Startup Fundraising Glossary

Navigate the world of startup financing with confidence

Explore a glossary of essential terms in startups, startup fundraising, bootstrapping and entrepreneurship. Decode the terminology and jargon with ease.

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Round of FundingA Round of Funding is a stage in the capital-raising process where a startup receives investments in exchange for equity or debt, such as seed, Series A, B, C, etc.Round TableA Round Table refers to a meeting where investors, founders, and stakeholders discuss strategies, progress, and future plans in a non-hierarchical setup.Rounds of FinancingRounds of Financing refers to the sequential stages through which a startup goes to raise capital, including seed, Series A, B, C, etc., each with different investor expectations and company valuations.Royalty FinancingRoyalty Financing is a method of raising funds where investors provide capital in exchange for a percentage of future revenues.Royalty StreamA Royalty Stream refers to the continuous flow of payments received from licensing agreements or royalties, providing a source of revenue from intellectual property rights.Rubber CheckA Rubber Check colloquially refers to a check that cannot be processed due to insufficient funds, highlighting financial instability or mismanagement.Run RateRun Rate extrapolates financial results into future periods. For startups, it indicates the expected financial performance based on current metrics.Run Rate EarningsRun Rate Earnings extrapolate current financial performance to predict a full year`s earnings, assuming no changes in the revenue or cost structure.RunwayRunway refers to the amount of time a startup can continue operating until it needs to secure additional funding, calculated based on current burn rate and existing financial reserves.Runway AnalysisRunway Analysis assesses the amount of time a startup can continue to operate at its current burn rate before it needs to generate positive cash flow or secure additional funding.Runway ExtensionRunway Extension refers to actions taken by a startup to lengthen the amount of time before additional funding is needed, often through cost-cutting or seeking additional investments.SaaS (Software as a Service) MetricsSaaS (Software as a Service) Metrics are specific metrics used to measure the performance and health of a SaaS startup, such as MRR (Monthly Recurring Revenue) and churn rate.SAFE (Simple Agreement for Future Equity)A SAFE (Simple Agreement for Future Equity) is an investment agreement between a startup and investors, promising future equity in the company without specifying the exact terms until a later financing round.Sales Performance Incentive FundA Sales Performance Incentive Fund is a fund created within a company to reward employees for achieving sales targets, often used in startups to motivate growth without high fixed salaries.ScalabilityScalability is the potential of a startup to grow significantly and manage increased demand without compromising performance or losing revenue.Scalability AnalysisScalability Analysis is the assessment of a startup`s potential to expand its operations and grow revenues significantly without equally significant increases in costs.Scalable ModelA Scalable Model is a business model that can easily adapt and grow in response to increased demand without a significant increase in costs or resources.Scalable StartupA Scalable Startup is a startup designed from the outset to grow rapidly and scale to a large size, often requiring significant amounts of capital to achieve.Secondary Equity OfferingsSecondary Equity Offerings are offerings of new stock by a company that has already gone public, which can dilute existing shares but also raise additional capital.Secondary FinancingSecondary Financing involves the sale of newly issued shares to investors by a company that has already gone through initial financing rounds.Secondary MarketThe Secondary Market is a market where investors buy and sell existing shares of a private company from each other, rather than from the company directly.Seed AcceleratorA Seed Accelerator is a program that provides startups with mentorship, resources, and sometimes capital, in exchange for equity, to accelerate their growth.Seed CapitalSeed Capital is initial funding used to begin developing a product or service, typically from personal savings, friends, or family.Seed RoundThe Seed Round is the initial funding stage aimed at getting a startup off the ground before it has generated any significant revenue.Seed StageThe Seed Stage is the early phase of a startup, typically characterized by developing the initial concept, product development, and seeking seed capital.Series A CrunchThe Series A Crunch refers to the difficulty startups may encounter in raising Series A funding after completing their seed round, often due to heightened investor expectations and the need for demonstrated traction and growth.Series A/B/C FundingSeries A/B/C Funding represents successive rounds of venture capital funding that a startup may secure after initial seed capital. Each round provides additional capital for growth and development, often in exchange for equity, and signifies advancing stages of a startup`s maturity.Shadow EquityShadow Equity is a form of incentive that mimics the benefits of owning equity in a company, such as profit sharing or performance bonuses, without granting actual equity shares. It`s often used to motivate and reward