Startup Glossary
The startup world is packed with buzzwords, complex jargon, and essential terms that every entrepreneur must understand. To cut through the noise, we’ve created a Startup Glossary featuring all the key terms you need to know to navigate the startup ecosystem.
Ecosystem and Networking
Here’s a detailed list for the Ecosystem and Networking category in a startup glossary:
1.Accelerator:
A program that provides startups with mentorship, resources, and often funding, in exchange for equity. Accelerators typically run for a few months and culminate in a Demo Day where startups pitch to investors.
2.Incubator:
An organization that supports startups in their early stages by providing workspace, mentorship, and resources. Unlike accelerators, incubators often do not have a fixed timeframe and may not offer funding in exchange for equity.
3.Startup Ecosystem:
The network of individuals, organizations, and resources that interact and work together to support the development and growth of startups. This includes founders, investors, mentors, accelerators, incubators, co-working spaces, and government entities.
4.Networking:
The process of building relationships with other professionals, entrepreneurs, investors, and advisors in order to gain support, knowledge, and opportunities for business growth.
5.Co-Working Space:
A shared workspace where entrepreneurs, freelancers, and startups can rent desks or offices. Co-working spaces often foster collaboration and networking opportunities among members.
6.Demo Day:
An event typically held at the end of an accelerator program where startups pitch their businesses to a room full of investors, industry experts, and the press. It’s an opportunity to gain funding, partnerships, and exposure.
7.Pitch Competition:
An event where startups present their business ideas to a panel of judges, often competing for prizes such as funding, mentorship, or resources. It’s a way to gain visibility, feedback, and validation for a business idea.
8.Mentorship:
Guidance provided by experienced entrepreneurs, investors, or industry experts to help startups navigate challenges, make decisions, and grow their business. Mentorship is a key component of many accelerators and incubators.
9.Demo Product:
A working model of a startup’s product that is used during pitches or Demo Days to showcase its features and capabilities. A demo product helps investors and customers understand the value proposition of the startup.
10.Community Building:
The process of creating a network of users, customers, or supporters around a startup or product. Strong community building can lead to increased brand loyalty, user feedback, and organic growth.
Compliance and Regulation
This category covers the legal and regulatory frameworks that startups must adhere to, ensuring that their operations align with industry standards, government regulations, and ethical practices. Understanding these terms is essential for avoiding legal pitfalls, protecting intellectual property, and maintaining a good standing in the market.
1. GDPR (General Data Protection Regulation)
A regulation enacted by the European Union that governs the protection and privacy of personal data. Startups that handle personal data of EU citizens must comply with GDPR or face significant penalties.
2. KYC (Know Your Customer)
A process by which businesses verify the identity of their clients to prevent fraud, money laundering, and other illegal activities. It’s a critical part of compliance for financial services and other sectors dealing with sensitive customer information.
3. HIPAA (Health Insurance Portability and Accountability Act)
A U.S. law designed to protect patient health information. Startups operating in the healthcare sector must ensure they comply with HIPAA to avoid legal issues and protect patient data.
4. AML (Anti-Money Laundering)
Laws and regulations that require companies, especially in the financial sector, to detect and prevent money laundering activities. Compliance with AML regulations is crucial for maintaining trust and avoiding legal consequences.
5. SOX (Sarbanes-Oxley Act)
A U.S. law that mandates strict financial reporting and auditing requirements for companies to protect shareholders and the public from accounting errors and fraudulent practices. Startups preparing for an IPO or interacting with public markets need to be aware of SOX compliance.
6. PCI DSS (Payment Card Industry Data Security Standard)
A set of security standards designed to ensure that all companies that accept, process, store, or transmit credit card information maintain a secure environment. Compliance with PCI DSS is critical for startups involved in e-commerce or handling online transactions.
7. FCPA (Foreign Corrupt Practices Act)
A U.S. law that prohibits companies from bribing foreign officials to obtain or retain business. Startups operating internationally must understand and comply with FCPA to avoid legal repercussions.
8. OFAC (Office of Foreign Assets Control)
A U.S. government agency that enforces economic and trade sanctions based on U.S. foreign policy and national security goals. Startups involved in international trade must comply with OFAC regulations to avoid penalties.
9. SEC Compliance
Refers to the requirements set by the U.S. Securities and Exchange Commission (SEC) that companies must follow, particularly if they are raising capital through securities offerings. Understanding SEC compliance is crucial for startups seeking investment through equity crowdfunding or preparing for an IPO.
