The bootstrapping and fundraising stage is where startups attract investment and begin to scale. Successful startups approach investors with a well-organized pitch and a thorough understanding of the investment process. These startups understand what makes their product remarkable and use their raised funds in pragmatic and thoughtful ways.
Hungry for more startup terms? Take a look at all ten sections of our Startup Glossary.
Startup Bootstrapping and Fundraising
Accelerator - Fixed-term programs that provide mentorship, valuable advice, and training for entrepreneurs. Oftentimes, these programs culminate in a pitch event.
Accredited Investor - An individual who meets the legal requirements for investment in a business venture. (see more)
Accrued Interest - The interest accrued on a debt or asset since the most recent interest payment was made.
Advisory Board - A group of external advisors who provide strategic advice. (see Creating a Startup Pitch Deck? Start with this Easy-to-Use Template to learn more)
Amortization - The scheduled process of gradually paying off a debt.
Angel Fund - A group of angel investors who work together and coordinate in the investment process.
Angel Investor - Individual who provides capital for startups in exchange for either debt or equity. (see What is an Angel Investor?)
Angel Round - Funding round dedicated to attracting angel investors.
Anti-Dilution Agreement - A legal agreement ensuring that if further investments are made into a company or a sale occurs, the investor’s shares are not diluted. This is primarily performed to protect the interests of early investors.
Bridge Financing - Short-term financing that is expected to be repaid quickly. (see Startups Can’t Borrow Their Way to Success, by Adeo Ressi)
Board of Directors - A group of individuals who have been elected by stockholders and chosen to oversee a company’s affairs. Oftentimes, investors request a board seat in exchange for a startup investment.
Bootstrapping - Starting a business without external help or investment. (see The Pros and Cons of Bootstrapping for more info)
Buyout - A common exit strategy in which a company’s shares are purchased, granting the purchaser a controlling interest in the company.
Capitalization Table - A table displaying the total amount of securities issued by a company, along with details of the ownership of these securities.
Capital Gain - The difference between the purchase price and selling price of a given asset.
Capital Under Management - The amount of capital available to a management team for venture capital investment.
Carried Interest or "Carry" - The portion of investment gains to which fund managers are entitled without contributing their own capital.
Capped Notes - This refers to the practice during investment rounds where a cap is placed on a company’s valuation.
Closing - The final stage in the investment process, where legal documents are signed and an investment becomes official.
Convertible Debt/Equity - Investments designed to turn into equity at a future point in time, when a company is first valued. This is a useful method for young companies to attract investment prior to valuation.
Crowdfunding - The process of generating money to fund a business via many individual donors across an online platform. (see Crowdfunding Checklist: 10 Steps To Launching A Successful Campaign)
Deal Flow - The rate at which investment opportunities are introduced to a funding institution.
Deal Room - Central location where investment pitches and negotiations take place.
Debt Financing - Money-raising tactic in which a company sells bonds or notes to an investor with the assumption that they will be re-purchased with interest. (see 7 Ways Entrepreneurs Can Avoid Financial Instability)
Due Diligence - An analysis made by an investor based on the facts and information about a company or product prior to investment.
Early Stage - The earliest stage of the three main startup phases. These are fledgling companies that are often pre-valuation.
Entrepreneur in Residence (EIR) - An experienced entrepreneur who is employed by a venture capital firm and plays an advisory role.
Equity Financing - Money-raising tactic where investment is provided in exchange for a portion of ownership over the company.
Exploding Offer - An investment offer that is retracted if it not accepted after a short time period.
First Refusal - Clause that requires investors and founders to offer their shares to an existing early investor before selling to a third party.
Full-Ratchet - A provision intended to protect investors, preventing extreme dilution of equity/shares.
Fund of Funds - A mutual fund that invests into other mutual funds.
Golden Handcuffs - Benefits or delayed payments offered by a company in order to prevent an employee’s departure.
Golden Parachute - A large compensation or lump payment for the dismissal of an executive, often occurring in the aftermath of a takeover.
