A glossary for early stage companies seeking investment

As an early-stage company, seeking investors can be a daunting task, especially if you are not familiar with the jargon and terms used in the investment world. In this blog post, we will provide a glossary of terms related to early-stage companies seeking investors to help you navigate this process with confidence.

Angel investor

An angel investor is an individual who invests their personal funds into early-stage companies. They typically invest in exchange for equity in the company.

Seed funding

Seed funding is the first round of funding that a company receives. It is typically used to fund the initial stages of a company's development, such as research and development, market research, and product development.

Series A funding

Series A funding is the first significant round of funding that a company receives from institutional investors, such as venture capitalists. It is typically used to fund the expansion of the company's operations.

Venture capital

Venture capital is a type of private equity financing that is provided by institutional investors to early-stage companies. It is typically used to fund high-growth companies that have the potential for significant returns on investment.

Valuation: Valuation is the process of determining the value of a company. It is typically calculated by looking at the company's financials, its market potential, and its competition.

Pre-money valuation

Pre-money valuation is the value of a company before any funding is received. It is used to determine the percentage of the company that investors will receive in exchange for their investment.

Post-money valuation

Post-money valuation is the value of a company after funding has been received. It is used to determine the percentage of the company that investors will receive in exchange for their investment.

Dilution

Dilution is the decrease in percentage ownership that existing shareholders experience when new shares are issued. It occurs when a company raises additional funding through the issuance of new shares.

Cap table: A cap table is a spreadsheet that lists all of the shareholders of a company and their ownership percentages. It is used to track the ownership of the company over time.

Term sheet

A term sheet is a document that outlines the terms and conditions of a proposed investment. It typically includes details such as the amount of funding, the valuation of the company, and the rights and responsibilities of the investors.

Due diligence

Due diligence is the process of conducting a thorough investigation of a company before investing. It typically involves reviewing the company's financials, legal documents, and operations to assess its potential for success.

Exit strategy

An exit strategy is a plan for how investors will eventually realize their return on investment. It typically involves selling the company or taking it public.

Understanding the terminology related to early-stage companies seeking investors is essential for entrepreneurs who are looking to raise capital. By familiarizing yourself with these terms, you can better navigate the investment process and communicate effectively with investors. Remember, seeking investment is a complex process, and it's always best to seek professional advice from a lawyer, accountant, or financial advisor.