company raises a $15M Series A, its primary round. A year later, it raises a $3M Series A-1 bridge.; Funding stagesLesson Bridge round Extension Series A
Primary sharesalso primary sale, primary issuance, primary: New shares that the company issues and sells. The cash goes to the company, and the new shares dilute all current holders.; A company sells 2,500,000 new shares at $2.00. The company gets $5M, and the total share count increases from 10,000,000 to 12,500,000.; Equity and sharesSecondary sale Dilution Priced round
Principalalso principal amount, face value: The amount of a loan before interest. In a convertible note, the principal and the interest usually convert into shares together.; A $500,000 note has $500,000 of principal. After 18 months at 8% simple interest, $560,000 converts.; InstrumentsLesson Convertible note Interest
Pro forma cap tablealso pro forma, pro forma capitalization, pro-forma: The cap table as it will be after a planned deal closes. Founders make one before they sign a term sheet, to see the ownership that they will really have.; A pro forma cap table shows the SAFEs as converted, the new option pool, and the shares of the new investor.; Equity and sharesLesson Cap table Term sheet Option pool shuffle
Pro rata amount: The money that an investor with a pro rata right can put into a round: its fully diluted ownership × the new money in the round.; A fund owns 10% before a $20M round. Its pro rata amount is $2M. This keeps it at 10% if no pool top-up or SAFE conversion in the round dilutes it.; Term sheetsLesson Pro rata right Super pro rata Dilution
Pro rata rightalso pro rata, pro-rata, participation right, preemptive right, right of first offer: The right, but not the obligation, to buy sufficient shares in a future round to keep your ownership percentage.; A fund owns 10%, and the next round sells 20%. Without its pro rata right, the fund decreases to 8%. To stay at 10%, it buys 10% of the new shares.; Term sheetsLesson Super pro rata Major investor Pro rata side letter Dilution
Pro rata side letteralso pro rata letter, SAFE side letter: An optional letter that gives a SAFE holder the right to buy shares in the priced round where the SAFE converts.; A SAFE holder owns 10% of the Company Capitalization. The Series A sells 3,400,000 new shares, so the holder can buy 340,000 of them.; InstrumentsLesson Pro rata right Side letter SAFE
Product-market fitalso PMF, product/market fit: The point where a product satisfies strong demand in a good market, and customers pull the product from you. Usage stays high, and new users come from word of mouth.; A retention curve becomes flat at 26% of users after month 6. That flat curve is a classic sign of product-market fit.; Company basicsTraction Cohort MVP Seed round
Promised Options: Options that the company promised to people, but did not grant yet. The post-money SAFE counts them in the Company Capitalization, so they dilute the founders and not the SAFE holders.; Northwind offers a new engineer 50,000 options in a signed offer letter. The board grants them next month. Until then, they are Promised Options.; InstrumentsLesson Company Capitalization Stock option Option pool
Protective provisionsalso vetoes, veto rights, protective provision, blocking rights: Actions that the company cannot do without approval from a set majority of the preferred holders. Examples are a sale of the company, a new senior class of stock, and large new debt.; The Series A lead holds 60% of the preferred, and the threshold is a majority. The lead alone can stop a new $3M bridge from angels.; Term sheetsLesson Board composition Economics and control Preferred stock
Public benefit corporationalso PBC, benefit corporation: A for-profit corporation that also states a public benefit in its charter. Its directors must balance that benefit against the financial interests of the shareholders.; A company that makes low-cost medical tests puts that purpose in its charter. Its board must include that purpose in its decision on a sale.; Company basicsC corporation Certificate of incorporation Fiduciary duty

Q

Q2T3also quadruple quadruple triple triple triple: The 2025 growth path from Bessemer for fast AI startups: quadruple ARR for two years, then triple it for three years.; $3M → $12M → $48M → $144M → $432M → $1.3B ARR. The real Bessemer averages increase more slowly after year 2.; MetricsLesson T2D3 Growth rate
QSBSalso Section 1202, qualified small business stock, 1202 exclusion: Qualified small business stock: a federal tax break on gains from C corp stock that you got directly from the company. For stock acquired after July 4, 2025, the break is 50% of eligible gain after 3 years, 75% after 4, and 100% after 5.; A cap for each company limits the eligible gain: the greater of $15M or 10× your basis. Stock acquired earlier keeps the old rules: a $10M cap and more than 5 years for 100%.; Legal and taxLesson C corporation Gross assets test Section 1045 rollover Holding period 83(b) election
Qualified financingalso qualified financing threshold, qualified round, next equity financing: A priced round of sufficient size to convert a note automatically. Cooley says that the minimum is often one to two times the principal of all notes outstanding.; Notes with $500,000 of principal have a $1M minimum. A $600,000 priced round does not convert them automatically.; InstrumentsLesson Convertible note Maturity date
Qualified IPOalso qualified public offering, QPO: An IPO that meets the conditions in the charter, such as a firm-commitment underwriting, an exchange listing, and sometimes a minimum price or size. At a qualified IPO, all preferred stock converts to common stock automatically.; The charter sets a minimum IPO price of $15.00, and the IPO prices at $12.00. The preferred does not convert automatically, so the company needs the approval of the requisite holders.; Term sheetsLesson IPO Preferred stock Conversion Requisite holders
Qualifying dispositionalso disqualifying disposition, ISO holding periods: A sale of ISO shares at least 2 years after grant and at least 1 year after exercise. All the gain is long-term capital gain, but an earlier sale is a disqualifying disposition.; 10,000 ISO shares with a $1 strike price sell at $30 after the two holding periods. The result is $290,000 of long-term capital gain.; Employee equityISO Capital gain Holding period