Technology and Innovation
This category encompasses the key terms and concepts related to the development and implementation of technology within startups. Understanding these terms is essential for startups aiming to leverage technological advancements to innovate, scale, and stay competitive in the market.
1. Minimum Viable Product (MVP)
A version of a product with just enough features to be usable by early customers, who can then provide feedback for future development. MVP allows startups to test the market with minimal resources and validate their ideas before fully committing to product development.
2. Agile Methodology
A project management and product development approach that emphasizes flexibility, collaboration, and customer feedback. Agile methodology is often used in software development to deliver incremental improvements and adapt to changing requirements quickly.
3. Cloud Computing
The delivery of computing services, including storage, processing, and software, over the internet (the cloud). Cloud computing enables startups to scale resources on demand, reduce costs, and increase flexibility in managing IT infrastructure.
4. Blockchain
A decentralized digital ledger that records transactions across multiple computers in a way that ensures security, transparency, and immutability. Blockchain technology is often associated with cryptocurrencies but has applications across various industries.
5. Artificial Intelligence (AI)
The simulation of human intelligence processes by machines, especially computer systems. AI is used to perform tasks such as learning, reasoning, and problem-solving, and it powers innovations like chatbots, predictive analytics, and autonomous vehicles.
6. Machine Learning (ML)
A subset of AI that involves the development of algorithms and statistical models that enable computers to improve their performance on a task through experience. Machine learning is widely used for tasks like recommendation systems, fraud detection, and image recognition.
7. Internet of Things (IoT)
A network of physical objects—devices, vehicles, appliances—that are embedded with sensors, software, and other technologies to connect and exchange data with other devices over the internet. IoT enables smart homes, wearable technology, and industrial automation.
8. Big Data
Extremely large datasets that are analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions. Big Data analytics helps startups make data-driven decisions, optimize operations, and personalize customer experiences.
9. API (Application Programming Interface)
A set of protocols and tools for building and integrating software applications. APIs allow different software systems to communicate with each other, enabling startups to extend functionality, integrate third-party services, and accelerate development.
10. SaaS (Software as a Service)
A software distribution model in which applications are hosted by a service provider and made available to customers over the internet. SaaS allows startups to offer software solutions on a subscription basis, reducing the need for in-house IT management.
11. DevOps
A set of practices that combine software development (Dev) and IT operations (Ops) to shorten the development lifecycle and deliver high-quality software continuously. DevOps emphasizes collaboration, automation, and monitoring throughout the development process.
12. Virtual Reality (VR)
A technology that creates a simulated environment that can be similar to or completely different from the real world. VR is used in gaming, training, and immersive experiences, providing startups with opportunities to innovate in various sectors.
13. Augmented Reality (AR)
An enhanced version of the real world achieved through the use of digital visual elements, sounds, or other sensory stimuli delivered via technology. AR is commonly used in apps for smartphones and wearable devices, offering new ways for startups to engage users.
14. Intellectual Property (IP)
Legal rights that protect creations of the mind, such as inventions, designs, and trademarks. Understanding IP is crucial for startups to protect their innovations and maintain a competitive edge in the market.
15. Disruptive Technology
Innovations that significantly alter the way businesses or entire industries operate. Disruptive technologies often displace established products or services, creating new markets and value networks.
16. Open Source
Software for which the original source code is made freely available and may be redistributed and modified. Open source projects can accelerate innovation, reduce costs, and foster community collaboration.
17. Scalability
The ability of a system, network, or process to handle a growing amount of work or its potential to accommodate growth. Scalability is a critical consideration for startups as they expand their user base and operations.
18. Prototype
An early sample, model, or release of a product built to test a concept or process. Prototypes are used to refine ideas, gather user feedback, and demonstrate functionality before full-scale production or development.
19. User Experience (UX)
The overall experience a person has when interacting with a product, system, or service, especially in terms of how easy or pleasing it is to use. Good UX design is essential for startups to ensure customer satisfaction and retention.
20. Intellectual Property Rights (IPR)
The legal protections granted to the creators of IP, including patents, copyrights, trademarks, and trade secrets. Startups must understand and manage their IPR to safeguard their innovations and avoid legal disputes.
Operation and Management
This category covers the key terms and concepts related to the day-to-day functioning, oversight, and strategic direction of a startup. Understanding these terms is essential for managing resources efficiently, making informed decisions, and ensuring sustainable growth.
