D. Comprehensive Startup Funding Glossary¶

D.1 Overview¶

This glossary provides clear, practical definitions of 175+ essential terms every founder should understand when navigating startup fundraising, particularly in the Indian ecosystem. Each entry includes a plain-English definition, real-world example, explanation of why it matters, and cross-references to relevant chapters in this book.

How to Use This Glossary: - Browse by category to learn terms in a related domain - Use Ctrl+F (Cmd+F on Mac) to search for specific terms - Follow chapter references for deeper understanding - Focus on the "Why It Matters" section to understand practical implications - Pay special attention to Indian-specific terms if raising capital in India

Categories Covered: 1. Funding Terms (40 terms) 2. Legal & Structural Terms (40 terms) 3. Financial & Metrics Terms (35 terms) 4. Startup Lifecycle Terms (25 terms) 5. Indian-Specific Terms (25 terms) 6. Investor & Deal Terms (25 terms)

1. Funding Terms¶

Accelerator¶

• Definition: A fixed-term program (typically 3-6 months) that provides startups with mentorship, resources, and often seed funding in exchange for equity.
• Example: Y Combinator invests $500,000 for 7% equity; Indian accelerators like Axelor or Surge invest ₹2-4 crore for 6-10% equity.
• Why It Matters: Beyond capital, accelerators provide network access, structured learning, and credibility that can significantly improve fundraising outcomes.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 6: Preparing to Fundraise

Angel Investor¶

• Definition: An individual who invests their personal capital in early-stage startups, typically at pre-seed or seed stage.
• Example: A successful entrepreneur invests ₹25 lakh in your startup at a ₹5 crore valuation, taking 5% equity.
• Why It Matters: Angels often provide first institutional capital and can open doors to VC networks. Their terms are usually founder-friendlier than VCs.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

Angel Tax¶

• Definition: Tax on share premium received by unlisted companies (Section 56(2)(viib) of Income Tax Act), treating certain fundraising as "income from other sources."
• Example: If you raise ₹1 crore at ₹10 crore valuation but tax authorities value company at ₹6 crore, the ₹40 lakh "excess" premium could be taxed at 30.9%.
• Why It Matters: This was a major deterrent to Indian startup fundraising until exemptions were introduced for DPIIT-recognized startups. Still requires careful compliance.
• See Chapter: Chapter 22: Indian Regulatory Framework

Burn Rate¶

• Definition: The rate at which a company spends its cash reserves, typically measured monthly.
• Example: If you have ₹1.2 crore in the bank and spend ₹20 lakh per month on salaries, office, and operations, your burn rate is ₹20 lakh/month.
• Why It Matters: Burn rate determines your runway and urgency to raise capital. High burn with low runway puts you in a weak negotiating position.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 13: Down Rounds and Difficult Financing

Bridge Round¶

• Definition: A small funding round raised between major rounds to extend runway while preparing for a larger fundraise.
• Example: You raised Series A in 2023, need 6 more months to hit Series B metrics, so you raise ₹3 crore bridge from existing investors at same valuation.
• Why It Matters: Bridge rounds can save companies from running out of cash, but frequent bridges signal struggling fundamentals to future investors.
• See Chapter: Chapter 19: Multi-Stage Fundraising

Cap (Valuation Cap)¶

• Definition: In convertible notes and SAFEs, the maximum valuation at which the instrument converts to equity, protecting early investors if valuation increases significantly.
• Example: Your SAFE has a ₹15 crore cap. If Series A happens at ₹40 crore, SAFE investors convert at ₹15 crore (getting 2.67x more shares than Series A investors).
• Why It Matters: Caps create significant dilution for founders if actual valuation far exceeds cap. Negotiate higher caps when possible.
• See Chapter: Chapter 3: Funding Instruments, Chapter 7: Term Sheet Analysis

CCPS (Compulsorily Convertible Preference Shares)¶

• Definition: Indian legal structure for issuing preference shares that must convert to equity at a specified trigger (typically next funding round or IPO).
• Example: Investor buys 1 lakh CCPS at ₹100/share with 1x liquidation preference and anti-dilution protection, converting to common shares at Series B.
• Why It Matters: This is the Indian equivalent of preferred stock used in US deals. Understanding CCPS is essential for Indian companies raising VC capital.
• See Chapter: Chapter 3: Funding Instruments, Chapter 22: Indian Regulatory Framework

Common Stock¶

• Definition: Basic equity ownership without special rights or preferences; what founders and employees typically hold.
• Example: You and your co-founder each own 5 million common shares. VCs buy preferred shares with liquidation preferences, but common stock votes on most matters.
• Why It Matters: Common stock is last in liquidation waterfall (paid after all preferred shares). In smaller exits, common shareholders may get nothing.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 7: Term Sheet Analysis

Convertible Note¶

• Definition: A debt instrument that converts to equity at a future priced round, typically with a discount rate and/or valuation cap.
• Example: You raise ₹50 lakh convertible note with 20% discount and ₹10 crore cap. At Series A (₹25 crore valuation), note converts at ₹8 crore (20% discount applies).
• Why It Matters: Convertible notes delay valuation discussions, making them popular for early-stage deals. But they're debt until conversion, creating obligations.
• See Chapter: Chapter 3: Funding Instruments

Down Round¶

• Definition: A funding round at a lower valuation than the previous round, diluting existing shareholders and triggering anti-dilution protections.
• Example: You raised Series A at ₹50 crore, but missed targets. Series B happens at ₹40 crore (20% down), triggering anti-dilution adjustments for Series A investors.
• Why It Matters: Down rounds are psychologically and financially painful. Anti-dilution provisions transfer dilution from investors to founders and employees.
• See Chapter: Chapter 13: Down Rounds and Difficult Financing, Chapter 18: Crisis Management

Dry Powder¶

• Definition: Capital committed to a VC fund that has not yet been invested; available firepower for new deals.
• Example: A VC fund raised ₹1,000 crore in 2023 and has invested ₹300 crore so far, leaving ₹700 crore in dry powder for future investments.
• Why It Matters: Funds with significant dry powder are more likely to lead rounds and write large checks. Understanding this helps in investor targeting.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

Equity Financing¶

• Definition: Raising capital by selling ownership shares in the company, rather than taking on debt.
• Example: You sell 20% of your company for ₹2 crore at a ₹10 crore post-money valuation.
• Why It Matters: Equity doesn't require repayment like debt, but permanently dilutes your ownership. Most VC funding is equity-based.
• See Chapter: Chapter 3: Funding Instruments, Chapter 16 (Alternative Funding Paths)

Follow-On Investment¶

• Definition: Additional investment by existing investors in subsequent funding rounds to maintain or increase their ownership percentage.
• Example: Your Series A lead owns 20% post-Series A. They invest again in Series B (exercising pro-rata rights) to maintain their 20% stake.
• Why It Matters: Strong follow-on from existing investors signals confidence to new investors. Lack of follow-on can be a red flag.
• See Chapter: Chapter 19: Multi-Stage Fundraising

Flat Round¶

• Definition: A funding round at the same valuation as the previous round, neither up nor down.
• Example: You raised Seed at ₹15 crore post-money in 2023. In 2024, you raise Series A at the same ₹15 crore pre-money (₹20 crore post-money with new investment).
• Why It Matters: Flat rounds avoid down round stigma but signal you haven't created significant value since last raise. Can still trigger some anti-dilution adjustments.
• See Chapter: Chapter 13: Down Rounds and Difficult Financing, Chapter 19: Multi-Stage Fundraising