R

Ramen profitablealso ramen profitability: Paul Graham's 2009 term for revenue that pays only the basic personal costs of the founders. It gives the company time and makes fundraising optional.; Two founders must have $3,000 each month each, and the company costs $1,500 each month. Thus they must make $7,500 each month in revenue.; MetricsBreak-even Default alive
Recapitalizationalso recap, restructuring, cap table reset: A large reset of the cap table, often when the company is in trouble. Earlier preferred stock converts or becomes smaller, and new money gets priority.; A company has $42M of preferences but a value of $20M. All old preferred stock converts to common, and a new investor puts in $10M. In Q2 2026, Cooley counted recaps in 1.81% of its deals.; Funding stagesLesson Down round Pay-to-play Cramdown Washout round Preference overhang
Redemption rightsalso redemption, put right, mandatory redemption: The right of investors to make the company repurchase their shares after a set date. It is rare, and the company usually does not have the cash.; An investor with $10M of Series A can demand $3.33M in each of years 5, 6, and 7. In Q2 2026, 5.4% of Cooley deals had redemption rights.; Term sheetsDirty terms Preferred stock
Reference checkalso investor references, backchannel, back-channel reference: A call to a founder that an investor backed, to learn how that investor acts when things go well and badly.; In April 2026, CRV recommended 5 to 7 reference calls, with at least one founder whose company had problems or closed.; Funding stagesLesson Due diligence Lead investor
Refresh grantalso refresher, refresh: A new equity grant to a current employee, often after strong work or when the first grant is mostly vested.; An engineer's first grant of 40,000 options is 75% vested after 3 years. The company adds 12,000 options that vest over 4 more years.; Employee equityLesson Equity grant Option pool Vesting
Registered agent: A person or company with an address in the state of incorporation that receives legal papers for the company. Incorporation services include it for the first year, then charge each year.; Company basicsLesson Incorporation Delaware C corp
Registrationalso securities registration, SEC registration, Securities Act of 1933: The default rule of US securities law. Under the Securities Act of 1933, a company that sells securities must register them with the SEC, unless an exemption applies.; Legal and taxExempt offering S-1 Security
Registration rightsalso demand registration, piggyback rights, S-3 registration: The right of investors to make the company register their shares with the SEC. Then the investors can sell those shares on a stock exchange after an IPO.; In the 2020 NVCA model, investors can demand registration at the earlier of two dates. The dates are 3 to 5 years after the closing, or 6 months after the IPO.; Term sheetsLesson IPO Investors' rights agreement Lockup
Regulation A+also Reg A, Reg A+, Regulation A, mini-IPO: A "mini-IPO" path. Tier 1 lets a company raise a maximum of $20M in 12 months, and Tier 2 lets it raise a maximum of $75M.; Legal and taxLesson Regulation Crowdfunding Crowdfunding IPO
Regulation Crowdfundingalso Reg CF, Regulation CF: An exemption that lets a company raise a maximum of $5M in 12 months from the public, through an SEC-registered online platform.; A non-accredited investor with income and net worth of less than $124,000 can invest the greater of $2,500 or 5% in 12 months.; Legal and taxLesson Crowdfunding Regulation A+
Regulation Dalso Reg D: The primary set of SEC exemptions for private offerings. It includes Rules 504, 506(b), and 506(c).; Legal and taxLesson Rule 506(b)Rule 506(c)Form D Accredited investor
Representations and warrantiesalso reps and warranties, reps: Statements of fact that the company makes about itself in the stock purchase agreement, for example about its shares, contracts, and IP. A disclosure schedule lists the exceptions.; The company states that its cap table is complete and that each employee signed an IP assignment. The disclosure schedule lists one contractor who did not sign.; Legal and taxLesson Stock purchase agreement Due diligence Closing conditions
Representations and warranties insurancealso R&W insurance, RWI, reps and warranties insurance: Insurance that pays the buyer of a company if the statements of the sellers about the company are not correct. With it, the escrow is often much smaller.; In 2025 deals with this insurance, the SRS Acquiom median general indemnity escrow was 0.5% of the deal value. In all 2025 deals that had a general indemnity escrow, the median was 10%.; ExitsLesson Escrow Survival period M&A
Repricingalso option repricing, reprice: A decrease of the strike price of underwater options, usually after a down round.; After a down round, the board changes the strike price of 200,000 options from $3.00 to the new 409A price of $1.80.; Employee equityUnderwater option Down round
Repurchase rightalso buyback right: The right of the company to buy back a founder's unvested shares if the founder leaves, usually at the lower of the price paid and the fair market value. Many agreements give the company 90 days to use it.; Ben leaves with 2,500,000 unvested shares that he bought at $0.00001. The company buys them back for $25.; Equity and sharesLesson Reverse vesting Vesting Founder stock
Requisite holdersalso requisite preferred, majority of the preferred: The set majority of the preferred holders whose approval the charter requires, for example for the protective provisions or for a conversion of all preferred stock.; The requisite holders are a majority of the preferred, and the lead investor holds 60%. The lead alone can approve a decision or block it.; Term sheetsLesson Protective provisions Preferred stock Drag-along
Reservesalso reserve ratio, follow-on reserves, follow-on capital: The part of a fund that the GP keeps for follow-on investments in its current portfolio companies.; A $50M seed fund has $40M to invest after fees. With 50% reserves, it writes approximately 25 first checks of $800,000 and keeps $20M for follow-on checks.; Investors and fundsLesson Pro rata right Signaling risk Fund life
Restricted securitiesalso restricted security, unregistered securities: Shares from a private offering that the buyer cannot freely sell again.; An angel holds restricted shares from a seed round. The angel can sell them only through an exemption, such as Rule 144.; Legal and taxRule 144 Transfer restrictions Exempt offering
Restricted stockalso restricted shares, restricted stock award, RSA: Stock that you own, but that the company can repurchase at your cost until it vests. Founder stock and options that you exercise early are usually restricted stock.; A founder holds 4,000,000 restricted shares on a 4-year schedule. If the founder leaves at month 18, the company can repurchase the 2,500,000 unvested shares.; Equity and sharesFounder stock Reverse vesting 83(b) election Early exercise Restricted securities
Restricted stock purchase agreementalso RSPA, founder stock purchase agreement: The contract that founders sign to buy their stock. It sets the vesting schedule and the right of the company to repurchase unvested shares.; Equity and sharesFounder stock Reverse vesting Vesting
Retrieval practicealso testing effect, practice testing, self-test: Study by recall: you find an idea in your memory without the text in front of you, for example in a self-test. It gives better memory than a second read.; In a 2006 study, students who did three recall tests remembered 61% of a text after one week. Students who only read the text again remembered 40%.; LearningLesson Spaced repetition Worked example
