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Startup Glossary – Pre Launch stage and Early Stage Funding

Compiled by Karthikeyani M., Associate – Incubation at SSN iFound

Pre-Launch Stage of Startup

  1. Founder’s Agreement: A legal document outlining the roles, responsibilities, and equity distribution among startup founders.
  2. Pre-Seed Stage: The earliest stage of funding when you’re seeking initial capital to take your startup from concept to development.
  3. Due Diligence: The process of investigating and assessing the potential risks and benefits of an investment, often conducted by investors before funding.
  4. Convertible Note: A type of short-term debt that can convert into equity in the future, often used in early-stage fundraising.
  5. Cap Table (Capitalization Table): A document that outlines the ownership and equity structure of your startup, including investors, founders, and employees.
  6. Pre-Money Valuation: The estimated value of your startup before it receives external funding.
  7. Post-Money Valuation: The estimated value of your startup after external funding has been added.
  8. Lead Investor: The primary investor who negotiates terms and often provides the largest portion of the funding in a round.
  9. Convertible Debt: A type of financing where a startup borrows money with the understanding that it will be converted into equity in the future.
  10. Equity Stake: The percentage of ownership in a startup that an investor receives in exchange for their investment.

Early-Stage Funding

  1. Accredited Investor: An individual or entity that meets specific financial criteria and is allowed to invest in private securities offerings.
  2. Bridge Loan: A short-term loan used to provide financing until more permanent funding can be secured.
  3. Burn Rate: The rate at which a company uses its cash reserves to cover operating expenses before generating positive cash flow.
  4. Convertible Equity: A form of investment where investors receive equity in the company, typically in a later stage of fundraising.
  5. Convertible Loan Agreement: A short-term debt that can be converted into equity at a later date, often used in early-stage funding rounds.
  6. Crowdfunding: Raising small amounts of money from a large number of people, typically via online platforms, to fund a startup or project.
  7. Deal Flow: The rate at which investment opportunities, such as startups seeking funding, flow through an investor’s network.
  8. Dilution: The reduction in the ownership percentage of existing shareholders when additional shares are issued, often due to new investment rounds.
  9. Down Round: A funding round in which a company’s valuation is lower than the previous round, resulting in a lower share price for existing investors.
  10. Equity Financing: Raising funds by selling shares or equity in the company to investors, diluting the ownership of existing shareholders.
  11. Initial Public Offering (IPO): The first sale of a company’s shares to the public, allowing it to be traded on a stock exchange.
  12. Liquidity Event: A situation where startup investors can cash out their investments, such as through an acquisition or IPO.
  13. Private Equity: Investments made in private companies, often involving venture capital and buyout firms.
  14. Runway: The period of time a startup can operate before running out of funds, based on its current burn rate and available cash.
  15. Series A Funding: The first significant round of funding after the seed stage. It is used to scale the business, expand operations, and grow the customer base.
  16. Term Sheet: A document outlining the key terms and conditions of an investment deal between a startup and investors.
  17. Valuation: The estimated monetary value of a startup, used to determine the price per share during fundraising.
  18. Vesting: A process by which founders and employees earn ownership of their shares over time, often to incentivize long-term commitment to the startup.
  19. Working Capital: The capital used by a company to cover its day-to-day operational expenses.
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