Fully Diluted Basis¶

• Definition: Calculation that includes all outstanding shares plus all shares that could be issued (options, warrants, convertible securities).
• Example: 8 million common shares outstanding + 2 million option pool + 1 million convertible note conversion = 11 million fully diluted shares.
• Why It Matters: Always negotiate on fully diluted basis. "10% of the company" on a non-diluted basis could actually be 7% fully diluted.
• See Chapter: Chapter 2: Valuation Fundamentals, Chapter 7: Term Sheet Analysis

Growth Equity¶

• Definition: Capital invested in mature companies that are past product-market fit and showing consistent revenue growth, typically Series B and beyond.
• Example: Your SaaS company is doing ₹20 crore ARR growing 100% YoY. You raise ₹50 crore Series B from growth equity investors to scale sales and marketing.
• Why It Matters: Growth equity investors focus on scaling what works rather than product development. They expect clear unit economics and payback periods.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 19: Multi-Stage Fundraising

Incubator¶

• Definition: A program or facility that helps early-stage startups develop their business, typically providing workspace, mentorship, and resources without fixed timelines.
• Example: T-Hub in Hyderabad provides office space, mentorship, and connections to startups for 12-18 months, usually taking 2-5% equity or nominal fees.
• Why It Matters: Unlike accelerators (fixed-term), incubators provide longer-term support. Useful for first-time founders who need extended handholding.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem

Lead Investor¶

• Definition: The investor who commits the largest amount in a round, typically sets terms, conducts due diligence, and takes a board seat.
• Example: In your ₹8 crore Series A, Accel invests ₹5 crore as lead (setting ₹35 crore valuation), while 3 other VCs invest ₹1 crore each as followers.
• Why It Matters: Having a strong lead makes it easier to close the round and signals quality to other investors. Leads also provide most post-investment support.
• See Chapter: Chapter 6: Preparing to Fundraise, Chapter 14: Choosing Your Investors

Liquidation Preference¶

• Definition: Contractual right that determines payout order and amounts when a company is sold or liquidated; preferred shareholders get paid before common stockholders.
• Example: Investor has 1x liquidation preference on ₹10 crore investment. In ₹15 crore exit, investor gets ₹10 crore first, remaining ₹5 crore split among common shareholders.
• Why It Matters: This is THE most important economic term in a VC deal. Multiple liquidation preferences (2x, 3x) or participating preferred can wipe out founder value in smaller exits.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 11: Dark Patterns - Predatory Terms to Avoid

MFN (Most Favored Nation) Clause¶

• Definition: Provision in convertible notes or SAFEs ensuring the holder receives the best terms from any subsequent convertible securities issued before the next priced round.
• Example: Your SAFE has MFN. You later issue another SAFE with better terms (lower cap, higher discount). Original SAFE automatically gets those better terms.
• Why It Matters: MFN protects early investors but can complicate your cap table. Each subsequent raise must be at equal or worse terms, limiting flexibility.
• See Chapter: Chapter 3: Funding Instruments, Chapter 7: Term Sheet Analysis

Mezzanine Financing¶

• Definition: Hybrid debt-equity financing, typically used for growth-stage companies, often with warrants or conversion options.
• Example: You raise ₹15 crore mezzanine debt at 12% interest plus warrants to buy 5% equity at current valuation.
• Why It Matters: Provides capital without immediate dilution but creates debt service obligations. Common in pre-IPO situations or growth-stage funding.
• See Chapter: Chapter 16: Alternative Funding Paths, Chapter 19: Multi-Stage Fundraising

Option Pool¶

• Definition: Reserved shares set aside for future employee stock options, usually created before or at time of VC investment.
• Example: 15% option pool created pre-money means founders dilute from 100% to 85% before VC investment. If VC buys 20%, founders end with 68% (85% × 80%).
• Why It Matters: Pre-money option pools dilute only founders. Always try to create pools post-money or make them as small as possible.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 15: ESOP Strategy and Employee Equity

Participating Preferred¶

• Definition: Preferred shares that receive liquidation preference first, then also participate pro-rata with common stock in remaining proceeds (aka "double dipping").
• Example: Investor invests ₹10 crore for 20% with 1x participating preferred. At ₹50 crore exit: gets ₹10 crore preference + 20% of remaining ₹40 crore = ₹18 crore total (36% of exit).
• Why It Matters: This is a founder-unfriendly term that massively benefits investors in smaller exits. Ideally refuse; if unavoidable, insist on participation cap (2x-3x).
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 11: Dark Patterns - Predatory Terms to Avoid

Pay-to-Play Provision¶

• Definition: Clause requiring existing investors to invest pro-rata in subsequent rounds or lose certain rights (like anti-dilution protection or board seats).
• Example: Series A investors who don't participate in Series B have their preferred shares convert to common, losing liquidation preference and anti-dilution rights.
• Why It Matters: Usually appears in down rounds or crisis scenarios. Aligns investor incentives but can be harsh on smaller investors who lack capital.
• See Chapter: Chapter 13: Down Rounds and Difficult Financing, Chapter 18: Crisis Management

Post-Money Valuation¶

• Definition: Company valuation immediately after a funding round; pre-money valuation plus investment amount.
• Example: ₹40 crore pre-money + ₹10 crore investment = ₹50 crore post-money. Investor owns 20% (₹10 crore ÷ ₹50 crore).
• Why It Matters: Post-money is what matters for calculating ownership percentages. Always clarify whether term sheet lists pre-money or post-money.
• See Chapter: Chapter 2: Valuation Fundamentals, Chapter 7: Term Sheet Analysis

Pre-Emptive Rights¶

• Definition: Right of existing investors to invest in future rounds to maintain their ownership percentage (also called pro-rata rights).
• Example: Investor owns 15% post-Series A. In Series B, they have the right (not obligation) to invest enough to maintain 15% ownership.
• Why It Matters: Standard and reasonable term. Investors want to increase ownership in winners. Founders benefit from committed long-term investors.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 19: Multi-Stage Fundraising

Pre-Money Valuation¶

• Definition: Company valuation before a funding round; determines how much equity is sold for the investment amount.
• Example: ₹40 crore pre-money valuation. Investor puts in ₹10 crore, gets 20% of company (₹10 crore ÷ ₹50 crore post-money).
• Why It Matters: This is what you negotiate. Higher pre-money = less dilution for founders. Pre-money must be on fully diluted basis.
• See Chapter: Chapter 2: Valuation Fundamentals, Chapter 9: Negotiating the Deal

Pre-Seed¶

• Definition: The earliest stage of funding, before seed round; typically from founders, friends, family, and angel investors.
• Example: You and co-founder invest ₹10 lakh each, raise ₹30 lakh from 3 angels at ₹3 crore valuation to build MVP and get first customers.
• Why It Matters: Pre-seed is about proving you can build something people want. Terms are usually simple; focus on finding believers rather than optimizing valuation.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 6: Preparing to Fundraise

Preferred Stock¶

• Definition: Class of stock with special rights and preferences over common stock, typically what VCs receive in exchange for their investment.
• Example: Series A Preferred Stock with 1x non-participating liquidation preference, anti-dilution protection, and board representation rights.
• Why It Matters: Preferred stock is how VCs protect their investment through downside protection (preferences) while maintaining upside through equity ownership.
• See Chapter: Chapter 3: Funding Instruments, Chapter 7: Term Sheet Analysis