1. Key Performance Indicators (KPIs)
Specific, measurable values that indicate how effectively a company is achieving its key business objectives. KPIs are used by startups to track progress, assess performance, and make data-driven decisions.
2. Lean Startup
A methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable. It emphasizes testing hypotheses, iterative development, and customer feedback.
3. Operational Efficiency
The ratio of the output gained from a business operation to the input used to produce it. Improving operational efficiency means optimizing resources to produce goods or services at the lowest possible cost while maintaining quality.
4. Business Process
A series of steps performed by a group of stakeholders to achieve a concrete goal. Startups must define and optimize their business processes to ensure consistency, efficiency, and scalability.
5. Organizational Structure
The system used to define a hierarchy within an organization. It identifies each job, its function, and where it reports within the company. Startups often experiment with different structures as they grow, from flat to more hierarchical models.
6. Change Management
The approach to transitioning individuals, teams, and organizations to a desired future state. Effective change management is crucial for startups as they evolve, scale, and pivot in response to market demands.
7. Strategic Planning
The process of defining a company’s direction and making decisions on allocating resources to pursue this strategy. For startups, strategic planning involves setting long-term goals, analyzing competitive environments, and identifying growth opportunities.
8. Corporate Governance
The system of rules, practices, and processes by which a company is directed and controlled. Good corporate governance ensures accountability, fairness, and transparency in a startup’s relationship with its stakeholders.
9. Risk Management
The process of identifying, assessing, and controlling threats to an organization’s capital and earnings. For startups, this includes managing financial risks, legal liabilities, technology risks, and market uncertainties.
10. Supply Chain Management
The management of the flow of goods and services, including all processes that transform raw materials into final products. Efficient supply chain management helps startups reduce costs, increase speed to market, and maintain quality.
11. Talent Management
The process of recruiting, developing, retaining, and utilizing people with the required skills and aptitude to meet current and future business needs. For startups, talent management is crucial for building a strong, adaptable team.
12. Customer Relationship Management (CRM)
The practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle. CRM systems help startups improve customer service, increase sales, and retain customers.
13. Outsourcing
The practice of hiring external organizations to perform tasks or produce goods that could be handled internally. Startups often outsource non-core activities to reduce costs and focus on their core competencies.
14. Vendor Management
The process of controlling costs, driving service excellence, and mitigating risks to gain increased value from vendors throughout the deal life cycle. Effective vendor management is essential for startups relying on third-party services and suppliers.
15. Business Continuity Planning (BCP)
A plan to ensure that critical business functions continue during and after a disaster or unexpected interruption. For startups, a BCP helps mitigate risks and minimize the impact of disruptions on operations.
16. Benchmarking
The process of comparing a company’s performance metrics to industry bests or best practices from other companies. Startups use benchmarking to identify areas for improvement and measure their progress against competitors.
17. Total Quality Management (TQM)
An organization-wide approach to continuous improvement in all aspects of a company’s operations, with the goal of delivering high-quality products and services. TQM is particularly important for startups looking to establish a reputation for excellence.
18. Time Management
The process of planning and controlling how much time to spend on specific activities. Effective time management allows startup teams to prioritize tasks, meet deadlines, and increase productivity.
19. Delegation
The assignment of responsibility or authority to another person (typically a subordinate) to carry out specific activities. Delegation is critical in startups to ensure efficient task distribution and empower team members.
20. Performance Appraisal
A regular review of an employee’s job performance and overall contribution to a company. Startups use performance appraisals to provide feedback, identify development needs, and set goals for future performance.
Marketing and Sales
This category covers essential terms and concepts related to promoting and selling products or services. A solid understanding of these terms is crucial for startups aiming to grow their customer base, increase revenue, and build a strong brand presence.
1. Conversion Rate
The percentage of users or visitors who take a desired action, such as making a purchase, signing up for a newsletter, or filling out a form. Conversion rate is a key metric for measuring the effectiveness of marketing and sales efforts.
2. Customer Acquisition Cost (CAC)
The total cost associated with acquiring a new customer, including marketing, sales, and any related expenses. CAC is an important metric for assessing the efficiency of customer acquisition strategies.
3. Customer Lifetime Value (CLTV or LTV)
The total revenue a business can expect from a single customer over the course of their relationship. LTV helps companies understand the long-term value of their customer base and guides decisions on marketing spend and customer retention strategies.
4. Churn Rate
The percentage of customers who stop using a product or service over a given period. A high churn rate can indicate customer dissatisfaction and impacts revenue growth, making it a critical metric for subscription-based businesses.