Incubator - A company or facility designed to aid entrepreneurs via shared resources, education, expertise, and intellectual capital. (see 8 Important Lessons You Can Learn from an Incubator)
Late Stage - A startup company that has been in existence for a noteworthy period of time and has proven to have a viable product and business model.
Lead Investor - Member of an investment syndicate who holds the largest stake in a given company. Oftentimes, the lead investor is a startup’s principal provider of capital. (see How To Secure A Lead Investor)
Leveraged Buyout - When a person or group of people take on debt in order to buy out the remaining shares of a company and achieve ownership.
Liquidation - The process of turning securities into cash, often as part of an exit strategy.
Liquidity Event - An event that allows venture capital firms realize their gains or losses by liquidating equity in a company.
Limited Partner (LP) - An investor with little control over the management of a partnership or a portfolio company, in exchange for less restrictions on liquidation.
Liquidation Preference - The right to receive a specific monetary value in exchange for equity, especially in the event of a company dissolving.
Management Buyout (MBO) - Funds provided for a management team to acquire a product or business.
Pre-Emptive Right - A clause in an investment agreement that grants investors the right to maintain the same percentage of equity after restructuring.
Post-Money Valuation - The value of a company, determined after an investment has been made.
Pre-Accelerator - Program that offers advice for companies that have not yet entered an accelerator.
Pre-Money Valuation - The value of a company, determined before an investment has been made.
Pre-Sales - A product for which customers have dedicated money and made purchases before the product has actually been shipped. Sometimes, pre-sales take place before products have been produced or finalized.
Preferred Stock - A stock that carries a fixed dividend and takes sale-order priority over other forms of stock.
Principal - The total value of the original sum invested.
Promissory Note - A legal document detailing the amount of debt owed along with an obligatory repayment plan.
Pro-Rata - Division of stocks or equity based on equal proportions.
Recapitalization - A corporate reorganization of capital structure by changing the mix of equity and debt.
Secondary Public Offering - When a company presents stock for sale to the public after an IPO.
Secondary Purchase - The act of purchasing stock from a shareholder rather than from the company itself.
Securities - All types of equity or debt.
Seed Round - The first round of financing for a startup. Usually funds raised in the seed round are intended to be spent on producing a prototype or proof of concept.
Seed Stage - The stage of a startup where profitability is extremely unlikely and seed funds are required to gain customer insights.
Series A - The first major round of venture capital funding wherein preferred stock is issued.
Series B/C/D/E - Later rounds where preferred stock is issued.
Share Consent - A legal clause requiring an investor’s consent in order for a business to sell shares at a later date.
Statutory Voting - A voting method for a Board of Directors in which a board member receives 1 vote for each share they own.
Stock Options - The right to sell or purchase stock for a set price during a pre-defined period of time. (see How Tech Startups Can Recruit And Keep Awesome Employees)
Strategic Investors - Investors who add value to their investments via industry ties or experience.
Syndication - The venture capital practice of each individual investor contributing a small portion of money required to fund a company.
Tag-Along Rights - Agreed stipulation stating that if a founder decides to sell their shares to a buyer, an existing investor can offer their shares to the buyer for the same amount.
Term Sheet - A non-binding agree designed to provide a layout of the basic terms and conditions of an investment. Term sheets are often used as templates for later legal documents.
Uncapped Notes - A funding practice designed to protect founders. Uncapped notes provide no guarantee that investors will be granted a specific amount of equity per dollar invested.
Underwriter - An investment bank with a contractual obligation to take any securities into their own books if the company in which they are vested has failed.
Valuation - The process by which a company’s value is determined.
Venture Capitalist - An individual investor who works at a venture capital firm and makes investment decisions. (see
What is Venture Capital? to learn more)
Vesting - The act of a company granting stock options to an employee.
Voting Right - A stockholder's right to vote on matters of corporate management.
Warrant - The right to buy or sell a given security at a certain price during a specified period.
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