Revenuealso sales, top line, GAAP revenue: Money that a company earns when it supplies the product or service that the customer pays for. Earned revenue is not the same as cash in the bank.; A customer prepays $1,200 in January for one year of software. January revenue is $100, and the other $1,100 is deferred revenue.; MetricsLesson Deferred revenue MRR ARR Bookings Billings
Revenue churnalso dollar churn, MRR churn, gross revenue churn: The percentage of recurring revenue that you lose in a period from cancellations and downgrades.; The 10 customers that cancel paid $5K of $100K MRR. Logo churn is 10%, but revenue churn is only 5%.; MetricsLesson Churn Logo churn GRR NRR
Revenue multiplealso ARR multiple, valuation multiple, price-to-sales, multiple of revenue: Valuation ÷ revenue or ARR. Investors use it to compare the prices of companies of different sizes.; $100M valuation ÷ $5M ARR = 20x.; ValuationLesson Comparables Valuation ARR
Revenue-based financingalso RBF, revenue-based finance, revenue share financing: An advance that the company pays back as a fixed percentage of future revenue until the payments get to a cap. It causes no dilution, but its yearly cost can be high.; Borrow $500,000 with a 1.4x cap. You pay a percentage of monthly revenue until you pay $700,000 in total.; InstrumentsLesson Venture debt Non-dilutive funding Bootstrapping
Reverse acquihirealso license-and-hire, reverse acqui-hire: A large company hires the leaders of a startup and pays a license fee for its technology, but does not buy the company.; In July 2025, Google paid $2.4B in license fees and compensation. It hired the CEO, a co-founder, and some researchers of Windsurf.; ExitsAcquihire M&A
Reverse vestingalso repurchase right, buyback right, founder vesting: A structure where founders own all their shares from day one. If a founder leaves, the company can repurchase the unvested shares at the original price.; Ben leaves at month 18 with 1,500,000 vested shares. The company repurchases his 2,500,000 unvested shares at $0.00001 each, for $25.; Equity and sharesLesson Vesting Founder stock Dead equity Restricted stock purchase agreement
Roadshowalso road show, IPO roadshow: The series of meetings where management pitches the IPO to large investors.; ExitsIPO Underwriter
ROFRalso right of first refusal, first refusal: Right of first refusal: the company, and often the investors, can buy a holder's shares at the same price before an outsider can.; A founder agrees to sell 500,000 shares to a buyer at $4. The company can buy those shares at $4 before the buyer can.; Term sheetsLesson Co-sale right Transfer restrictions Secondary sale ROFR and co-sale agreement
ROFR and co-sale agreementalso Right of First Refusal and Co-Sale Agreement, co-sale agreement: The document that gives the company and the investors a right of first refusal when founders sell shares. It also gives the investors a co-sale right.; Legal and taxLesson ROFR Co-sale right NVCA model documents
Rolling closealso rolling closes, rolling basis: A close of one investor at a time. SAFEs make it possible, because each investor signs a separate contract.; An angel signs a SAFE on Wednesday and sends the wire on Thursday. A second angel signs the next week, at the same cap.; Funding stagesLesson First close SAFE Handshake deal
Rolling fundalso rolling funds: A fund that raises money each quarter by subscription, not one time at the start. Each quarter is legally a separate small fund.; A manager raises $900,000 each quarter. In 2026, the AngelList admin fee is 2% × $900,000 + $25,000 = $43,000 for each quarterly fund.; Investors and fundsMicro-VC Solo GP
RSUalso restricted stock unit, RSUs: Restricted stock unit: a promise to give you shares at a later time, with no purchase price, when you satisfy conditions. RSUs are common at late-stage and public companies.; 10,000 RSUs settle at a $30 IPO price. You have $300,000 of wage income at settlement.; Employee equityLesson Double-trigger RSU Stock option Equity grant
Rule 144also SEC Rule 144: The SEC rule for the resale of restricted shares. The holding period is 6 months if the company files reports with the SEC, and 1 year if it does not.; Legal and taxRestricted securities Holding period
Rule 148 demo dayalso Rule 148, qualified demo day: An SEC rule that lets a startup speak about its raise at a qualified demo day without general solicitation. The event has more than one company and a sponsor such as a university, an angel group, or an accelerator.; At such an event, you can say only that you raise money, the type and amount of the security, the use of the money, and the amount not yet sold.; Legal and taxLesson General solicitation Rule 506(b)Demo Day
Rule 504also Reg D 504: A Regulation D exemption for a maximum of $10M in 12 months. Rule 506 offerings are exempt from state registration, but Rule 504 offerings are not, so the state rules still apply.; Legal and taxLesson Regulation D Rule 506(b)Blue sky laws
Rule 506(b)also 506(b), Rule 506b, 506b: An exemption with no dollar limit and no public advertisements. You can sell to an unlimited number of accredited investors and to 35 or fewer non-accredited, sophisticated investors in each 90-day period.; If a non-accredited investor buys, the company must give large disclosure documents with financial statements. Thus most startups take only accredited investors.; Legal and taxLesson Rule 506(c)General solicitation Accredited investor Form D
Rule 506(c)also 506(c), Rule 506c, 506c: An exemption that lets you advertise to the public, but each buyer must be accredited. You must take "reasonable steps to verify" that status.; A checkbox from the investor is not sufficient. The SEC says that self-certification alone "is not sufficient."; Legal and taxLesson Rule 506(b)General solicitation Accredited investor
Rule 701also SEC Rule 701: The SEC exemption that lets private companies give equity to employees and advisors without registration. If the company grants more than $10M in 12 months, it must give more disclosure.; Legal and taxEquity grant Stock option Exempt offering
Rule of 40also Rule of 40%, 40% rule: A test for software companies: revenue growth % + profit margin % must be 40 or more. Brad Feld made it popular in 2015, for companies with approximately $50M or more of revenue.; 30% growth + 15% EBITDA margin = 45, so the company passes. 60% growth − 25% margin = 35, so it does not pass.; MetricsLesson Burn multiple EBITDA Growth rate
Run ratealso annualized run rate, revenue run rate, annualized revenue: The revenue of a recent period multiplied to a full year: one month × 12, or one quarter × 4. It includes one-time revenue, and it shows speed, not money that the company collected.; $8.33M of revenue last month × 12 = a "$100M run rate." In April 2026, YC said that run rate "is never abbreviated to ARR."; MetricsLesson ARR Trailing twelve months revenue Vibe revenue MRR
Runwayalso cash runway, months of runway: The number of months until the cash is gone at the current net burn. Runway = cash ÷ net burn.; $3.6M of cash ÷ $300,000 of net burn each month = 12 months of runway.; MetricsLesson Net burn Default alive Milestone
RVPIalso residual value to paid-in: Residual value to paid-in capital: the reported value of the stakes that a fund still holds ÷ paid-in capital.; LPs paid in $80M, and the fund holds stakes with a reported value of $120M. RVPI = 1.5x.; Investors and fundsTVPI DPI