Price Per Share¶

• Definition: Valuation divided by number of shares outstanding; the actual price paid per share in a priced equity round.
• Example: ₹40 crore pre-money valuation ÷ 10 million shares outstanding = ₹400 per share price for the round.
• Why It Matters: This determines conversion prices for convertible instruments and is adjusted by anti-dilution provisions in down rounds.
• See Chapter: Chapter 2: Valuation Fundamentals, Chapter 7: Term Sheet Analysis

Priced Round¶

• Definition: Funding round where shares are sold at a specific price per share, establishing a clear company valuation (as opposed to convertible notes/SAFEs).
• Example: Series A priced round: selling 2 million Series A Preferred shares at ₹500/share, raising ₹100 crore at ₹40 crore pre-money valuation.
• Why It Matters: Priced rounds provide clarity on ownership but require more legal work than convertible instruments. Standard for Series A and beyond.
• See Chapter: Chapter 3: Funding Instruments, Chapter 7: Term Sheet Analysis

Pro-Rata Rights¶

• Definition: Right (not obligation) of existing investors to participate in future rounds to maintain their ownership percentage.
• Example: Seed investor owns 8% post-seed. In Series A, they can invest pro-rata to maintain 8%, or pass and get diluted to ~5%.
• Why It Matters: Standard term that doesn't hurt founders. Gives investors option to double down on winners while limiting exposure to losers.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 19: Multi-Stage Fundraising

Runway¶

• Definition: Number of months a company can operate before running out of cash at current burn rate.
• Example: ₹1.2 crore in bank ÷ ₹20 lakh monthly burn = 6 months runway.
• Why It Matters: The #1 metric for fundraising timing. Start raising with 9-12 months runway. With <6 months, you're in crisis mode with weak negotiating leverage.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

SAFE (Simple Agreement for Future Equity)¶

• Definition: Y Combinator-created instrument for early-stage investment; not debt, converts to equity at next priced round with discount and/or cap.
• Example: Investor gives ₹25 lakh via SAFE with ₹10 crore cap and 20% discount. At Series A (₹30 crore valuation), SAFE converts at ₹10 crore cap (better than 20% discount).
• Why It Matters: SAFEs are simpler than convertible notes (no maturity date or interest) but can create significant dilution if caps are too low relative to next round valuation.
• See Chapter: Chapter 3: Funding Instruments

Seed Round¶

• Definition: First institutional funding round, typically after product-market fit is demonstrated; usually ₹1-5 crore in India, $500K-$3M in US.
• Example: You raise ₹3 crore seed at ₹12 crore post-money from a combination of angels, seed funds, and micro VCs.
• Why It Matters: Seed sets your trajectory. The terms you accept here (especially around anti-dilution and liquidation preferences) compound through future rounds.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 6: Preparing to Fundraise

Series A, B, C...¶

• Definition: Sequential priced equity rounds; Series A is first institutional VC round, Series B/C/D are subsequent growth rounds.
• Example: Seed at ₹12 crore post-money → Series A at ₹50 crore post-money → Series B at ₹150 crore → Series C at ₹400 crore.
• Why It Matters: Each series typically involves larger checks, higher valuations, and more stringent terms. Series A is the hardest to raise (highest rejection rate).
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 19: Multi-Stage Fundraising

Soonicorn¶

• Definition: Indian startup valued between $500M and $1B, expected to achieve unicorn status ($1B+ valuation) soon.
• Example: Your fintech company raises Series C at ₹4,000 crore ($500M) valuation, making you a soonicorn. At current growth, Series D could hit unicorn valuation.
• Why It Matters: Marketing term signaling momentum. Being labeled a soonicorn can attract top-tier investors and talent.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 23: Indian Success Stories and Lessons Learned

Super Pro-Rata Rights¶

• Definition: Right to invest more than their pro-rata share in subsequent rounds, typically given to lead investors or strategic participants.
• Example: Lead investor owns 18% and has 2x super pro-rata, meaning they can buy up to 36% of the next round if they want.
• Why It Matters: Rewards lead investors for taking risk. Can crowd out new investors, so don't grant super pro-rata to too many investors.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 14 (Choosing Your Investors)

Syndicate¶

• Definition: Group of investors who pool capital to invest together, typically organized by a lead investor or through platforms like LetsVenture or AngelList.
• Example: An angel investor organizes a syndicate of 15 smaller angels to collectively invest ₹1.5 crore in your seed round.
• Why It Matters: Syndicates let smaller investors access deals and provide founders with larger check sizes without managing many individual investors.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 6: Preparing to Fundraise

Unicorn¶

• Definition: Privately-held startup valued at $1 billion or more.
• Example: Flipkart became India's first unicorn in 2011. As of 2024, India has 100+ unicorns including Razorpay, CRED, Zerodha, etc.
• Why It Matters: Unicorn status is a major milestone attracting media, talent, and investors. But overvaluation can make future rounds and exits challenging.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 23: Indian Success Stories and Lessons Learned

Up Round¶

• Definition: Funding round at a higher valuation than the previous round, indicating positive company growth.
• Example: You raised Seed at ₹12 crore post-money. Series A at ₹50 crore pre-money is a significant up round (4.2x increase).
• Why It Matters: Up rounds are the goal of every startup. They validate your progress, create wealth for all shareholders, and signal momentum.
• See Chapter: Chapter 19: Multi-Stage Fundraising

Venture Capital (VC)¶

• Definition: Professional investment firms that raise money from institutions (LPs) to invest in high-growth startups in exchange for equity.
• Example: Sequoia Capital India (now Peak XV) manages multiple funds totaling billions of dollars, investing ₹10-100 crore checks in Series A-C startups.
• Why It Matters: VCs provide not just capital but network, brand, and expertise. However, they have obligations to LPs that can misalign with founder interests.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

2. Legal & Structural Terms¶

Acceleration (Vesting)¶

• Definition: Immediate vesting of unvested stock options or shares, triggered by specific events like acquisition (single-trigger) or acquisition + termination (double-trigger).
• Example: You have 4 years vesting with 1 year cliff. Company is acquired after 18 months. Single-trigger acceleration vests all 48 months immediately.
• Why It Matters: Founders should negotiate double-trigger acceleration (acquisition + termination) to protect against being fired post-acquisition and losing unvested shares.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 7: Term Sheet Analysis

Anti-Dilution Protection¶

• Definition: Mechanism that protects investors from dilution in down rounds by adjusting their conversion price, giving them more shares.
• Example: Investor paid ₹100/share. Next round is ₹60/share. Broad-based weighted average might adjust investor's price to ₹80, giving them 25% more shares.
• Why It Matters: Broad-based weighted average is standard and reasonable. Narrow-based or full ratchet are founder-killers that should be rejected.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 11: Dark Patterns - Predatory Terms to Avoid, Chapter 13 (Down Rounds)

Articles of Association (AoA)¶

• Definition: Legal document defining company's internal governance, rights of shareholders, and operational procedures (required under Companies Act 2013).
• Example: Your AoA specifies voting rights, dividend policy, share transfer restrictions, and procedures for board meetings.
• Why It Matters: AoA must align with SHA (Shareholders Agreement) terms. Contradictions create legal nightmares. Many VCs require AoA amendments at investment.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 22: Indian Regulatory Framework