5. Lead Generation
The process of attracting and converting strangers into potential customers, or leads. Lead generation is the first step in the sales funnel and involves various strategies like content marketing, social media, and email campaigns.
6. Sales Funnel
The visual representation of the customer journey, from the awareness stage to the final purchase. The sales funnel helps businesses understand where potential customers are in their decision-making process and how to move them towards conversion.
7. Return on Investment (ROI)
A measure of the profitability of an investment, calculated as the ratio of net profit to the cost of the investment. ROI is a key metric for evaluating the success of marketing campaigns and other business initiatives.
8. Brand Equity
The value that a brand adds to a product or service, often reflected in customer loyalty, perception, and willingness to pay a premium. Strong brand equity can lead to increased sales and competitive advantage.
9. Content Marketing
A strategy focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience. Content marketing aims to drive profitable customer action by educating and engaging the target market.
10. Pay-Per-Click (PPC)
A digital advertising model where advertisers pay a fee each time their ad is clicked. PPC is commonly used in search engine advertising (like Google Ads) and can drive targeted traffic to a website quickly.
11. Search Engine Optimization (SEO)
The process of optimizing a website to rank higher in search engine results pages (SERPs). SEO involves improving site content, structure, and technical aspects to increase visibility and attract organic traffic.
12. Market Segmentation
The process of dividing a broad target market into smaller, more defined groups based on shared characteristics, such as demographics, behavior, or needs. Market segmentation helps businesses tailor their products and marketing efforts to specific audiences.
13. Unique Selling Proposition (USP)
The specific benefit or feature that makes a product or service stand out from its competitors. A strong USP is crucial for differentiating a brand and persuading customers to choose it over alternatives.
14. Customer Retention
Strategies and activities designed to keep existing customers engaged and satisfied, reducing churn and increasing customer loyalty. Effective customer retention can lead to higher LTV and more stable revenue streams.
15. Inbound Marketing
A strategy that focuses on attracting customers through relevant and helpful content and interactions, rather than traditional outbound marketing methods like cold calling or ads. Inbound marketing aims to draw customers in by providing value at every stage of the buyer’s journey.
16. Outbound Marketing
Traditional marketing methods that involve pushing messages out to potential customers, such as TV ads, direct mail, cold calling, and email blasts. Outbound marketing is more interruptive compared to inbound marketing.
17. Sales Pipeline
A visual representation of the stages a prospect goes through as they move from lead to customer. The sales pipeline helps sales teams manage their workflow and prioritize activities to close deals more effectively.
18. Customer Relationship Management (CRM)
A system or software used to manage interactions with current and potential customers. CRM tools help businesses streamline processes, improve customer relationships, and increase sales.
19. Market Penetration
A strategy focused on increasing the market share of an existing product within an existing market. Market penetration involves tactics like price reductions, increased marketing efforts, or product improvements.
20. Value Proposition
A statement that explains how a product or service solves a problem or improves a situation for the customer and why it’s better than the competition. A strong value proposition is key to attracting and retaining customers.
21. TAM (Total Addressable Market)
The overall revenue opportunity available if a product or service captures 100% of its potential market.
22. SAM (Serviceable Available Market)
The segment of the TAM that your product or service can address, taking into account constraints like geography, business model, or technology.
23. SOM (Serviceable Obtainable Market)
The portion of the SAM that a company can realistically capture in the short to medium term often based on competition, resources, and capabilities.
Product Development
This category encompasses the terms and concepts related to the process of bringing a new product or service from an idea to the market. It includes stages like ideation, design, testing, and launch, and is critical for startups aiming to innovate and meet customer needs.
1. Minimum Viable Product (MVP)
The simplest version of a product that can be released to market, with just enough features to satisfy early customers and provide feedback for future development. An MVP allows startups to validate their product idea and make improvements before a full-scale launch.
2. Product Lifecycle
The stages a product goes through from its inception to its decline, typically including development, introduction, growth, maturity, and decline. Understanding the product lifecycle helps companies manage marketing strategies, product updates, and discontinuation plans.
3. Agile Development
A methodology for software and product development that emphasizes iterative progress, collaboration, and flexibility. Agile involves breaking projects into smaller tasks or sprints, allowing teams to adapt quickly to changes and continuously improve the product.
4. User Experience (UX)
The overall experience a person has when interacting with a product, including its usability, design, and emotional impact. Good UX is crucial for customer satisfaction and can significantly influence the success of a product.