S

S corporationalso S corp, S-corp: A corporation with a special tax status. It can have a maximum of 100 shareholders and only one class of stock, and thus it cannot sell preferred stock to VC funds.; Company basicsLesson C corporation LLC Preferred stock
S-1also Form S-1, S-1 filing, registration statement: The registration statement that a US company files with the SEC before an IPO.; ExitsIPO Registration
SAFEalso simple agreement for future equity, safe note, safes: Simple Agreement for Future Equity: a contract that Y Combinator made in 2013. The investor pays today and gets shares at the next priced round, and the SAFE has no interest and no maturity date.; In March 2026, Maya pays $100,000 on a SAFE and owns zero shares. At the Series A, the SAFE converts into preferred shares.; InstrumentsLesson Valuation cap Post-money SAFE Discount MFN clause Convertible note Conversion
SAFE liquidity eventalso Liquidity Event, change of control, sale before conversion: A sale of the company or an IPO before the SAFE converts. A capped SAFE then gets the larger of its money back or its value as common stock at the cap.; A $1M SAFE has a $10M cap. In a $50M sale, it converts and gets $5M. In a $5M sale, it gets its $1M back.; InstrumentsLesson Dissolution event SAFE Exit
Safe Preferred Stockalso shadow preferred, shadow series, sub-series, Series A-2: A sub-series of preferred stock for a SAFE that converts at its cap price. Its liquidation preference for each share is the SAFE price, so the total preference is the amount that the investor paid.; Investor A paid $200,000 and got 588,235 shares at $0.34. The preference is $200,000, not 588,235 × $1.1144 = $655,529.; InstrumentsLesson Conversion Liquidation preference Safe Price
Safe Pricealso cap price, SAFE conversion price: The price at which a post-money SAFE converts through its cap. Safe Price = post-money valuation cap ÷ Company Capitalization.; $10M cap ÷ 11,111,111 shares = $0.90. A $1M SAFE gets $1,000,000 ÷ $0.90 = 1,111,111 shares.; InstrumentsLesson Company Capitalization Valuation cap Conversion price Discount Price
SAFE stackingalso stacked SAFEs, SAFE stack: The sale of many SAFEs before a priced round, often at different caps. Post-money SAFEs do not dilute each other, but each one dilutes the founders.; YC says: "Five $100k SAFEs at a $5M cap is 10% sold, not 2%."; InstrumentsLesson Post-money SAFE Dilution Valuation cap
Same-day salealso exercise and sell, same-day exercise and sale: An exercise and a sale of the shares at the same time, so that the sale money pays the strike price. It is possible only when a buyer exists, for example at an IPO or in a tender offer.; In a tender offer at $8.00, an employee exercises and sells 20,000 options with a $0.40 strike price. She gets 20,000 × $7.60 = $152,000 before tax.; Employee equityLesson Exercise Net exercise Tender offer
SBIR and STTR grantsalso SBIR, STTR, Small Business Innovation Research, Small Business Technology Transfer, federal grant: US federal research grants for small businesses that take no equity. A law of April 13, 2026 reauthorized the two programs through September 30, 2031.; From October 16, 2026, agencies can give up to $335,937 for Phase I and $2,239,578 for Phase II without an SBA waiver.; InstrumentsLesson Non-dilutive funding
Scoutalso scout program, VC scout: A founder or an operator who gets money from a VC firm to invest in early startups for the firm. In return, the scout gets a share of the profits.; Sequoia started the best-known scout program in 2009. In 2019, TechCrunch reported that each Sequoia scout got up to $100,000 to invest.; Investors and fundsLesson Signaling risk Multistage fund Angel investor
Secondary salealso secondary, secondaries, secondary transaction, founder secondary: A sale of current shares from one holder to a new buyer. The seller gets the cash, and the company issues no new shares.; A founder sells 200,000 shares at $12 when the last preferred price was $15. That is a 20% discount and $2.4M before tax.; ExitsLesson Primary shares Tender offer ROFR Transfer restrictions
Section 1045 rolloveralso Section 1045, 1045 rollover, QSBS rollover: A rule that moves the tax on a QSBS gain to a later date, if you held the stock for more than 6 months. You must put the money into new QSBS within 60 days.; You sell QSBS after 2 years for $1.5M. You buy new QSBS for $1.5M within 60 days, and the tax on the gain moves to a later date.; Legal and taxQSBS
Securityalso securities: A legal term for stock, SAFEs, notes, and similar investments. When you sell one, securities law applies.; A $25,000 SAFE that a founder sells to an uncle is a security. The sale must use an exemption from registration.; Legal and taxExempt offering Regulation D Registration
Seed roundalso seed, seed funding, seed stage: The round that pays a team to find product-market fit. It is often the first round with a fund as the lead investor.; For 2026 through September 30, PitchBook-NVCA gives a median US seed deal of $3.0M at an $18.3M pre-money valuation.; Funding stagesLesson Pre-seed Series A Product-market fit Priced seed round
Seed-strappingalso seedstrapping, seed-strap: An informal name for a plan with one seed round and no later rounds. The company uses the seed money to get to profitability.; A company raises a $2M seed round, gets to break-even in 30 months, and does not raise again.; Funding stagesBootstrapping Seed round Break-even
Seniorityalso stacked preferences, senior preferred, liquidation seniority, standard seniority: The order of payment between series of preferred stock. Senior preferred gets its full preference before junior preferred gets money.; Seed $3M and Series A $12M, and a $10M sale. If the Series A is senior, it gets $10M and the seed gets $0. In Q1 2026, Wilson Sonsini found senior preferences in 18% of Series B and later rounds.; Term sheetsLesson Pari passu Preference stack Liquidation preference
