Fundraising Glossary
Plain-English definitions of the terms you will meet in a round, each with an example.
66 terms
- Accelerator
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A fixed-length programme that gives startups mentoring, a network and usually a small investment in exchange for equity.
Example: A three-month programme investing €100k for 7% and ending with a demo day.
- Angel investor
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An individual who invests their own money in early-stage companies, often with operating experience in the sector.
Example: A former SaaS founder writes a €25k cheque into your pre-seed round.
- Anti-dilution
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A clause protecting investors if a later round is priced lower than theirs, by adjusting their conversion price.
Example: After a down round, a broad-based weighted-average clause gives seed investors some extra shares.
- ARPU
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Average revenue per user (or account) over a period, usually monthly.
Example: €30k MRR across 250 customers = €120 ARPU.
- ARR
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Annual recurring revenue: the yearly value of active subscription contracts, excluding one-off fees.
Example: 100 customers paying €200 a month = €240k ARR.
- Board of directors
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The group that oversees the company and approves major decisions; investors often take a seat after leading a round.
Example: After seed, the board has two founders and one investor.
- Bridge round
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A small round, often convertible, that extends runway until a larger priced round.
Example: Existing investors put in €300k on a convertible note to reach Series A metrics.
- Burn multiple
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Net burn divided by net new ARR in the same period; a measure of how efficiently a company grows.
Example: Burning €1.2M to add €600k ARR gives a burn multiple of 2.
- Burn rate
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How much cash a company spends per month. Gross burn is total spending; net burn subtracts incoming cash.
Example: €60k expenses and €15k revenue = €45k net burn.
- CAC
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Customer acquisition cost: sales and marketing spend divided by new customers won.
Example: €30k spend for 60 customers = €500 CAC.
- CAC payback
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Months of gross margin needed to recover the cost of acquiring a customer.
Example: €600 CAC and €90 monthly gross margin per customer = about 6.7 months.
- Cap table
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A table listing who owns which shares, options and convertibles in a company.
Example: Founders 70%, option pool 10%, seed investors 20%.
- Carried interest
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The share of fund profits (typically 20%) that VC partners receive after returning investors’ capital.
Example: A €50M fund returning €150M pays roughly €20M carry to the partners.
- Churn
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The share of customers or revenue lost in a period.
Example: Losing 6 of 200 customers in a month = 3% monthly churn.
- Cliff
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The initial period before any vesting happens; leaving before it means losing unvested shares.
Example: With a one-year cliff, a co-founder who leaves after 10 months keeps nothing.
- Convertible note
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A loan that converts into equity at a later round, usually with a cap and discount, and accrues interest.
Example: A €200k note with 5% interest converts at Series A at a 20% discount.
- Data room
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An organised online folder of documents investors review during due diligence.
Example: Folders for corporate documents, financials, contracts, IP and team.
- Deck
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Your pitch presentation, usually 10–15 slides, sent ahead of or shown during investor meetings.
Example: A send-ahead deck with more detail than the one you present live.
- Dilution
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The reduction of existing shareholders’ percentage when new shares are issued.
Example: Selling 20% in a round turns a founder’s 50% into 40%.
- Down round
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A round priced at a lower valuation than the previous one.
Example: Series A at €20M pre after a seed at €25M post.
- Drag-along
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A right that lets a majority of shareholders force the minority to join in a sale of the company.
Example: Holders of 75% agree to sell; drag-along obliges the remaining 25% to sell too.
- Due diligence
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The investor’s verification of your company before closing: legal, financial, technical and commercial.
Example: The lawyer checks that all IP was assigned to the company.
- EISEurope
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Enterprise Investment Scheme: UK tax relief for individuals investing in qualifying companies, up to higher limits than SEIS.
Example: A UK angel claims 30% income tax relief on a £100k EIS investment.
- ESOP
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Employee share option plan: options reserved for team members, usually 10–15% of the company.
Example: A senior engineer receives options over 0.5%, vesting over four years.
- Estonian OÜEurope
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A private limited company in Estonia, popular with founders via e-Residency for fully online administration.
Example: A Slovak team incorporates an OÜ to raise from investors who prefer its simple corporate law.
- EU grants vs equityEurope
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Grants (e.g. Horizon Europe, EIC Accelerator, national programmes) give non-dilutive money with reporting obligations; equity gives flexible money for ownership.
Example: A deep-tech startup combines a €2.5M EIC grant with an equity component and a seed round.
- Exit
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The event where investors and founders turn their shares into cash: an acquisition or IPO.
Example: A trade sale to a larger competitor after seven years.
- Follow-on
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An investor investing again in a later round of a company already in their portfolio.
Example: The seed fund reserves capital to follow on at Series A.
- Founder vesting
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Founder shares that are earned over time, protecting the company if a founder leaves.
Example: Four years with a one-year cliff, monthly thereafter.
- Fully diluted
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Share count including all options, warrants and convertibles as if they were exercised or converted.
Example: 1M issued shares plus 150k options = 1.15M fully diluted.
- Gross margin
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Revenue minus direct cost of delivering it, as a percentage of revenue.
Example: €100k revenue, €25k hosting and support = 75% gross margin.
- IRR
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Internal rate of return: the annualised return of an investment, accounting for time.
Example: 3× over five years ≈ 25% IRR.
- j.s.a.Europe
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Jednoduchá spoločnosť na akcie — Slovakia’s simple joint-stock company, built for startups, allowing share classes and easier investor entry.
Example: A Bratislava startup converts from s.r.o. to j.s.a. before its seed round.
- Lead investor
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The investor who sets the terms of a round, usually takes the largest part and does most of the due diligence.
Example: The lead takes €600k of a €1M round; angels follow with the rest.