employees or consultants.Share AllocationShare Allocation is the process through which a company distributes its shares among investors, founders, and employees. This process is crucial during fundraising or compensation planning, establishing the ownership structure of the company.Share Conversion RightsShare Conversion Rights allow shareholders to convert their shares from one type (e.g., preferred) into another type (e.g., common), potentially at predetermined conditions or triggers, offering flexibility in investment terms.Share DilutionShare Dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. This often happens during new funding rounds, acquisitions, or when options and warrants are exercised.Share Option PoolThe Share Option Pool is a portion of a startup`s equity reserved for future issuance to employees, advisors, and consultants as part of their compensation. This pool is designed to align the interests of the team with the growth of the company.Share RegistryThe Share Registry is an official record of individuals and entities that own shares in a company. It tracks ownership changes, share issuances, and transfers, serving as a crucial document for corporate governance.Share VestingShare Vesting is the gradual granting of equity to employees over time, ensuring they remain committed to the company for a certain period. This mechanism helps startups retain talent by tying their rewards to the company`s long-term success.Shareholder Rights AgreementA Shareholder Rights Agreement outlines the rights and protections afforded to shareholders, including voting rights, dividend rights, and protections against dilution. This agreement aims to clarify and safeguard shareholders` interests.Shareholder Rights PlanA Shareholder Rights Plan, also known as a "poison pill," is a defense strategy against hostile takeovers. It allows existing shareholders to purchase additional shares at a discount if an acquirer surpasses a certain ownership threshold, diluting the acquirer`s stake.Shareholders` AgreementA Shareholders` Agreement is a contract among a company`s shareholders detailing the operation of the company and defining the shareholders` rights, duties, and obligations. It serves as a framework for managing shareholder relations and decision-making.Silent AcceleratorA Silent Accelerator offers support, resources, and possibly funding to startups without the publicity of demo days or extensive public engagement. It focuses on growth and development with a lower profile approach.Silent PartnerA Silent Partner invests capital in a business but does not take part in daily management or decision-making processes. They provide financial support while remaining in the background of the company`s operational activities.Single Purpose Vehicle (SPV)A Single Purpose Vehicle (SPV) is a separate legal entity created by a parent company to isolate financial risk, particularly used in securing investments or loans for specific projects. It helps manage risk and segregate assets from the main company.Social CapitalSocial Capital encompasses the networks, relationships, and reputation that a startup leverages to gain a competitive edge, secure funding, or establish strategic partnerships. It is a valuable, intangible asset in the business world.Social EntrepreneurshipSocial Entrepreneurship involves creating businesses and organizations with the primary goal of addressing social, cultural, or environmental challenges. These ventures seek to drive social change through innovative solutions and sustainable business models.Social Venture CapitalSocial Venture Capital is a subset of venture capital investing that aims to achieve both financial returns and positive social or environmental impacts. It supports startups that address societal challenges while seeking profitability.Soft CommitmentA Soft Commitment is an initial, non-binding expression of interest from an investor to fund a startup, subject to further evaluation, due diligence, and final agreement. It indicates potential financial support without firm obligations.Soft EquitySoft Equity refers to equity or equity-like rewards granted for non-monetary contributions to a startup, such as expertise, time, or network access. It`s akin to sweat equity but may involve different valuation and compensation mechanisms.Soft FundingSoft Funding consists of grants, subsidies, or other non-repayable financial support provided to startups, often by governmental or non-profit organizations. This type of funding supports early-stage development without financial repayment obligations.Soft LaunchA Soft Launch is the release of a new product or service to a limited audience or market segment before a wider, public launch. It allows startups to gather feedback, adjust offerings, and refine marketing strategies in a controlled environment.Soft LoanA Soft Loan offers favorable terms to the borrower, such as lower interest rates or longer repayment periods, often subsidized by governments or international organizations to support development projects or startups.SolvencySolvency refers to a startup`s ability to meet its long-term financial obligations, ensuring its capacity to continue operations, invest in growth, and withstand financial challenges over time.Special Purpose Acquisition Company (SPAC)A Special Purpose Acquisition Company (SPAC) is a publicly-traded company created specifically to acquire or merge with an existing company, facilitating that company`s transition to a public entity without a traditional IPO.