5. Prototyping
The process of creating an early sample or model of a product to test and refine its features and design. Prototypes help teams identify potential issues and gather user feedback before moving into full production.
6. Product-Market Fit
The degree to which a product satisfies a strong market demand. Achieving product-market fit means that a product has successfully met the needs of its target audience, leading to sustainable growth and profitability.
7. Iteration
The process of making repeated improvements or refinements to a product based on testing, feedback, and analysis. Iteration is a key component of agile development, allowing teams to evolve a product over time.
8. Roadmap
A strategic plan that outlines the vision, direction, and progress of a product over time. A product roadmap typically includes key milestones, features, and timelines, helping align teams and stakeholders on the development process.
9. User Stories
Short, simple descriptions of a feature or functionality from the perspective of the end user. User stories are used in agile development to capture customer requirements and guide the development process.
10. Beta Testing
The phase of product development where a nearly complete product is released to a select group of users outside the company for real-world testing. Beta testing helps identify bugs, usability issues, and other improvements before the final launch.
Financial Terms
This category includes key concepts and terminology related to the financial management and operations of a startup. Understanding these terms is essential for effective financial planning, fundraising, and maintaining the financial health of a company.
1. Burn Rate
The rate at which a company spends its cash reserves to cover operating expenses before generating positive cash flow. Burn rate is critical for startups to monitor, as it determines how long they can operate before needing additional funding.
2. Cash Flow
The total amount of money being transferred into and out of a business, especially as affecting liquidity. Positive cash flow indicates that a company has more money coming in than going out, which is essential for sustaining operations.
3. Gross Margin
The difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue. Gross margin is a key indicator of a company’s financial health and profitability, showing how much profit is made from each dollar of sales.
4. Runway
The amount of time a startup can operate before it runs out of cash, based on its burn rate. A longer runway gives startups more time to achieve key milestones or secure additional funding.
5. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
A measure of a company’s overall financial performance and profitability. EBITDA provides an indication of earnings that excludes non-operating expenses and non-cash charges, offering a clearer picture of operating profitability.
6. Valuation
The process of determining the current worth of a company. Valuation is critical during fundraising rounds, mergers, acquisitions, and for determining equity shares. It can be based on factors such as revenue, market conditions, and growth potential.
7. Capital Expenditure (CapEx)
Funds used by a company to acquire, upgrade, or maintain physical assets such as property, industrial buildings, or equipment. CapEx is important for long-term growth and development but can impact cash flow.
8. Revenue Model
A framework for generating income. It identifies the specific ways a startup plans to make money, whether through direct sales, subscription fees, licensing, advertising, or other methods.
9. Bootstrapping
Starting and growing a company with minimal external funding, relying instead on personal finances and revenue generated by the business. Bootstrapping requires careful financial management and is common in the early stages of a startup.
10. Profit and Loss Statement (P&L)
A financial report summarizing the revenues, costs, and expenses incurred during a specific period, usually a fiscal quarter or year. The P&L statement shows whether a company is profitable and is used to assess financial performance.
11. Gross Revenue
The total revenue generated by a business before any expenses, taxes, or costs are deducted. Gross revenue is a key indicator of a company’s ability to generate sales.
12. Net Revenue
The revenue that remains after all deductions, such as discounts, returns, and allowances, have been subtracted from gross revenue. Net revenue provides a more accurate picture of a company’s true earnings from sales.
13. Equity Financing
Raising capital by selling shares of the company to investors. Equity financing dilutes ownership but does not require repayment, making it an attractive option for startups seeking to raise funds without incurring debt.
14. Debt Financing
Raising capital through borrowing, typically via loans or bonds. Debt financing must be repaid with interest, but it allows founders to retain full ownership of their company.
15. Working Capital
The difference between a company’s current assets and current liabilities. Working capital is a measure of a company’s short-term financial health and its ability to cover day-to-day operations.
Funding and Investment
This category encompasses the various financial mechanisms, terms, and strategies involved in raising capital for startups. Understanding these terms is essential for entrepreneurs looking to secure funding, manage investor relationships, and strategically grow their businesses.
1. Seed Funding
The initial capital raised by a startup to support early-stage development, often used for product development, market research, and building a minimum viable product (MVP). Seed funding typically comes from personal savings, friends and family, angel investors, or seed-stage venture capital firms.
2. Series A, B, C Funding
Refers to successive rounds of investment that a startup raises after seed funding, typically from venture capital firms. Series A funding is often used to scale the business, Series B for further growth and market expansion, and Series C for scaling operations, entering new markets, or preparing for an IPO.
