Startup Ecosystem Glossary

Pro rata rights give an investor the right to participate in future financing rounds so they can maintain a specified ownership percentage in a company.

A liquidation preference gives certain investors the right to receive specified proceeds before other shareholders when a company is liquidated or experiences certain exit events.

Vesting is the process through which a person earns the right to keep or exercise equity or equity-linked compensation over time or after meeting specified conditions.

An employee stock option pool is a portion of a company's equity reserved for granting stock options or other equity compensation to employees and, depending on the plan, other eligible service providers.

A stock option gives its holder the right, but not the obligation, to purchase shares of a company at a specified price during a defined period or upon specified conditions.

Fully diluted means calculating ownership as though all relevant securities that could become equity had already been converted or exercised into shares.

Post-money valuation is the agreed value of a company immediately after a new investment is included.

Pre-money valuation is the agreed value assigned to a company immediately before a new investment is added.

Dilution is the reduction in an existing shareholder's ownership percentage that can occur when a company issues additional shares or other equity interests.

A cap table is a record of a company's ownership structure, showing who holds its shares or other equity interests and how ownership is distributed.

An ownership stake is the percentage or other proportion of a company that a person or entity owns.

Equity represents an ownership interest in a company and, depending on the instrument and its rights, may give its holder claims on the company's residual assets, profits, voting rights, or other shareholder rights.

A follow-on investment is additional capital invested by an existing investor in a company after its initial investment.

Co-investment is when two or more investors invest in the same company or investment opportunity, typically as part of the same financing.

A portfolio company is a company in which an investment firm, fund, or other investor has made an investment.

Investor relations is the ongoing management of communication and relationships between a company and its current or prospective investors.

Cold outreach is direct communication with a person or organisation with whom the sender has no established relationship, usually to initiate a professional conversation or opportunity.

A warm introduction is an introduction to a person or organisation made through a mutual connection who already has a relationship with both parties.

Deal flow is the stream of investment opportunities that reaches an investor or investment organisation for consideration.

A founder-investor network is a connected group of entrepreneurs and investors who exchange relationships, knowledge, opportunities, and access to capital.