Seriesalso series of preferred, Series A Preferred, share series: The name for each new class of preferred stock that a round sells. The letters go up with each priced round: Series Seed, Series A, Series B, and later letters.; The investors in the Series A buy shares of Series A Preferred Stock.; Equity and sharesPreferred stock Series A Share class
Series Aalso Series A round, A round: The first large priced round, usually from an institutional investor after product-market fit. Investors buy Series A preferred stock, and the earlier SAFEs convert.; For 2026 through September 30, PitchBook-NVCA gives a median US Series A of $17.4M at a $60.3M pre-money valuation.; Funding stagesLesson Seed round Series B Priced round Series A crunch Lead investor
Series A crunchalso A crunch: The name for a market where many companies with seed money cannot raise a Series A.; With the graduation rates that Carta gave in March 2026, approximately 15 of 100 seed companies raise a Series A within two years.; Funding stagesLesson Graduation rate Bridge round Series A
Series Balso Series B round, B round: The round that pays for more of what works: larger sales teams, new customer segments, and new markets.; For 2026 through September 30, PitchBook-NVCA gives a median US Series B of $39.5M at a $187.0M pre-money valuation.; Funding stagesLesson Series A Series C and later Step-up
Series C and lateralso Series C, Series D, late stage, growth round, growth stage: Large rounds for expansion, acquisitions, or preparation for an IPO. The names continue with D, E, and later letters.; For 2026 through September 30, PitchBook-NVCA gives a median US Series C of $77.0M at a $500.0M pre-money valuation.; Funding stagesLesson Series B Mezzanine round Crossover fund IPO
Series Seed documentsalso Series Seed docs, seed documents: A free, shorter set of priced-round documents for seed rounds. The core set has a term sheet, an investment agreement, and a restated charter.; The Series Seed core set has approximately 18,000 words. The five core NVCA documents have approximately 78,000 words without footnotes.; Legal and taxLesson Priced seed round NVCA model documents
Shadow seriesalso sub-series, shadow preferred: A sub-series of preferred stock for SAFE or note holders who converted at a lower price than the new investors paid. Its liquidation preference is the money that the holder paid, not the round price.; Northwind's two pre-seed SAFEs converted at $0.60 and $1.00 a share, so they got Series Seed-1 and Seed-2. The seed investors paid $1.088 for Series Seed.; Equity and sharesLesson Preferred stock Series SAFE Conversion
Sharealso stock, shares, share of stock: One unit of ownership in a corporation. Your percentage is your number of shares divided by the total number of shares.; Ada and Ben each hold 4,000,000 of 8,000,000 shares, so each owns 50%. With 1 share each, they still own 50% each.; Equity and sharesLesson Equity Ownership percentage Authorized shares Price per share
Share classalso class of stock, stock class, class of shares: A group of shares with the same rights. Common stock and each series of preferred stock are separate classes.; A cap table after a Series A often has three classes: common, Series Seed Preferred, and Series A Preferred.; Equity and sharesLesson Common stock Preferred stock Series Cap table
Shutdownalso wind-down, dissolution, shut down, liquidation: The permanent close of a company. It pays its creditors, then gives the cash that stays to shareholders in the order of the waterfall.; Carta counted 966 shutdowns among its customers in 2024 and 769 in 2023.; ExitsLesson Dissolution event Waterfall Cockroach mode
Side letteralso side agreement: A separate agreement that gives one investor more rights, such as pro rata rights, information rights, or an MFN.; The lead SAFE investor gets a pro rata side letter. The other SAFE holders sign only the standard form.; InstrumentsLesson Pro rata side letter MFN clause Information rights
Signaling riskalso signalling risk, negative signal: If a large current investor does not invest again, new investors think that this is bad news.; A multistage fund puts $1M into your seed round, then does not invest in your Series A. Other investors ask what that fund knows.; News and slangMultistage fund Scout Reserves
Simple interest: Interest that grows on the principal only: principal × annual rate × years. Most convertible notes use it. Compound interest also grows on the interest of earlier years.; $500,000 at 7% simple interest for 18 months grows by $52,500. With interest that compounds once a year, it grows by $53,408.; InstrumentsLesson Interest Principal Convertible note
Single-trigger accelerationalso single trigger, single-trigger: Acceleration that one event causes, usually a sale of the company. Investors and buyers do not like it, because buyers want the team to stay after the sale.; In April 2025 data from Gunderson, more than 90% of companies gave founders no single-trigger acceleration at formation.; Equity and sharesLesson Acceleration Double-trigger acceleration
Small businessalso lifestyle business, SMB: A company that its owners do not design to become 100 times larger. It can be a very good business, but venture money rarely fits it.; A café, a plumber, or a local agency can be a very good small business. None of them plans to sell to millions of customers.; Company basicsLesson Startup Bootstrapping
Soft circlealso soft commit, soft commitment, soft-circled: A verbal commitment to invest that is not binding.; An angel says "put me down for $50K if you find a lead." That is a soft circle with a condition, not a handshake deal.; News and slangHandshake deal Lead investor
Solo founderalso single founder, solo-founded: A company with only one founder. That founder holds all the founder shares at the start.; On Carta, approximately 36% of the startups that started in 2025 had a solo founder. For 2024, Carta reports give 30% to 35%.; Company basicsFounder Equity split