Assignment of IP¶

• Definition: Legal transfer of intellectual property rights (patents, trademarks, copyright) from individual (founder/employee) to the company.
• Example: You sign an agreement assigning all code, designs, and inventions you create for the company to the company, not to you personally.
• Why It Matters: Investors require confirmation that the company, not founders, owns all IP. Without proper assignment, IP ownership disputes can kill deals.
• See Chapter: Chapter 8: Investor Due Diligence, Chapter 24: Templates, Checklists, and Frameworks

Board Observer Rights¶

• Definition: Right to attend board meetings and receive materials without voting rights, typically granted to minor investors or advisors.
• Example: An angel investor who invested ₹10 lakh gets observer rights, allowing them to attend meetings but not vote on decisions.
• Why It Matters: Observer rights provide transparency without giving away control. Reasonable to grant to smaller investors who want to stay informed.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 12: Board Dynamics and Governance

Board of Directors¶

• Definition: Group of individuals elected to oversee company management, make major decisions, and protect shareholder interests.
• Example: 5-person board: 2 founder seats, 2 investor seats, 1 independent director. Requires majority (⅗) to approve major decisions.
• Why It Matters: Board composition = control. Founders should maintain board control as long as possible. Balanced boards (equal founder-investor seats + independent tiebreaker) are ideal.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 12: Board Dynamics and Governance

Broad-Based Weighted Average Anti-Dilution¶

• Definition: Anti-dilution formula that considers all outstanding securities and the size of the down round, resulting in moderate adjustment.
• Example: Calculation considers all shares (not just new shares), resulting in price adjustment from ₹100 to ₹85 instead of full ratchet's ₹60.
• Why It Matters: This is the market standard and is reasonable. More founder-friendly than narrow-based or full ratchet. Always negotiate for this version.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 13: Down Rounds and Difficult Financing

Clawback Provision¶

• Definition: Clause allowing company or investors to reclaim shares or benefits under certain conditions (typically fraud, misconduct, or termination for cause).
• Example: If you're terminated for cause within 2 years, company can buy back your vested shares at fair market value.
• Why It Matters: Reasonable clawbacks protect the company, but overly broad ones (like clawing back on any termination) are unfair to founders.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 11: Dark Patterns - Predatory Terms to Avoid

Cliff (Vesting)¶

• Definition: Initial period in vesting schedule where no shares vest; if you leave before cliff, you get nothing. Standard is 1-year cliff.
• Example: 4-year vesting with 1-year cliff means 0% vests for 11 months, 25% vests at 12 months, then remaining vests monthly over 36 months.
• Why It Matters: Cliffs protect against co-founders leaving early with significant equity. 1-year cliff is standard for employees and founders.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 15 (ESOP Strategy)

Co-Sale Rights¶

• Definition: Right allowing shareholders to join in a sale of shares by other shareholders on the same terms (also called tag-along rights).
• Example: Founder is selling 5% stake to a strategic investor at ₹500/share. Tag-along rights let you sell proportional shares at same ₹500 price.
• Why It Matters: Protects minority shareholders from being left behind when majority sells. Standard protection that should be mutual (founder + investors).
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 20 (Secondary Sales)

Conversion Rights¶

• Definition: Right to convert preferred shares to common shares, typically at any time at the holder's option.
• Example: Investor holds 1 million Series A Preferred shares. At IPO, they convert to common shares (usually 1:1 ratio) to sell on public market.
• Why It Matters: Investors convert to common when doing so is more valuable (typically successful IPO or acquisition above preference amounts).
• See Chapter: Chapter 3: Funding Instruments, Chapter 21 (Exit Planning)

Cumulative Dividends¶

• Definition: Dividends that accumulate over time if not paid, must be paid before common shareholders receive anything.
• Example: 8% cumulative dividend on ₹10 crore investment. After 3 years, ₹2.4 crore in accumulated dividends must be paid before common shareholders get any distribution.
• Why It Matters: This is a hidden cost that compounds and prioritizes investors. Highly unfavorable for founders. Non-cumulative dividends (if any) are much better.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 11: Dark Patterns - Predatory Terms to Avoid

Drag-Along Rights¶

• Definition: Right allowing majority shareholders to force minority shareholders to join in a sale of the company.
• Example: Investors holding 60% want to sell company for ₹500 crore. Drag-along forces you (holding 20%) to sell your shares too at same price.
• Why It Matters: Prevents minority from blocking favorable exit. Reasonable with protections: sale must be to third party, at fair price, with minimum threshold (e.g., ₹100 crore).
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 21 (Exit Planning)

Employment Agreement¶

• Definition: Contract specifying terms of employment including title, salary, equity, responsibilities, and termination conditions.
• Example: Your CTO employment agreement specifies ₹40 lakh salary, 2% equity with 4-year vesting, and 3-month notice period.
• Why It Matters: Even co-founders should have employment agreements separate from equity. Clarifies roles, compensation, and departure terms.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 24 (Templates & Checklists)

Fiduciary Duty¶

• Definition: Legal obligation of board members to act in the best interests of the company and all shareholders, not just themselves.
• Example: A VC director must vote for an acquisition that's good for the company, even if their fund would prefer you continue raising capital.
• Why It Matters: Directors owe fiduciary duty to company, not their fund. This prevents (in theory) pure self-interest voting, but conflicts still arise.
• See Chapter: Chapter 12 (Board Dynamics), Chapter 14 (Choosing Your Investors)

Founder Vesting¶

• Definition: Vesting schedule applied to founder shares, typically 4 years with 1-year cliff, to ensure founders remain committed.
• Example: You own 5 million shares subject to 4-year vesting. If you leave after 18 months, you keep 37.5% (1.875 million), company repurchases rest.
• Why It Matters: VCs almost always require founder vesting. It protects the company if a founder leaves early, making remaining shares available for key hires.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 7: Term Sheet Analysis

Full Ratchet Anti-Dilution¶

• Definition: Most aggressive anti-dilution protection; adjusts investor's conversion price all the way down to the price of the down round.
• Example: Investor paid ₹100/share. Down round happens at ₹60/share. Full ratchet adjusts ALL investor shares to ₹60, increasing their share count by 67%.
• Why It Matters: This is a FOUNDER KILLER. All dilution transfers to founders/employees. This term is a clear red flag and should be rejected outright.
• See Chapter: Chapter 11 (Dark Patterns), Chapter 13 (Down Rounds)

Information Rights¶

• Definition: Rights of investors to receive regular financial and operational information about the company.
• Example: Quarterly financial statements, annual audited financials, monthly metrics, and advance notice of board meetings within 15 days.
• Why It Matters: Reasonable information rights are standard. Overly burdensome ones (weekly reports, daily metrics) create excessive administrative burden.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 12: Board Dynamics and Governance

Liquidation Waterfall¶

• Definition: Order and method of distributing proceeds when company is sold or liquidated, accounting for liquidation preferences and participation.
• Example: At ₹50 crore exit: Series B gets ₹15 crore (1x preference), Series A gets ₹10 crore (1x preference), remaining ₹25 crore to common shareholders.
• Why It Matters: Understanding the waterfall is critical. Multiple preference stacks can mean founders get nothing in small/medium exits even with "ownership."
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 21 (Exit Planning)

Majority Voting¶

• Definition: Decision-making mechanism requiring more than 50% of votes to approve an action.
• Example: Your SHA requires majority board approval for hiring executives. With a 5-person board, you need 3 votes to approve.
• Why It Matters: Simple majority is standard for routine decisions. Supermajority (75% or 80%) for major decisions like M&A protects minority interests.
• See Chapter: Chapter 12 (Board Dynamics)

