Common terms Every Founder trying to fundraise should know
1. MVP (Minimum Viable Product) - The simplest version of a product built with just enough features to test demand and gather user feedback.
2. Data Room - A secure folder containing company documents investors review before investing.
3. Pre-Seed Round - The earliest fundraising stage used to validate an idea and build an initial product.
4. Seed Round - Early-stage funding used to grow the team, product, and customer base after initial validation.
5. Angel Investor - A wealthy individual who invests personal money into startups, usually at an early stage.
6. Venture Capital (VC) - Professional investment firms that invest in high-growth startups in exchange for equity.
7. Due Diligence - The process where investors verify a startup’s financials, legal status, team, and business model before investing.
8. Term Sheet - A non-binding document outlining the key terms and conditions of a proposed investment.
9. Cap Table (Capitalization Table) - A record showing who owns what percentage of a company, including founders, employees, and investors.
10. Burn Rate - The amount of money a startup spends each month.
11. Runway - The number of months a company can operate before running out of cash.
12. TAM (Total Addressable Market) - The total revenue opportunity if you captured 100% of the market.
13. SAM (Serviceable Available Market) - The portion of the TAM your product can realistically serve.
14. SOM (Serviceable Obtainable Market) - The market share you can realistically capture in the near term.
15. Valuation - The estimated worth of a company at a specific point in time.
16. Pre-Money Valuation - The company’s valuation immediately before new investment capital is added.
17. Post-Money Valuation - The company’s valuation immediately after an investment is made.
18. Dilution - The reduction in an existing shareholder’s ownership percentage after new shares are issued.
19. MRR (Monthly Recurring Revenue) - Predictable revenue generated every month from subscriptions or recurring customers.
20. ARR (Annual Recurring Revenue) - The yearly equivalent of recurring revenue, typically ARR = MRR × 12.
21. Traction - Evidence that customers want your product, usually shown through growth in users, revenue, or transactions.
22. LTV (Lifetime Value) - The total revenue or profit expected from a customer throughout their relationship with the company.
23. Acquisition - When one company purchases another company.