- Liquidation preference
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The right of investors to get their money (or a multiple) back before other shareholders in an exit.
Example: A 1× non-participating preference on €2M means investors receive the first €2M or convert, whichever is better.
- LP
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Limited partner: an investor in a VC fund, such as a pension fund, family office or public fund-of-funds.
Example: The European Investment Fund is an LP in many European VC funds.
- LTV
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Customer lifetime value: the gross profit a customer generates before churning.
Example: €120 ARPU × 75% margin ÷ 3% churn = €3,000.
- LTV:CAC
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The ratio of lifetime value to acquisition cost; 3:1 or better is considered healthy.
Example: €3,000 LTV and €600 CAC = 5:1.
- Milestone
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A measurable achievement the round is meant to fund, which makes the next round possible.
Example: €1M ARR and a repeatable sales motion in two countries.
- MOIC
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Multiple on invested capital: total value returned divided by amount invested.
Example: €100k becoming €1.2M is a 12× MOIC.
- MRR
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Monthly recurring revenue from active subscriptions.
Example: 200 customers on €150/month = €30k MRR.
- Net revenue retention
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Revenue this year from last year’s customers, divided by their revenue last year, including expansion and churn.
Example: 115% NRR means existing customers grew revenue by 15% net.
- Option pool shuffle
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Creating or enlarging the option pool inside the pre-money valuation, so it dilutes only existing shareholders.
Example: A €4M pre-money including a new 10% pool effectively values the existing company lower.
- Pitch deck
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See Deck.
Example: Problem, solution, market, traction, team, business model, ask.
- Post-money valuation
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Company value immediately after the investment: pre-money plus new money.
Example: €2M pre + €500k = €2.5M post.
- Pre-emption right
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An existing investor’s right to invest in future rounds to maintain their percentage.
Example: A 10% holder may buy 10% of the shares issued in the next round.
- Pre-money valuation
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Company value immediately before the investment.
Example: Investors offer €500k at €2M pre-money.
- Pre-seed
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The earliest institutional round, often before product-market fit, funded by angels, accelerators and pre-seed funds.
Example: €300k from angels and an accelerator to build an MVP and land pilots.
- Priced round
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A round where shares are issued at an agreed price per share, as opposed to convertible instruments.
Example: Seed round at €2.5M pre-money, €1.25 per share.
- Pro rata
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An investor’s right to keep their percentage by investing proportionally in later rounds.
Example: Owning 8%, the investor may take 8% of the Series A.
- Runway
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Months until the company runs out of cash at its current burn.
Example: €400k cash ÷ €50k net burn = 8 months.
- s.r.o.Europe
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Spoločnosť s ručením obmedzeným — the Slovak (and Czech) limited liability company. Common and simple, but less flexible for investor rounds than a j.s.a.
Example: Adding an investor to an s.r.o. requires a notarised change of the memorandum and registry update.
- SAFE
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Simple Agreement for Future Equity: a right to receive shares in a later priced round, usually with a valuation cap and/or discount and no interest.
Example: A €150k SAFE with a €3M cap converts at the cap if Series A is priced higher.
- Scorecard method
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A valuation method that adjusts a regional average pre-money valuation by weighted comparison factors.
Example: A team scored 150% vs average raises the valuation by 15%.
- Secondary
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The sale of existing shares (from founders, employees or early investors) rather than new shares from the company.
Example: At Series B a founder sells 3% of her shares to a new investor.
- Seed round
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The first significant round, typically to prove product-market fit and a repeatable growth engine.
Example: €1.5M led by a seed fund to reach €1M ARR.
- SEISEurope
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Seed Enterprise Investment Scheme: UK tax relief for individuals investing in very early companies, with higher relief rates than EIS.
Example: A UK angel claims 50% income tax relief on a SEIS-eligible investment.
- Series A
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The first large institutional round after seed, usually to scale a proven model.
Example: €8M to expand from two markets to six.
- Syndicate
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A group of angels investing together, often led by one experienced angel.
Example: Twelve angels pool €250k through a syndicate lead.
- TAM, SAM, SOM
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Total addressable market, serviceable addressable market, and serviceable obtainable market — three nested views of market size.
Example: TAM: all EU dental clinics; SAM: clinics in CEE; SOM: those you can win in 5 years.
- Term sheet
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A short, mostly non-binding document setting out the key terms of an investment.
Example: Pre-money, round size, liquidation preference, board, vesting and protective provisions.
- Ticket size
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The amount an investor typically puts into one company in one round.
Example: A seed fund with €300k–€1M tickets.
- Traction
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Evidence that customers want what you make: revenue, usage, growth, retention, signed pilots.
Example: €25k MRR growing 12% month over month.
- Valuation cap
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The maximum valuation at which a SAFE or note converts, protecting early investors if the next round is priced high.
Example: A €4M cap converts as if the company were worth €4M even if Series A is at €10M.
- Venture debt
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Loans to venture-backed companies, often alongside equity rounds, that extend runway with little dilution.
Example: €1M venture debt with warrants after a Series A.
- Warm introduction
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An introduction to an investor by someone they know and trust; converts far better than cold outreach.
Example: A portfolio founder forwards your short blurb to her investor.
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How it works
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Frequently asked questions
What are EIS and SEIS?
UK tax relief schemes that let individual investors reduce tax on investments in qualifying early-stage companies. They matter if you plan to raise from UK angels.
What is a j.s.a.?
A Slovak simple joint-stock company (jednoduchá spoločnosť na akcie), designed for startups: low minimum capital and flexible share classes, which makes investor rounds easier than in an s.r.o.
Grants or equity — which is better?
Grants are non-dilutive but slow, restrictive and paperwork-heavy; equity is fast and flexible but costs ownership. Many European startups combine both.
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