Memorandum of Association (MoA)¶

• Definition: Legal document required for company incorporation, defining company's objectives, scope of activities, and relationship with external world.
• Example: Your MoA lists company objectives as "software development and SaaS services" with authorized share capital of ₹10 lakh.
• Why It Matters: MoA defines what your company can legally do. Must be filed with Registrar of Companies. Amendments require shareholder approval.
• See Chapter: Chapter 22: Indian Regulatory Framework

No-Shop Clause¶

• Definition: Agreement to stop fundraising and negotiating with other investors for a specified period (typically 30-45 days) while due diligence progresses.
• Example: You sign term sheet with Accel including 45-day no-shop. You must cease all conversations with other VCs during this period.
• Why It Matters: Reasonable no-shops (30-45 days) are standard. Longer periods (60-90 days) or those without deal certainty are red flags.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 9 (Negotiating Your Term Sheet)

Non-Compete Clause¶

• Definition: Agreement restricting individual from starting or joining a competing business for specified time period after leaving company.
• Example: 1-year non-compete prevents you from joining or starting a competing fintech company after leaving your current fintech startup.
• Why It Matters: Non-competes are generally unenforceable in California but valid in India. Keep them narrow (1 year, specific industry) rather than broad.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 24 (Templates & Checklists)

Non-Dilution Clause¶

• Definition: Provision ensuring specific shareholders maintain their ownership percentage, typically through automatic issuance of additional shares.
• Example: Investor has non-dilution rights. When you issue shares to new investors, this investor automatically receives additional shares to maintain 20% ownership.
• Why It Matters: This is extremely founder-unfavorable. Different from anti-dilution (which only protects in down rounds). Should be rejected.
• See Chapter: Chapter 11 (Dark Patterns)

Non-Disclosure Agreement (NDA)¶

• Definition: Contract where parties agree to keep certain information confidential.
• Example: Before sharing detailed financial projections and customer data with a potential investor, you both sign an NDA.
• Why It Matters: Most VCs won't sign NDAs to hear your pitch (they see too many similar ideas). Save NDAs for due diligence phase with sensitive data.
• See Chapter: Chapter 6 (Preparing to Fundraise), Chapter 8 (Due Diligence)

Pari Passu¶

• Definition: Latin term meaning "equal footing"; used to indicate securities that rank equally in liquidation or voting rights.
• Example: Series A-1 and Series A-2 shares are pari passu, meaning they have identical liquidation preferences and voting rights.
• Why It Matters: Multiple series can have different preference stacks. Pari passu ensures equal treatment within a fundraising round.
• See Chapter: Chapter 7: Term Sheet Analysis

Personal Guarantee¶

• Definition: Commitment where founder is personally liable for company debts or obligations if company cannot pay.
• Example: Bank requires your personal guarantee for ₹50 lakh loan. If company defaults, bank can seize your personal assets.
• Why It Matters: Personal guarantees pierce the corporate veil, putting founder personal wealth at risk. Avoid in equity deals; sometimes unavoidable in debt.
• See Chapter: Chapter 11 (Dark Patterns), Chapter 16 (Alternative Funding Paths)

Protective Provisions¶

• Definition: Matters requiring approval of preferred shareholders (sometimes supermajority) beyond normal board voting, protecting investor interests.
• Example: Changes to liquidation preferences, issuing senior securities, M&A above ₹10 crore, changing business significantly all require investor approval.
• Why It Matters: Reasonable protective provisions protect investors without blocking routine operations. Overly broad ones (hiring, firing, expenses above ₹1 lakh) are red flags.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 11: Dark Patterns - Predatory Terms to Avoid, Chapter 12 (Board Dynamics)

Redemption Rights¶

• Definition: Right allowing investors to force the company to buy back their shares at specified price after certain time period.
• Example: After 5 years, investor can require company to repurchase shares at greater of cost or fair market value.
• Why It Matters: Extremely unfavorable for founders. Creates liquidity obligation that most startups can't meet. This term should be strongly resisted.
• See Chapter: Chapter 11 (Dark Patterns)

Right of First Refusal (ROFR)¶

• Definition: Right to purchase shares before they are sold to a third party, typically on same terms as third-party offer.
• Example: You want to sell 2% stake to strategic investor. ROFR holders (existing investors) have 30 days to buy those shares on same terms.
• Why It Matters: Standard investor protection that shouldn't block legitimate sales. Can be abused if ROFR holders drag out decision to prevent secondary sales.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 20 (Secondary Sales)

Shareholders Agreement (SHA)¶

• Definition: Contract among shareholders defining rights, obligations, governance, transfer restrictions, and other terms beyond standard corporate law.
• Example: Your SHA specifies board composition (2-2-1), liquidation preferences (1x non-participating), drag-along rights (80% threshold), and anti-dilution protection.
• Why It Matters: SHA is THE governing document for investor-startup relationship. More important than term sheet. Have lawyer review every clause carefully.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 25 (When to Call a Lawyer)

Supermajority Voting¶

• Definition: Requirement for 66.7%, 75%, or higher percentage of votes to approve certain major actions.
• Example: M&A requires 75% shareholder approval. With 70% ownership, you can't sell company without some investor approval.
• Why It Matters: Supermajority protections prevent majority from steamrolling minority on critical decisions. 75% is common for M&A, charter amendments.
• See Chapter: Chapter 12 (Board Dynamics)

Tag-Along Rights¶

• Definition: See "Co-Sale Rights" - same concept, different terminology.

Tranche Funding¶

• Definition: Investment split into multiple installments, with subsequent tranches released upon hitting milestones.
• Example: ₹5 crore committed: ₹2 crore at signing, ₹1.5 crore at 100 customers, ₹1.5 crore at ₹50 lakh MRR.
• Why It Matters: Reduces investor risk but creates uncertainty for founders. If milestones aren't hit, later tranches may not come, leaving you undercapitalized.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 9 (Negotiating Your Term Sheet)

Vesting Schedule¶

• Definition: Timeline over which shares or options become owned by the recipient; typically 4 years with 1-year cliff for founders/employees.
• Example: 1 million options vest over 4 years: 250K vest after year 1 (cliff), then 62,500 per quarter (or ~20,833 per month) for remaining 3 years.
• Why It Matters: Vesting aligns long-term incentives and prevents people from leaving early with large equity stakes. 4-year with 1-year cliff is market standard.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 15 (ESOP Strategy)

Voting Rights¶

• Definition: Rights to vote on company matters, typically proportional to share ownership, though can be modified for different share classes.
• Example: You hold 40% of shares, giving you 40% of votes on matters requiring shareholder approval (unless there are super-voting or non-voting shares).
• Why It Matters: Economic ownership ≠ voting control. Some deals have dual-class structures where founders keep voting control despite low ownership.
• See Chapter: Chapter 10 (Protecting Your Equity and Control), Chapter 22 (Indian Regulatory Framework)

Warrant¶

• Definition: Right to purchase shares at specified price within specified time period, often issued with debt or as compensation.
• Example: Lender provides ₹2 crore debt plus warrants to buy 50,000 shares at ₹100/share any time in next 5 years.
• Why It Matters: Warrants provide upside to debt holders without immediate dilution. Understand dilution impact if/when warrants are exercised.
• See Chapter: Chapter 16 (Alternative Funding Paths)