3. Venture Capital (VC)
A form of private equity investment where venture capital firms provide funding to startups and small businesses with high growth potential in exchange for equity. VCs often bring valuable expertise, networks, and resources to help startups succeed.
4. Angel Investor
An individual who provides capital to early-stage startups in exchange for equity or convertible debt. Angel investors often invest their own money and may also offer mentorship and advice to the startup’s founders.
5. Convertible Note
A form of short-term debt that converts into equity, typically in conjunction with a future financing round. Startups use convertible notes to raise funds without immediately setting a valuation on the company.
6. Term Sheet
A non-binding agreement that outlines the key terms and conditions of an investment deal between a startup and investors. It includes details on valuation, ownership structure, governance rights, and the type of security being issued.
7. Cap Table (Capitalization Table)
A table that outlines the ownership stakes in a company, detailing the percentages of equity owned by founders, investors, employees, and other stakeholders. The cap table is crucial for understanding the dilution of ownership after each funding round.
8. Equity Crowdfunding
A method of raising capital where startups offer equity to a large number of investors through an online platform. This allows startups to raise funds from the public, not just accredited investors, and can be an alternative to traditional venture capital.
9. SAFE (Simple Agreement for Future Equity)
An investment contract used by startups to raise early-stage funding. SAFEs convert into equity at a future date, typically when the startup raises a priced round of financing. SAFEs are popular in seed funding rounds due to their simplicity and flexibility.
10. Dilution
The reduction in the ownership percentage of existing shareholders due to the issuance of new equity. Dilution occurs during fundraising rounds when new shares are issued to investors, and it’s an important consideration for founders as they raise capital.
Legal Terms
Here’s a list of common legal terms that are often included in a startup glossary:
1. Articles of Incorporation:
The legal document that establishes a corporation and defines its structure, including its purpose, board of directors, and share structure.
2. Bylaws:
The rules and regulations that govern the internal management of a corporation, including how meetings are conducted and the roles of officers.
3. Cap Table (Capitalization Table):
A table that shows the ownership stakes in a company, including equity shares, preferred shares, and convertible securities.
4. Convertible Note:
A type of short-term debt that converts into equity, typically during a future financing round.
5. Dilution:
The reduction in ownership percentage of existing shareholders due to the issuance of new shares.
6. Equity:
Ownership in a company, represented by shares of stock.
7. Founders’ Agreement:
A contract among the founding members of a startup that outlines their rights, responsibilities, and ownership stakes.
8. Intellectual Property (IP):
Legal rights to inventions, designs, software, trademarks, and other creations of the mind.
9. Non-Disclosure Agreement (NDA):
A legal contract that protects confidential information shared between parties.
10. Option Pool:
A reserved portion of a startup’s equity set aside to incentivize employees, advisors, or contractors.
11. Preferred Stock:
A class of stock that has preferential rights over common stock, often in terms of dividends and liquidation.
12. Term Sheet:
A non-binding document that outlines the key terms and conditions of a proposed investment.
13. Vesting Schedule:
The timeline over which founders or employees earn their equity shares in a company.
14. Cliff:
A period in a vesting schedule during which equity does not vest; typically, if an employee leaves before the cliff period ends, they receive no equity.
15. Drag-Along Rights:
A provision that allows majority shareholders to force minority shareholders to join in the sale of a company.
16. Liquidation Preference:
A clause that determines the order and amount of payments to investors in the event of a liquidation event, such as a sale or bankruptcy.
17. Due Diligence:
Investigating a company’s business, legal, and financial aspects before entering into a transaction.
18. SAFE (Simple Agreement for Future Equity):
A financing contract that gives investors the right to purchase equity in the future, often during the next funding round.
19. Pro Rata Rights:
The right of existing investors to maintain their ownership percentage by participating in future funding rounds.
20. Accredited Investor:
A person or entity that meets certain financial criteria and is legally allowed to invest in private securities offerings.
21. Term Sheet:
A document that outlines the general terms and conditions of an investment, usually non-binding.
22. Warrant:
A security that grants the holder the right to purchase shares of a company at a specific price before a certain date.
23. Employment Agreement:
A contract outlining the terms of employment, including salary, benefits, and job responsibilities.
24. Lock-Up Period:
A period following an IPO during which company insiders are restricted from selling their shares.
25. Indemnification:
A provision that protects one party from liabilities or damages caused by another party’s actions.
