Glossary
Venture and diligence terms, defined plainly
Plain definitions of the venture, screening, diligence and data protection terms that come up when a fund reviews founders.
31 pages
- Investment thesisA fund's written statement of what it backs and why, used to screen deals consistently.Read more
- Deal flowThe stream of investment opportunities a fund sees, and the pipeline it moves through.Read more
- Due diligenceThe checking a fund does before it invests: claims, documents, customers, legal and the cap table.Read more
- Data roomThe secure set of documents a startup shares with investors for due diligence.Read more
- SAFE note (simple agreement for future equity)A contract for shares at a later priced round, with a valuation cap, a discount or both.Read more
- TAM SAM SOMTotal, serviceable and obtainable market: three sizes on most pitch deck market slides.Read more
- Investment committeeThe group that makes a fund's final investment decision, and how its meetings run.Read more
- Investment memoThe written case for or against one investment, prepared for the decision makers.Read more
- Term sheetThe short outline of a proposed investment's terms, signed before the legal documents.Read more
- Pre-seed fundingThe earliest outside funding round, usually on SAFEs or notes, before much traction exists.Read more
- Seed roundA startup's first significant outside funding, used to reach product-market fit.Read more
- Cap tableThe record of who owns what in a company, before and after a round.Read more
- Equity dilutionHow issuing new shares reduces existing holders' percentages, with the formula.Read more
- Pro rata rightsAn investor's right to buy into future rounds to keep its ownership percentage.Read more
- Convertible noteA loan to a startup that converts into shares at a later priced round.Read more
- Lead investorThe investor that sets a round's terms and does the main diligence.Read more
- Angel syndicateIndividual investors backing startups together behind a lead angel, deal by deal.Read more
- Corporate venture capitalAn established company investing in outside startups for strategic and financial reasons.Read more
- Venture capital scout programFounders and operators finding or backing early startups on a fund's behalf.Read more
- MRR (monthly recurring revenue)The predictable subscription revenue a company expects each month, and how to check it.Read more
- ARR (annual recurring revenue)The yearly value of a company's recurring contracts, and the definitions to check.Read more
- Net revenue retentionHow much recurring revenue a company keeps and grows from existing customers.Read more
- Burn multipleNet burn divided by net new ARR: the cash spent to add each dollar of recurring revenue.Read more
- CAC payback periodThe months a company needs to earn back the cost of winning a customer.Read more
- Thesis fitHow well a startup matches a fund's thesis, assessed criterion by criterion.Read more
- Founder-market fitHow well a team's experience, insight and access suit the market it targets.Read more
- Data controller and processorWho decides why personal data is used, and who processes it on their behalf, under GDPR and DPDP.Read more
- Deal sourcing in venture capitalThe work a fund does to find investment opportunities, and how to track it.Read more
- Follow-on investmentMoney a fund puts into a company it already backs, in a later round.Read more
- Fundraising pipelineThe investors a founder is approaching for a round, each at a stage with a next step.Read more
- Closing checklist (funding round)Every step between agreed terms and money received in a funding round, with an owner for each.Read more
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