3. Financial & Metrics Terms¶

Annual Recurring Revenue (ARR)¶

• Definition: Total value of recurring revenue normalized to one year; key metric for SaaS and subscription businesses.
• Example: 1,000 customers paying ₹10,000/month = ₹1 crore MRR = ₹12 crore ARR.
• Why It Matters: ARR is the north star metric for SaaS companies. Investors value SaaS companies as multiples of ARR (typically 5-15x depending on growth and retention).
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

Burn Multiple¶

• Definition: Cash burned divided by net new ARR; efficiency metric showing capital spent to generate $1 of new revenue.
• Example: Burned ₹3 crore this quarter, added ₹1 crore in new ARR = 3x burn multiple.
• Why It Matters: Lower is better. <1.5x is excellent, 1.5-3x is good, >3x is concerning. Shows capital efficiency in achieving growth.
• See Chapter: Chapter 5 (Building Your Fundable Company)

CAC Payback Period¶

• Definition: Number of months to recover customer acquisition cost from gross profit.
• Example: CAC is ₹12,000, gross profit per customer is ₹4,000/month → 3-month CAC payback.
• Why It Matters: Shorter payback = faster you can reinvest in growth. <12 months is excellent, 12-18 months is good, >18 months is concerning for SaaS.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

Cash Flow Statement¶

• Definition: Financial statement showing cash inflows and outflows from operating, investing, and financing activities over a period.
• Example: Q4 cash flow: Operating activities -₹50 lakh, Investing activities -₹10 lakh, Financing activities +₹2 crore = Net increase ₹1.4 crore.
• Why It Matters: Profitability ≠ cash flow. A profitable company can run out of cash. This statement shows actual cash generation/consumption.
• See Chapter: Chapter 8 (Due Diligence)

Churn Rate¶

• Definition: Percentage of customers who cancel or don't renew in a given period; inverse of retention.
• Example: Start month with 1,000 customers, lose 50 customers = 5% monthly churn (60% annual churn).
• Why It Matters: High churn is a startup killer. For SaaS, monthly churn should be <2-3% (annual <25%). High churn makes growth expensive and unsustainable.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 13: Down Rounds and Difficult Financing

Contribution Margin¶

• Definition: Revenue minus variable costs (COGS and variable expenses); shows profitability per unit before fixed costs.
• Example: Sell product for ₹1,000, variable costs ₹400 = ₹600 contribution margin (60% contribution margin ratio).
• Why It Matters: Positive contribution margin means each additional sale contributes to covering fixed costs and profit. Negative contribution margin = losing money on every sale.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Customer Acquisition Cost (CAC)¶

• Definition: Total sales and marketing spend divided by number of new customers acquired in that period.
• Example: Spent ₹40 lakh on sales/marketing in Q1, acquired 200 customers = ₹20,000 CAC.
• Why It Matters: CAC must be significantly less than LTV (ideally LTV:CAC ratio > 3:1) for sustainable growth. Rising CAC is a red flag.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

Discounted Cash Flow (DCF)¶

• Definition: Valuation method that calculates present value of future cash flows using a discount rate reflecting risk.
• Example: Project ₹10 crore annual profit in 5 years. At 30% discount rate, present value ≈ ₹2.69 crore (₹10 crore ÷ 1.30^5).
• Why It Matters: DCF is theoretically correct but rarely used for early-stage startups due to uncertain cash flows. More relevant for mature companies.
• See Chapter: Chapter 2 (Valuation Fundamentals)

EBITDA (Earnings Before Interest, Tax, Depreciation, Amortization)¶

• Definition: Operating profit metric excluding non-operating expenses and non-cash charges; proxy for cash generation.
• Example: Revenue ₹100 crore, COGS ₹40 crore, operating expenses ₹45 crore = ₹15 crore EBITDA (before interest, tax, D&A).
• Why It Matters: EBITDA shows core business profitability. Many later-stage companies are valued as multiples of EBITDA (10-20x for high-growth).
• See Chapter: Chapter 2 (Valuation Fundamentals), Chapter 21 (Exit Planning)

Gross Margin¶

• Definition: (Revenue - Cost of Goods Sold) ÷ Revenue; shows profitability after direct costs but before operating expenses.
• Example: Revenue ₹1 crore, COGS ₹30 lakh = ₹70 lakh gross profit = 70% gross margin.
• Why It Matters: High gross margins (>70% for SaaS, >50% for marketplaces) fund growth and lead to eventual profitability. Low margins require huge scale.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Gross Merchandise Value (GMV)¶

• Definition: Total value of goods/services sold through a platform before deducting fees, returns, or discounts.
• Example: Your marketplace processed ₹50 crore in transactions this quarter. That's your GMV. If you take 15% commission, revenue is ₹7.5 crore.
• Why It Matters: GMV shows market activity but isn't revenue. Focus on take rate (commission %) and actual revenue for valuation.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Gross Revenue Retention (GRR)¶

• Definition: Percentage of revenue retained from existing customers excluding expansions (includes downgrades and churn).
• Example: Start year with ₹1 crore ARR from existing customers, end with ₹900 lakh (after churn/downgrades) = 90% GRR.
• Why It Matters: GRR measures core product value. >90% is good for SaaS, >85% is acceptable, <80% signals weak product-market fit.
• See Chapter: Chapter 5 (Building Your Fundable Company)

IRR (Internal Rate of Return)¶

• Definition: Annualized rate of return for an investment, accounting for timing of cash flows; key metric VCs use to evaluate fund performance.
• Example: Investor puts in ₹10 crore, gets ₹50 crore back after 5 years = 38% IRR.
• Why It Matters: VCs target 25-30%+ IRR. Understanding their return requirements helps you understand their incentives and deal structure preferences.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

Lifetime Value (LTV)¶

• Definition: Total gross profit expected from a customer over their entire relationship with the company.
• Example: Customer pays ₹1,000/month, 60% gross margin, stays 36 months on average = ₹21,600 LTV (₹1,000 × 0.60 × 36).
• Why It Matters: LTV must significantly exceed CAC (ideally LTV:CAC > 3:1) for sustainable unit economics. Low LTV relative to CAC = unsustainable business.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

LTV:CAC Ratio¶

• Definition: Lifetime value divided by customer acquisition cost; efficiency metric showing return on acquisition investment.
• Example: LTV ₹21,600, CAC ₹6,000 = 3.6:1 ratio.
• Why It Matters: >3:1 is good, >4:1 is excellent, <3:1 is concerning. Low ratios mean you're overspending on acquisition or have retention problems.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 13: Down Rounds and Difficult Financing

Monthly Recurring Revenue (MRR)¶

• Definition: Normalized monthly value of all active subscriptions; building block metric for SaaS businesses.
• Example: 500 customers at ₹10,000/month + 300 customers at ₹20,000/month = ₹50 lakh + ₹60 lakh = ₹1.1 crore MRR.
• Why It Matters: MRR and MRR growth rate are core SaaS metrics. Consistent MRR growth signals healthy business and makes fundraising easier.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Net Revenue Retention (NRR)¶

• Definition: Percentage of revenue retained from existing customers including expansions, upgrades, downgrades, and churn.
• Example: Start year with ₹1 crore from existing customers, add ₹30 lakh in expansions, lose ₹20 lakh to churn = ₹1.1 crore = 110% NRR.
• Why It Matters: NRR >100% means existing customers are growing their spending faster than churn. Best SaaS companies have 120%+ NRR. <100% is concerning.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Rule of 40¶

