Startup & Fundraising Glossary

Plain-English definitions of 58+ terms every founder runs into.

A

Acceleration

A clause that speeds up vesting of stock or options when a triggering event occurs, like an acquisition or termination without cause. Single-trigger accelerates on the event itself; double-trigger requires the event plus a separate condition like termination.

Example: Founder vesting often has double-trigger acceleration on acquisition.

Acqui-hire

An acquisition where the buyer is primarily interested in acquiring the team rather than the product or technology. The startup typically winds down after the deal.

Example: Big tech companies often acqui-hire small AI startups for the engineers.

Anti-Dilution

A protection clause that adjusts an investor's ownership if the company raises a future round at a lower valuation (a down round). The two main types are full ratchet and weighted average.

Example: Most investors push for broad-based weighted average anti-dilution.

ARR

Annual Recurring Revenue — the predictable yearly revenue from subscriptions or contracts. Calculated as MRR × 12. ARR is the headline metric for SaaS valuations.

Example: A SaaS company with ₹83,000 MRR has roughly ₹10 lakh ARR.

B

Board Seat

A formal position on the company's board of directors with voting rights on major decisions. Lead investors typically negotiate for a board seat starting at Series A.

Bridge Round

A short-term financing round meant to extend runway between two priced rounds. Usually structured as a SAFE or convertible note that converts at the next round.

Example: A ₹2 crore bridge gives the team six more months to hit Series A metrics.

Burn Rate

The rate at which a startup is spending its cash reserves each month. Gross burn is total monthly spend; net burn subtracts revenue.

Example: ₹15 lakh net burn per month means you lose ₹15 lakh monthly after revenue.

C

Cap

On a SAFE or convertible note, the maximum valuation at which the instrument converts to equity. Caps protect the investor if the next round prices the company much higher.

Example: A ₹40 crore cap means an investor converts at ₹40 crore even if the priced round is ₹100 crore.

Cap Table

A table listing every shareholder, the number of shares they hold and their ownership percentage. The cap table is the source of truth for who owns what.

Carry

The share of profits a venture fund manager (GP) takes from a successful exit. Industry standard is 20% — meaning GPs keep 20% of profits after returning capital to LPs.

Cliff

A period at the start of a vesting schedule before any shares vest. The most common is a 1-year cliff — if you leave before the cliff, you get nothing.

Example: A 4-year vest with a 1-year cliff vests 25% on the one-year anniversary.

Common Stock

Standard equity ownership, usually held by founders and employees. Common stock has fewer rights and protections than preferred stock and is paid out last in a liquidation.

Convertible Debt

A loan that converts into equity at a later date — typically at the next priced round, with a discount or cap. A subset of convertible notes.

Convertible Note

A short-term debt instrument that converts to equity at a future financing event. Usually carries an interest rate, a maturity date, a discount and sometimes a cap.

Example: ₹50 lakh note with 8% interest, 20% discount and ₹30 crore cap.

D

Data Room

A secure online folder where founders share due diligence documents with potential investors — financials, contracts, IP, hiring docs and so on.

Dilution

The reduction in existing shareholders' ownership percentage when new shares are issued. Every funding round dilutes existing holders.

Example: If the company sells 20% to a new investor, existing holders go from 100% to 80%.

Discount

A percentage off the next round's price-per-share that early SAFE or note holders receive. Rewards them for taking earlier risk.

Example: 20% discount on a ₹50/share priced round means early holders convert at ₹40.

Down Round

A funding round priced below the previous round's valuation. Usually a sign of trouble — and triggers anti-dilution clauses for prior investors.

DPI

Distributions to Paid-In capital — the cash a venture fund has actually returned to its LPs divided by what they invested. The ultimate proof of fund performance.

Drag-Along

A clause that lets majority shareholders force minority shareholders to join in selling the company. Prevents small holders from blocking a deal.

Due Diligence

The deep investigation an investor runs on a startup before closing — covering financials, legal, technical, customer references and team backgrounds.

E

Equity

Ownership in a company, usually represented by shares. Equity holders have a claim on the company's assets and profits, in proportion to their stake.

ESOP

Employee Stock Option Pool — a reserved set of shares for current and future employees. Pre-Series A pools are typically 10–15% of post-money equity.

Exit

A liquidity event for shareholders — usually an acquisition, IPO or secondary sale. The end goal of most venture-backed investments.

F

Follow-on

When an existing investor participates in a future funding round to maintain or grow their ownership. Often paired with pro rata rights.

G

General Partner — the person or firm managing a venture fund. GPs make investment decisions and earn management fees plus carry.

I

Information Rights

An investor's contractual right to receive periodic financial and operational updates from the company — typically monthly or quarterly.

IPO

Initial Public Offering — the first time a company sells shares to the public on a stock exchange. The most prestigious (and rarest) exit path.

IRR

Internal Rate of Return — the annualized rate of return on an investment. Accounts for the time value of money, unlike MOIC.

Example: Turning ₹1 crore into ₹3 crore in 5 years is roughly a 25% IRR.