Solo GPalso solo capitalist, single-GP fund: A venture fund with one manager and no partners. A solo GP can make a decision in one day, but it has small reserves and key-person risk.; Investors and fundsLesson Micro-VC Super angel
Soonicornalso future unicorn: A startup that persons think can become a unicorn soon.; News and slangUnicorn
Sovereign wealth fundalso sovereign fund, SWF: An investment fund that a government owns. Some sovereign funds invest in very large AI rounds.; Investors and fundsLimited partner Crossover fund Mega-round
SPACalso special purpose acquisition company, blank-check company, de-SPAC: Special purpose acquisition company: a shell company that lists first, then merges with a private company to make it public.; A SPAC with $200M in its trust merges with your company. If SPAC shareholders redeem 80% of the trust, the company gets only $40M of cash.; ExitsIPO Direct listing
Spaced repetitionalso spaced review, spacing, distributed practice: Reviews that come back after longer and longer gaps, near the time when you start to forget. The best first gap depends on how long you want to remember.; For one year of memory, the best first review is approximately 18 to 37 days after the lesson: 5% to 10% of the year.; LearningLesson Retrieval practice
Spray and prayalso spray-and-pray investing, spray-and-pray: A strategy of many small bets with little due diligence, with the hope that one becomes a big winner.; News and slangPower law Micro-VC
Spreadalso bargain element, option spread, intrinsic value: The fair market value at exercise minus the strike price, multiplied by the number of options.; ($11 − $1) × 10,000 options = a $100,000 spread.; Employee equityExercise AMT NSO ISO
SPValso special purpose vehicle, single-deal fund: Special purpose vehicle: a legal entity for one deal, usually an LLC. It collects money from many investors to invest in one company.; An SPV raises $1M with 20% carry and later gets $10M. The lead gets 20% × $9M = $1.8M, and the SPV investors get $8.2M.; Investors and fundsLesson Syndicate Layered SPV Transfer restrictions Carried interest
Startupalso start-up, startup company: A company that its founders design for very fast growth, usually with one product for a very large market. Paul Graham wrote in 2012 that growth is the one essential thing.; One bakery is a small business. Software that 10,000 bakeries use, with 10% growth each month, is a startup.; Company basicsLesson Small business Venture capital Growth rate Product-market fit
Stealth modealso stealth, in stealth, stealth startup: A period when a company operates but does not tell the public what it makes.; Company basicsStartup
Step-upalso step up, price step-up: The new round price ÷ the previous round price. It shows how much more the new investors pay for each share.; Seed preferred sold at $1.00 a share and Series A preferred at $2.50 a share is a 2.5x step-up.; ValuationValuation step-up Up round Down round Price per share
Stock optionalso option, options, employee stock option, ESO: The right to buy a share at a fixed price, the strike price, at a later time. An option is not a share until you exercise it.; To exercise 10,000 options at $1.00, you pay $10,000.; Employee equityLesson Strike price Exercise ISO NSO Vesting Option pool
Stock purchase agreementalso SPA, share purchase agreement: The document that records the purchase of shares in a priced round. It gives the number of shares, the price, the closing, and the statements of fact from the company.; Legal and taxLesson NVCA model documents Closing conditions Priced round
Stock splitalso split, forward split: A change that divides each share into more shares. The percentage and the total value of each holder stay the same.; In a 10-for-1 split, 100 shares at $50 become 1,000 shares at $5.; Equity and sharesShare Price per share
Strategic buyeralso strategic acquirer, strategic: An operating company that buys a startup because it wants the product, the customers, or the team.; A large accounting software company buys a startup to add the startup's AI product to its suite.; ExitsFinancial buyer M&A Corporate venture capital
Strike pricealso exercise price, strike: The fixed price for each share in an option. It must be equal to or more than the fair market value of the common stock on the grant date.; You get 40,000 options at a $0.40 strike price. At a $5.00 share value, you can pay $16,000 for shares with a value of $200,000.; Employee equityLesson Stock option Fair market value 409A valuation Spread Underwater option
Super angelalso super-angel: An angel who invests very often or in large amounts, sometimes through a small fund.; Investors and fundsAngel investor Micro-VC Solo GP
Super pro rataalso super pro-rata right, super pro rata right: A right to buy more than your pro rata share of a future round. It leaves less space for new investors.; An investor holds 12% before a $20M Series B. Pro rata lets it put in $2.4M, and a 2x super pro rata lets it put in $4.8M.; Term sheetsLesson Pro rata right Major investor
Survival periodalso claims period, indemnity period: The time after the closing of a sale in which the buyer can make claims against the sellers, usually paid from the escrow.; In 2025 deals, the SRS Acquiom median survival period was 12 months. After it ends, the sellers get the escrow that stays.; ExitsLesson Escrow Representations and warranties insurance M&A
Syndicatealso angel syndicate, online syndicate, AngelList syndicate: A lead angel who raises an SPV from backers for each deal and gets carry on it. On the cap table, the SPV shows as one investor, not 40.; A syndicate lead finds a seed deal, raises $500K from 40 backers into an SPV, and takes 20% of the profit.; Investors and fundsLesson SPV Angel investor Carried interest

