Pre-seed
Rounds & StagesThe earliest institutional round, usually raised on an idea, prototype, or very early traction.
Example
You raise $500K on a SAFE from angels and a pre-seed fund to hire one engineer and launch v1.
Glossary
Speak the languageof the term sheet.
- Plain-English definitions of the terms you'll hear in investor meetings, term sheets, and diligence.
- Each entry comes with a quick example so you can use it with confidence.
Seed
Rounds & StagesThe first priced round for most startups — you have a product and early signal, but not yet repeatable growth.
Example
With 1,200 weekly active users and $8K MRR, you raise a $2M seed at a $10M post-money valuation.
Series A
Rounds & StagesThe first 'scale' round. Investors expect product-market fit and a repeatable go-to-market motion.
Example
At $150K MRR growing 15% MoM, you raise a $10M Series A led by a growth-focused fund.
Bridge round
Rounds & StagesA smaller round between two priced rounds to extend runway until you hit the next milestone.
Example
You raise a $750K SAFE bridge to reach $200K MRR before opening your Series A.
SAFE
Deal TermsSimple Agreement for Future Equity. An investor gives you cash now that converts into shares at your next priced round.
Example
An angel writes a $50K SAFE with a $6M cap; when you close a seed at $10M, their SAFE converts as if the price were $6M.
Convertible note
Deal TermsDebt that converts into equity at the next round. Similar to a SAFE but carries interest and a maturity date.
Example
A $250K note at 5% interest with a 20% discount converts into your seed round shares 18 months later.
Valuation cap
Deal TermsThe maximum company valuation used to convert a SAFE or note — protects early investors if your next round prices high.
Example
A SAFE with a $6M cap converts at $6M even if your priced round is at $12M — the early investor gets 2x the ownership.
Discount
Deal TermsA percentage reward that lets SAFE/note holders convert at a lower price than new round investors.
Example
A 20% discount on a $10M round means the SAFE converts as if the valuation were $8M.
Pre-money valuation
Deal TermsWhat your company is worth before new investment comes in.
Example
$8M pre-money + $2M new investment = $10M post-money. Investors own 20%.
Post-money valuation
Deal TermsCompany value after the new round closes — pre-money plus the money raised.
Example
Raising $2M at a $10M post-money means the $2M buys exactly 20% of the company.
Term sheet
Deal TermsA short, mostly non-binding document that outlines the key terms of an investment before lawyers draft final docs.
Example
A lead investor sends a term sheet: $3M at $12M post, 1x non-participating preferred, one board seat.
Liquidation preference
Deal TermsHow much investors are paid back before common shareholders in a sale. '1x non-participating' is founder-friendly.
Example
1x preference: on a $20M sale, an investor who put in $2M gets $2M back first, then shares the rest by ownership %.
Pro rata rights
Deal TermsThe right for an existing investor to invest in future rounds to keep their ownership percentage from being diluted.
Example
Owning 10% pre-Series A, your seed investor exercises pro rata to buy 10% of the new round and stay at 10%.
Cap table
Cap Table & EquityThe spreadsheet of who owns what — founders, employees, and investors, with share counts and percentages.
Example
Post-seed cap table: founders 70%, option pool 15%, seed investors 15%.
Dilution
Cap Table & EquityThe reduction in existing owners' percentages when new shares are issued (new round, option pool expansion).
Example
You owned 60% before a round that sold 20% to new investors — you're now diluted to 48%.
Option pool
Cap Table & EquityShares reserved for future employee equity grants. Investors usually want it topped up before their round closes.
Example
A 10% option pool created pre-money means founders — not new investors — absorb that dilution.
Vesting
Cap Table & EquityThe schedule that determines when granted shares actually belong to a founder or employee.
Example
Standard: 4 years with a 1-year cliff. Leave after 6 months and you keep zero shares.
Preferred vs. common shares
Cap Table & EquityInvestors get preferred shares (with protective terms); founders and employees hold common shares.
Example
In a $10M sale, preferred holders collect their liquidation preference first; common holders share the remainder.
MRR / ARR
MetricsMonthly / Annual Recurring Revenue — the predictable subscription revenue investors most want to see.
Example
$25K MRR = $300K ARR. A 15% MoM growth rate would put you around $135K MRR in 12 months.
Burn rate
MetricsHow much cash your company loses each month (gross burn) or net of revenue (net burn).
Example
You spend $80K/month and earn $30K → $50K net burn.
Runway
MetricsHow many months of cash you have left at your current net burn.
Example
$600K in the bank ÷ $50K net burn = 12 months of runway.
CAC / LTV
MetricsCustomer Acquisition Cost and Lifetime Value. LTV/CAC > 3 is a healthy signal for SaaS investors.
Example
You spend $60 to acquire a customer who pays you $240 over their lifetime → LTV/CAC = 4.
Churn
MetricsThe percentage of customers (or revenue) you lose in a given month.
Example
5% monthly logo churn is high for B2B SaaS; 2% or less is what most Series A investors want to see.
Lead investor
People & ProcessThe investor who sets the terms and writes the largest check in a round. Other investors follow their lead.
Example
A seed fund leads your $2M round with $1.2M and sets the valuation; four angels fill the remaining $800K.
Warm intro
People & ProcessAn introduction to an investor from someone they already know and trust. Much higher hit rate than cold email.
Example
A founder in the investor's portfolio forwards your one-line pitch with a 'you should meet Lexy' note.
Data room
People & ProcessA secure shared space (like DocSend) where you host the documents investors need for due diligence: pitch deck, financials, cap table, contracts, and metrics.
Example
After signing a term sheet, you send investors a DocSend link to your data room; you can see who opened the deck and how long they spent on each slide.
Due diligence
People & ProcessThe investor's deep review of your business, team, and legal setup before wiring the money.
Example
Diligence turns up an unassigned IP contract from a past contractor — you fix it before signing.
Board seat
People & ProcessA seat on your company's board of directors, usually taken by the lead investor after a priced round.
Example
Post-Series A your board is: 2 founders, 1 lead investor, 1 independent director.
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