• Definition: Heuristic stating healthy SaaS companies should have growth rate + profit margin ≥ 40%.
• Example: 60% YoY growth + -20% profit margin = 40. Or 25% growth + 15% margin = 40.
• Why It Matters: Balances growth and profitability. Above 40 is good, below 40 suggests need to improve efficiency or accelerate growth.
• See Chapter: Chapter 5 (Building Your Fundable Company)

SAM (Serviceable Available Market)¶

• Definition: Portion of TAM that your product can serve given your current business model and distribution.
• Example: TAM for food delivery in India is ₹50,000 crore. Your SAM (metros only, lunch/dinner only) is ₹15,000 crore.
• Why It Matters: More realistic than TAM. Investors want to see large SAM (>₹5,000 crore / $500M+) that you can capture with your model.
• See Chapter: Chapter 2 (Valuation Fundamentals), Chapter 6 (Preparing to Fundraise)

SOM (Serviceable Obtainable Market)¶

• Definition: Portion of SAM you can realistically capture in near term (3-5 years) given competition and resources.
• Example: SAM is ₹15,000 crore. Realistically, you can capture 2-3% = ₹300-450 crore SOM in 5 years.
• Why It Matters: Most realistic market size metric. Your financial projections should align with SOM, not TAM.
• See Chapter: Chapter 2 (Valuation Fundamentals), Chapter 6 (Preparing to Fundraise)

TAM (Total Addressable Market)¶

• Definition: Total revenue opportunity available if your product achieved 100% market share in all possible use cases.
• Example: Total smartphone users in India (800M) × average annual spend on your app category (₹500) = ₹400,000 crore TAM.
• Why It Matters: Shows market size potential to investors. But TAM is often inflated - focus on SAM and SOM for realistic planning.
• See Chapter: Chapter 2 (Valuation Fundamentals), Chapter 6 (Preparing to Fundraise)

TVPI (Total Value to Paid-In)¶

• Definition: VC fund metric showing total value (realized + unrealized) divided by capital invested; measures multiple returned.
• Example: Fund invested ₹500 crore, current portfolio value is ₹1,250 crore = 2.5x TVPI.
• Why It Matters: VCs need 3x+ TVPI to generate target returns after fees. Understanding this helps you understand their exit pressure.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

Unit Economics¶

• Definition: Profit or loss on a per-unit basis (per customer, per transaction, per ride, etc.) before fixed costs.
• Example: Each ride: Revenue ₹100, driver payout ₹60, payment fees ₹2, insurance ₹3 = ₹35 contribution margin per ride.
• Why It Matters: Positive unit economics = business model works at scale. Negative unit economics = losing money on every transaction, can't scale profitably.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 13: Down Rounds and Difficult Financing

Valuation Multiple¶

• Definition: Valuation divided by key metric (revenue, ARR, GMV); benchmarking tool for comparing companies.
• Example: Company valued at ₹150 crore with ₹30 crore ARR = 5x ARR multiple.
• Why It Matters: Multiples vary by sector, growth rate, and market conditions. SaaS: 5-15x ARR. Marketplaces: 2-5x GMV. Understanding multiples helps calibrate valuation expectations.
• See Chapter: Chapter 2: Valuation Fundamentals, Chapter 9: Negotiating the Deal

4. Startup Lifecycle Terms¶

Acqui-Hire¶

• Definition: Acquisition primarily for the team rather than product/technology; typically small exits where product is shut down.
• Example: Google buys your 8-person AI startup for ₹20 crore, shuts down product, and makes team work on Google products.
• Why It Matters: Often positioned as success but usually means product failed. Founders/employees get jobs + some payout, but not true success exit.
• See Chapter: Chapter 21 (Exit Planning)

Bootstrap¶

• Definition: Building and growing a company using personal savings, revenue, and organic growth without external investment.
• Example: You and co-founder invest ₹5 lakh each, reach profitability at ₹50 lakh revenue, then grow using profits without raising VC.
• Why It Matters: Bootstrapping maintains 100% ownership and control but limits growth speed. Great option if capital efficient or in markets VCs don't love.
• See Chapter: Chapter 16 (Alternative Funding Paths)

Direct Listing¶

• Definition: Going public by listing existing shares on exchange without raising new capital or using underwriters (unlike traditional IPO).
• Example: Spotify and Slack went public via direct listings, allowing employees/investors to sell shares without traditional IPO process.
• Why It Matters: Avoids IPO dilution and underwriter fees but provides no new capital. Requires existing liquidity and strong brand.
• See Chapter: Chapter 21 (Exit Planning)

Founder-Market Fit¶

• Definition: Alignment between founder's background/expertise and the problem they're solving; why this founder can win in this market.
• Example: Doctor building healthcare AI has founder-market fit through deep domain expertise and network that outsider would lack.
• Why It Matters: Strong founder-market fit makes fundraising easier and execution more likely to succeed. First thing many investors evaluate.
• See Chapter: Chapter 6: Preparing to Fundraise, Chapter 14: Choosing Your Investors

Go-to-Market Strategy (GTM)¶

• Definition: Comprehensive plan for bringing product to market and acquiring customers, including channels, pricing, and sales approach.
• Example: SaaS GTM: Freemium model → Self-serve signups → Product-led growth → Add inside sales at ₹5L+ ACV → Add field sales at ₹25L+ ACV.
• Why It Matters: Strong GTM execution separates winners from losers. Investors heavily evaluate GTM feasibility and cost-effectiveness.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

Growth Hacking¶

• Definition: Creative, low-cost marketing tactics focused on rapid user acquisition and viral growth rather than traditional marketing.
• Example: Dropbox's referral program (give 500MB free storage for each friend invited) drove viral growth without large marketing spend.
• Why It Matters: Critical for early-stage startups with limited marketing budgets. But doesn't replace product-market fit.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Initial Public Offering (IPO)¶

• Definition: Process of offering private company shares to public in new stock issuance, transitioning from private to public company.
• Example: Zomato's IPO in 2021 at ₹76/share raised ₹9,375 crore, valuing company at ₹60,000 crore on listing day.
• Why It Matters: IPO is the ultimate liquidity event for investors and employees. Requires ₹500+ crore revenue, profitability path, and strong governance.
• See Chapter: Chapter 21 (Exit Planning), Chapter 23 (Indian Success Stories)

Minimum Viable Product (MVP)¶

• Definition: Simplest version of product with enough features to attract early adopters and validate core value proposition.
• Example: First version of your SaaS has only 1 core feature and basic UI, built in 2 months for ₹5 lakh, to test if anyone will pay.
• Why It Matters: MVP philosophy prevents over-building before validation. Ship fast, get feedback, iterate. Don't build for 12 months in darkness.
• See Chapter: Chapter 5 (Building Your Fundable Company)

Pivot¶

• Definition: Fundamental change in business model, product, or target market based on learnings; strategic course correction.
• Example: Slack started as gaming company (Glitch), failed, pivoted to internal communication tool they built, became ₹25,000+ crore company.
• Why It Matters: Pivots are normal and often necessary. Being open to pivoting based on data is strength, not weakness. But don't pivot constantly.
• See Chapter: Chapter 5 (Building Your Fundable Company), Chapter 18 (Crisis Management)

Product-Market Fit¶

• Definition: The degree to which a product satisfies strong market demand; state where customers want your product and tell others.
• Example: 40%+ of users say they'd be "very disappointed" if product disappeared (Sean Ellis test). Organic growth from word of mouth. Low churn.
• Why It Matters: Product-market fit is THE milestone. Everything before is searching for it. Everything after is scaling it. Don't scale before achieving it.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