T

T2D3also triple triple double double double: A classic growth path for SaaS after $2M ARR: triple ARR for two years, then double it for three years. Neeraj Agrawal of Battery Ventures named it in 2015.; $2M → $6M → $18M → $36M → $72M → $144M ARR.; MetricsLesson Q2T3 Growth rate ARR
Take ratealso take, rake, net revenue margin: The percentage of GMV that a marketplace keeps as revenue.; GMV of $100K this month with a 20% take rate gives $20K of marketplace revenue.; MetricsGMV Revenue
TAM, SAM, and SOMalso TAM, SAM, SOM, total addressable market, serviceable available market, serviceable obtainable market, market size: Three sizes of a market. TAM counts all possible buyers, SAM counts the buyers that you can reach, and SOM counts the part that you can really win.; 50,000 US dental clinics × $6,000 each year = a $300M TAM.; Company basicsPitch deck Startup
TCValso total contract value: Total contract value: the value of a full customer contract for all of its years.; A 3-year contract at $120,000 each year has a TCV of $360,000 and an ACV of $120,000.; MetricsACV Bookings
Tender offeralso tender, employee tender, liquidity program: A structured offer to buy shares from many holders, often employees, at one price for a set period. Under SEC Rule 14e-1, it must stay open for at least 20 business days.; An investor offers to buy up to $50M of employee and founder shares at $20 each. Each employee can sell up to 20% of the vested shares.; ExitsLesson Secondary sale Buyback
Tentative minimum taxalso TMT: The result of the second, parallel tax calculation for the AMT. You pay the larger of this tax and your regular tax, and the difference is the AMT.; In 2026, a single filer with $310,000 of AMT income has a tentative minimum tax of 26% × ($310,000 − $90,100) = $57,174.; Employee equityLesson AMT ISO AMT-free spread
Term sheetalso TS, termsheet: A short document with the primary terms of an investment. Most of it is not binding, but some clauses are binding, such as confidentiality and the no-shop.; The Series Seed term sheet has approximately 2 pages, and the 2020 NVCA model has 15 pages. The final documents often have more than 100 pages.; Term sheetsLesson No-shop Exploding offer Economics and control NVCA model documents Closing
The askalso use of funds, ask slide: The last slide of a pitch deck: the amount that you raise and what it buys. A good ask connects the money to the milestones of the next round.; "We raise $3.6M. It pays for 24 months and five persons, and it takes us to the revenue that a Series A needs."; Funding stagesLesson Pitch deck Milestone
The markalso mark, carrying value: The value at which a fund holds an investment at this time.; "They hold it at the Series C mark" tells you that the fund values the stake at the Series C price.; ValuationMarkup Markdown Mark-to-market
Tokenized sharesalso tokenized stock, pre-IPO tokens: Crypto tokens that claim to follow the value of the shares of a private company. Transfer restrictions can make these deals risky for the buyer.; News and slangTransfer restrictions SPV Layered SPV
Tourist investoralso tourist, tourist capital: An investor that is not a usual VC, such as a hedge fund, a crossover fund, or a corporation. It invests a lot in booms and goes away in downturns.; News and slangCrossover fund FOMO
Traction: Measured proof of demand, such as revenue, users, retention, and growth.; $40,000 of monthly recurring revenue, with 15% growth each month.; Company basicsProduct-market fit MRR Growth rate Cohort
Trailing twelve months revenuealso TTM, TTM revenue, LTM, last twelve months: The total revenue that the company earned in the last 12 months. It looks back in time, and thus nobody can make it larger with one good week.; MRR starts at $100,000 and increases 10% each month. In month 12, ARR is $3.42M, but TTM revenue is only $2.14M.; MetricsLesson Run rate ARR Revenue
Tranched roundalso tranches, tranche, tranched financing, milestone-based financing: A round where the investors agree to the full amount at the start but pay it in parts when the company gets to milestones. The NVCA added tranche terms to its model documents in October 2025.; In Q2 2026, Cooley found tranches in 29.6% of its life sciences deals.; Funding stagesMilestone NVCA model documents
Transfer restrictionsalso transfer restriction, share transfer restrictions: Rules in the charter, the bylaws, or the stock agreements that make company consent necessary before a holder sells shares. They make many SPV deals and token deals for private shares risky.; In August 2025, OpenAI said that an unauthorized SPV sale "will not be recognized and carry no economic value to you."; Legal and taxROFR SPV Tokenized shares Secondary sale
Treasury shares: Shares that the company issued, then bought back and keeps. They are issued but not outstanding, so they give ownership to nobody.; A company issued 8,200,000 shares and bought back 200,000. It has 200,000 treasury shares and 8,000,000 outstanding shares.; Equity and sharesLesson Issued shares Outstanding shares Authorized shares
TVPIalso total value to paid-in: Total value to paid-in capital: (distributions + current reported value) ÷ paid-in capital. It includes paper gains, and TVPI = DPI + RVPI.; Paid in $80M, $40M of distributions, and $120M of reported value. TVPI = 2.0x, but DPI is only 0.5x.; Investors and fundsLesson DPI RVPI IRR Markup

U

Uncapped SAFEalso uncapped MFN SAFE, MFN-only SAFE: A SAFE with no valuation cap. The YC form has no cap and no discount, but it has an MFN.; YC puts $375,000 on an uncapped MFN SAFE. If no later SAFE has better terms, it converts at the Series A price.; InstrumentsLesson MFN clause SAFE YC standard deal
Underwater optionalso underwater, out-of-the-money option: An option with a strike price that is more than the current fair market value. At this time, an exercise gives no value.; Your strike price is $3.00, and after a down round the 409A price is $1.80.; Employee equityRepricing Strike price Down round
Underwriteralso underwriters, bookrunner, investment bank: The investment bank that sets the IPO price and sells the IPO shares to investors.; ExitsIPO Roadshow
Unicornalso unicorns, billion-dollar startup, valued at $1B: A private startup with a valuation of $1B or more in a funding round. Aileen Lee made the term in TechCrunch on November 2, 2013, when she found only 39 such US software companies.; Crunchbase counted 311 new unicorns worldwide from January to September 2026. The valuation comes from the last priced round, not from a sale.; News and slangLesson Decacorn Hectocorn Soonicorn Centaur Valuation Headline valuation
Unissued option poolalso unallocated pool, unallocated option pool, available pool, unissued pool: The part of the option pool that the company did not grant yet. Fully diluted counts usually include it.; A pool of 1,500,000 shares with 800,000 granted options has an unissued pool of 700,000 shares.; Equity and sharesOption pool Fully diluted shares Company Capitalization
Unissued sharesalso unissued stock: Authorized shares that the company did not issue yet. They are a reserve for the option pool and for future investors.; 10,000,000 authorized shares − 8,200,000 issued shares = 1,800,000 unissued shares.; Equity and sharesAuthorized shares Issued shares Option pool
Unit economics: The profit or loss on one unit, such as one customer or one order, after you subtract its direct costs.; LTV is $20,000, and CAC is $6,000. Each customer gives $3.33 of gross profit for each dollar of acquisition cost.; MetricsLesson CAC LTV Gross margin CAC payback
Up roundalso upround: A round at a higher price for each share than the previous round. The round dilutes current holders, but each of their shares has a higher value.; You own 40% of a company at a $20M post-money valuation, a $8M stake. After an up round, you own 32% at $60M, a $19.2M stake.; ValuationLesson Down round Flat round Step-up Dilution
Usage-based pricingalso consumption pricing, pay as you go: Pricing in which the customer pays for what it uses, such as each request or each task, and not a flat fee. Revenue moves with usage, so it can increase and decrease fast, and a16z excludes variable usage fees from ARR.; Customers pay $0.01 for each request. A month with 8M requests earns $80K, and the next month can earn more or less.; MetricsLesson Run rate ARR Gross margin

