SAFE
Simple Agreement for Future Equity. A convertible instrument that converts to equity in a future priced round.
Knowledge base
Fundraising glossary
Plain-English definitions of the venture and fundraising terms you'll actually encounter.
ARR
Annual Recurring Revenue. Subscription revenue normalized to a one-year basis.
MRR
Monthly Recurring Revenue. Subscription revenue per month.
Pre-money valuation
The value of a company before new investment is added.
Post-money valuation
Pre-money valuation plus the new investment.
Dilution
Reduction in ownership percentage caused by issuing new shares.
Term sheet
Non-binding outline of the proposed terms of an investment.
Liquidation preference
The order and multiple in which investors are paid out in an exit.
Pro rata rights
An investor's right to maintain their ownership percentage in future rounds.
Cap table
A table showing all equity ownership in a company.
Runway
How many months a company can operate before running out of cash.
Burn rate
How much cash a company spends per month, net of revenue.
MOIC
Multiple on Invested Capital. Total value returned divided by capital invested.
IRR
Internal Rate of Return. The annualized return rate of an investment.
DPI
Distributions to Paid-in Capital. Cash returned to LPs vs. cash called.
TVPI
Total Value to Paid-in Capital. Realized + unrealized value vs. cash called.
LP
Limited Partner. An investor in a venture fund.
GP
General Partner. The manager of a venture fund.
Bridge round
A short-term financing between two larger rounds.
Down round
A new round at a lower valuation than the previous round.
Lead investor
The investor setting the terms and writing the largest check in a round.
Warm intro
An introduction made by a mutual, trusted contact.
Data room
A secure repository of diligence documents shared with prospective investors.
Vesting
The schedule on which founders or employees earn ownership of their shares.
Cliff
An initial period before any vesting occurs, typically 12 months.