K

KISS

Keep It Simple Security — a 500 Startups-designed convertible instrument similar to a SAFE, used as an alternative to convertible notes.

L

Lead Investor

The investor who sets terms, contributes the largest cheque and typically takes a board seat in a financing round. Other investors follow on the same terms.

Limited Partner

An LP — the investors who put money into a venture fund. Pension funds, family offices, endowments and high-net-worth individuals are common LPs.

Liquidation Preference

A clause giving preferred shareholders priority to recover their investment before common shareholders in a sale. 1x non-participating is the founder-friendly default.

Example: 1x liquidation preference means investors get their money back first, then common splits the rest.

Limited Partner — see above. The capital provider in a venture fund.

M

MOIC

Multiple On Invested Capital — total return divided by invested amount, ignoring time. A 3x MOIC means ₹1 crore became ₹3 crore.

MRR

Monthly Recurring Revenue — the predictable monthly revenue from subscriptions. The unit metric for SaaS health.

Example: ₹2 lakh MRR equals ₹24 lakh ARR.

N

NDA

Non-Disclosure Agreement. Most VCs do not sign NDAs to review pitches — they see too many similar ideas to risk the legal exposure.

O

Observer Rights

The right to attend board meetings without voting rights. Often given to investors who don't qualify for full board seats but want visibility.

P

Pari Passu

Latin for "equal footing." Used in term sheets to indicate that two classes of shares have equal rights — for example, in liquidation preferences.

Post-Money

The valuation of a company after a funding round closes. Pre-money plus the new investment equals post-money.

Example: ₹40 crore pre-money + ₹10 crore raise = ₹50 crore post-money.

Pre-IPO

A late-stage funding round just before a company goes public. Often involves crossover hedge funds and growth equity firms.

Pre-Money

The valuation of a company before a funding round closes. The pre-money valuation determines the share price for the round.

Preferred Stock

A class of shares with extra rights — typically liquidation preference, anti-dilution, voting and information rights. Investors almost always receive preferred stock.

Pro Rata

The right of an existing investor to participate in future rounds to maintain their ownership percentage. Standard for lead investors and many seed funds.

R

Right of First Refusal

ROFR — gives the company or existing investors first dibs to buy shares before they can be sold to outsiders. Limits surprise share transfers.

Runway

How many months a startup can operate before running out of cash. Calculated as cash on hand divided by net burn rate.

Example: ₹3 crore cash and ₹15 lakh monthly net burn = 20 months of runway.

S

SAFE

Simple Agreement for Future Equity — a Y Combinator-designed instrument that converts to equity at the next priced round. Simpler than a convertible note (no interest, no maturity).

Seed

The first institutional funding round, typically used to build product and find product-market fit. In India, seed rounds are usually ₹2–8 crore.

Series A

The first priced round after seed, usually for scaling a proven business. Indian Series A is typically ₹15–60 crore.

Series B

The second priced round, focused on scaling go-to-market and team. Indian Series B rounds typically range from ₹60 crore to ₹250 crore.

Series C

Later-stage growth capital for scaling internationally, acquiring competitors or preparing for IPO. Indian Series C rounds typically run ₹250 crore and up.

T

Tag-Along

A right that lets minority shareholders join a sale if a majority holder is selling shares — protecting them from being left behind on bad terms.

Term Sheet

A non-binding document outlining the key terms of a proposed investment. Once signed, it's the basis for definitive legal documents.

TVPI

Total Value to Paid-In capital — current value of a venture fund (cash returned plus residual portfolio value) divided by capital invested. A leading indicator of DPI.

U

Up Round

A funding round priced above the previous round's valuation. The healthy default — signals progress and protects existing investors.

V

Valuation

What the company is worth at a moment in time, usually expressed as pre-money or post-money. Determined by negotiation, not formula.

Vesting

The schedule by which founders or employees earn their shares over time. Standard is 4 years with a 1-year cliff and monthly vesting after.

Vesting Schedule

The specific timeline of how shares vest. The industry default is 25% after one year, then monthly for the next 36 months.

Why founders need the vocabulary

Fundraising has its own dense, slightly intimidating vocabulary. Liquidation preferences, pari passu, weighted average anti-dilution — every term sheet is dotted with phrases that mean something specific and consequential. Founders who don't speak the language can sign documents that quietly tilt economics in the investor's favour. Conversely, founders who do speak it can negotiate with confidence and avoid the most common term sheet traps.

This glossary is built for founders, not lawyers. Each definition is short, plain and paired with a real-world example wherever useful. It covers the terms you'll see in your first SAFE, your first priced round, and your first acquisition discussion. Bookmark it, search it before signing anything, and add it to your team's onboarding so everyone speaks the same language.

Tips for using a glossary well

Read every term in your term sheet — out loud — before signing.
If a term is missing, ask your investor to define it in writing.
Use the search above when you're reviewing a deck or doc.
Pair this glossary with a good startup lawyer for the high-stakes calls.
Re-read the basics (cap, discount, pro rata) every time you raise.