V

Valuationalso company valuation, valued at, value: The price of the full company in a deal. It is an agreed price for a part of the company, not the cash in the bank.; A company raises $5M at a $25M post-money valuation. It has $5M of new cash in the bank, not $25M.; ValuationLesson Pre-money valuation Post-money valuation Headline valuation Unicorn
Valuation capalso cap, post-money cap, post-money valuation cap, pre-money cap: The highest valuation at which a SAFE or a note converts into shares. If the priced round values the company higher, the investor converts at the lower price of the cap.; A $500K SAFE has a $5M post-money cap. The Series A price is $1.7647 a share, but the SAFE converts at $0.40. The cap is a limit on the price, not the value of the company today.; InstrumentsLesson SAFE Discount Conversion price Safe Price Post-money SAFE
Valuation step-up: The new pre-money valuation ÷ the previous post-money valuation. It is larger than the price step-up when the new round adds shares, such as a larger option pool, before the money comes in.; A seed at a $20M post-money valuation and a Series A at a $60M pre-money valuation give a valuation step-up of 3x. For 2026 through Q3, PitchBook-NVCA gave a median of 2.2x for AI companies and 1.5x for other companies.; ValuationLesson Step-up Price per share Up round
Venture capitalalso VC, venture capital firm, VC firm, venture firm, VC fund: Money that a firm invests in young private companies for equity. A VC firm raises funds from LPs and invests them in startups that can become very large.; From January to September 2026, US VC deal value was $515.8B across approximately 14,199 deals (PitchBook-NVCA).; Investors and fundsLesson General partner Limited partner Power law Management fee Carried interest
Venture debtalso venture loan, venture lending, growth debt: Loans from specialist lenders to VC-backed startups, usually near an equity round and with warrants. The company must pay the loan back also when the business goes badly.; In February 2026, Mercury gave approximately 10% to 14% interest at non-bank lenders, with warrant coverage of 10% to 20% of the loan.; InstrumentsLesson Warrant coverage Warrant Non-dilutive funding Revenue-based financing
Vestingalso vest, vesting schedule, vested, unvested: A schedule that gives you your equity in parts over time, as you stay with the company. The standard schedule is 4 years with a 1-year cliff, then monthly vesting.; With 4,000,000 shares on 4-year vesting and a 1-year cliff, 1,000,000 shares vest at month 12. Then 83,333 shares vest each month.; Equity and sharesLesson Cliff Reverse vesting Acceleration Founder re-vesting
Vibe revenue: Revenue from users who try an AI product from curiosity and possibly do not come back. A company that calls this revenue ARR overstates its recurring revenue.; A paid two-week pilot at $25,000 is not $650,000 of ARR, although $25,000 × 26 = $650,000.; News and slangLesson ARR Run rate CARR
Vintage yearalso vintage, fund vintage: The year when a fund starts to invest. Investors compare funds of the same vintage, because they invested in the same market.; As of Q2 2026, the median fund of the 2017 vintage on Carta had a DPI of only 0.37x.; Investors and fundsFund life DPI TVPI
Voting agreementalso NVCA voting agreement: The document that tells who elects each board seat. It also contains the drag-along.; Legal and taxLesson Board composition Drag-along NVCA model documents

W

Warm introalso warm introduction, intro, double opt-in intro: An introduction to an investor from a person that the investor trusts. YC calls it "by far the best way" to meet a VC or an angel, outside of demo days.; The strongest introduction comes from a respected investor who just committed to you. The next best comes from founders that the investor backed.; Funding stagesLesson Cold email Fundraising pipeline One-liner
Warrantalso stock warrant, warrants: A right to buy shares at a set price at a later time. Companies often give warrants to lenders or partners.; A lender gets warrants for 50,000 shares at $1.00 together with a loan.; Equity and sharesWarrant coverage Venture debt Fully diluted shares
Warrant coveragealso warrant coverage ratio: The value of the warrants that a lender gets, as a percentage of the loan.; 10% coverage on a $5M loan = warrants for $500,000 of stock.; InstrumentsWarrant Venture debt
Washout roundalso washout: A down round with so much dilution that the earlier shareholders lose almost all their ownership.; The earlier holders own 80% of the company before the round and 5% after it.; News and slangCramdown Down round Recapitalization
Waterfallalso liquidation waterfall, exit waterfall, distribution waterfall: The order and the math of who gets what when a company sells or closes. Debt comes first, then preferred stock by seniority, then common stock.; A $36M sale with $42M of preferences: the preferred holders take all $36M, and the common holders get $0.; ExitsLesson Liquidation preference Preference stack Seniority Conversion point Fund waterfall
Wire transferalso wire, bank wire, wire instructions: The bank transfer that sends the investor's money to the company account. Criminals often send false wire instructions by email, so founders confirm each change by telephone.; In 2025, the FBI received 24,768 complaints of business email compromise, with $3.05B of reported losses.; Funding stagesLesson Closing
Worked examplealso faded example, faded examples, backward fading: A problem that shows each step of the solution. In faded examples, the next problems hide the last steps, one more each time, until you do the full problem.; A SAFE conversion has five steps. The first example shows all five. The second hides step 5, and the third hides steps 4 and 5.; LearningLesson Retrieval practice

Y

Y Combinatoralso YC: The best-known US accelerator and the maker of the SAFE. From 2025, it operates four 3-month batches each year in San Francisco and invests $500,000 in each company.; In October 2026, the YC site said that more than 10,000 companies apply every 3 months, with an acceptance rate of approximately 1%.; Investors and fundsLesson Accelerator YC standard deal Batch Demo Day Office hours SAFE
YC standard dealalso YC deal, Y Combinator deal, accelerator round, YC SAFE: Y Combinator invests $500,000 in each company: $125,000 on a post-money SAFE for 7%, and $375,000 on an uncapped MFN SAFE.; If the next SAFEs have a $15M post-money cap, the MFN SAFE converts at that cap: $375,000 ÷ $15M = 2.5%. YC then owns approximately 9.5% before the priced round.; Funding stagesLesson Y Combinator MFN clause Uncapped SAFE Post-money SAFE Implied valuation

Z

Zombie startupalso zombie, zombie unicorn, walking dead: A company that still operates but cannot raise money at its last price and cannot find an exit.; News and slangPreference overhang Down round Cockroach mode