Reverse Flip¶

• Definition: Process of moving company domicile from foreign jurisdiction (typically Delaware/Singapore) back to India.
• Example: You incorporated in Delaware for foreign VC access. Now reversing to Indian entity for IPO on Indian stock exchanges.
• Why It Matters: With matured Indian VC ecosystem and strong IPO market, many startups are reverse flipping. Complex process requiring tax/legal expertise.
• See Chapter: Chapter 22: Indian Regulatory Framework, Chapter 23 (Indian Success Stories)

Secondary Market/Sale¶

• Definition: Sale of existing shares from current shareholders (founders/employees/early investors) rather than company issuing new shares.
• Example: At Series C, lead investor allows founders to sell ₹5 crore of personal shares (secondary) in addition to ₹50 crore primary round.
• Why It Matters: Provides founder liquidity without diluting company. Investors see small secondary as de-risking; large secondary signals lack of conviction.
• See Chapter: Chapter 20 (Secondary Sales), Chapter 21 (Exit Planning)

Traction¶

• Definition: Measurable evidence that business model is working; typically user growth, revenue growth, engagement metrics.
• Example: Grew from 0 to 10,000 users in 6 months with 40% MoM growth, ₹15 lakh MRR, <3% churn = strong traction.
• Why It Matters: Traction is what gets you funded. Early-stage investors bet on potential; later-stage investors want proof via traction metrics.
• See Chapter: Chapter 5: Building Your Fundable Company, Chapter 6: Preparing to Fundraise

Unicorn Path¶

• Definition: Growth trajectory and strategy for reaching $1B+ valuation, typically requiring 3-4 funding rounds over 7-10 years.
• Example: Seed (₹3 crore) → Series A (₹25 crore) → Series B (₹150 crore) → Series C (₹500 crore) → Series D (₹2,000 crore / $1B+).
• Why It Matters: Not all startups need to be unicorns. But if raising VC, investors expect unicorn-scale outcomes. Understand if your market can support this.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 19: Multi-Stage Fundraising

Valley of Death¶

• Definition: Period between startup launch and achieving positive cash flow where company is most vulnerable to running out of capital.
• Example: After spending ₹50 lakh building MVP, you have 8 months runway to prove model works and raise seed round, or you die.
• Why It Matters: Most startups die in the valley of death. Minimize time here by: achieving product-market fit quickly, managing burn, or raising sufficient capital.
• See Chapter: Chapter 5 (Building Your Fundable Company), Chapter 18 (Crisis Management)

5. Indian-Specific Terms¶

Angel Tax Exemption¶

• Definition: Exemption from angel tax (Section 56(2)(viib)) for DPIIT-recognized startups, removing taxation on share premium above fair value.
• Example: DPIIT-recognized startup raises ₹1 crore at ₹10 crore valuation. Previously could face angel tax on "excess" premium, now exempt.
• Why It Matters: Major relief announced in 2023. But exemption requires DPIIT recognition, specific criteria, and proper documentation.
• See Chapter: Chapter 22: Indian Regulatory Framework

Companies Act 2013¶

• Definition: Primary legislation governing corporate affairs, incorporating, and operation of companies in India.
• Example: Section 62 governs further issue of shares, Section 42 governs private placements, Sections 149-172 govern board composition.
• Why It Matters: All Indian private limited companies must comply. Violations can void investment agreements or result in penalties.
• See Chapter: Chapter 22: Indian Regulatory Framework, Chapter 25 (When to Call a Lawyer)

DVR (Differential Voting Rights) Shares¶

• Definition: Shares with different voting rights than ordinary shares (higher or lower), allowed under Companies Act but rarely used.
• Example: Founders hold shares with 10x voting rights, maintaining control despite owning <50% economic interest.
• Why It Matters: DVR shares could allow founder control similar to dual-class US structures. But regulatory/market acceptance in India remains uncertain.
• See Chapter: Chapter 10 (Protecting Your Equity and Control), Chapter 22 (Indian Regulatory Framework)

DPIIT (Department for Promotion of Industry and Internal Trade)¶

• Definition: Government body that recognizes startups, administers Startup India program, and provides tax benefits and support.
• Example: Registering on Startup India portal and getting DPIIT certificate provides angel tax exemption, faster patent processing, and access to funds.
• Why It Matters: DPIIT recognition is essential for Indian startups to access various benefits. Free to apply, requires meeting startup definition criteria.
• See Chapter: Chapter 22: Indian Regulatory Framework

FC-GPR (Form C - General Permission Route)¶

• Definition: RBI form filed by Indian company within 30 days of issuing shares to foreign investors documenting foreign investment details.
• Example: After Series A closes with Singapore VC investing ₹10 crore, you file FC-GPR with RBI reporting investment details.
• Why It Matters: Mandatory compliance filing. Failure to file or late filing can result in penalties and complications for future fundraising.
• See Chapter: Chapter 22: Indian Regulatory Framework

FC-TRS (Form C - Transfer)¶

• Definition: RBI form filed by Indian company within 60 days of transfer of shares involving foreign investor (secondary sales).
• Example: Your seed investor (foreign) sells shares to Series A investor. You must file FC-TRS reporting this transfer.
• Why It Matters: Required for any share transfer involving non-residents. Part of FEMA compliance critical for foreign investment.
• See Chapter: Chapter 20 (Secondary Sales), Chapter 22 (Indian Regulatory Framework)

FEMA (Foreign Exchange Management Act)¶

• Definition: Law regulating foreign exchange and foreign investment into India, enforced by RBI.
• Example: FEMA prescribes valuation methodologies for foreign investment, sector caps, pricing guidelines, and reporting requirements.
• Why It Matters: All foreign VC investment must comply with FEMA. Non-compliance can void investments or result in penalties/prosecution.
• See Chapter: Chapter 22: Indian Regulatory Framework

Flip (Incorporation)¶

• Definition: Process of creating foreign parent company (typically Delaware or Singapore) that owns Indian subsidiary, common for raising foreign VC.
• Example: You have Indian Pvt Ltd. You create Delaware C-Corp that acquires Indian entity, making it a wholly-owned subsidiary. VCs invest in Delaware entity.
• Why It Matters: Flips ease foreign VC investment and US M&A/IPO but involve tax costs (15-20% on share swap) and complexity. Less common now with reverse flip options.
• See Chapter: Chapter 22: Indian Regulatory Framework

FLA (Foreign Liabilities and Assets) Return¶

• Definition: Annual return filed by Indian companies with foreign investment or overseas investments reporting all foreign transactions.
• Example: Your company must file FLA by July 15 reporting all foreign investment, loans, and overseas assets as of March 31.
• Why It Matters: Mandatory FEMA compliance. Even if no foreign transactions during year, "nil" return must be filed.
• See Chapter: Chapter 22: Indian Regulatory Framework

Indian Private Limited Company (Pvt Ltd)¶

• Definition: Most common structure for Indian startups; private company limited by shares with 2-200 shareholders.
• Example: "YourStartup Private Limited" incorporated under Companies Act 2013 with authorized capital ₹10 lakh, 10 lakh shares of ₹10 each.
• Why It Matters: Pvt Ltd structure provides limited liability, allows foreign investment under FEMA, and supports CCPS issuance. Required for most VC funding.
• See Chapter: Chapter 22: Indian Regulatory Framework

LLP (Limited Liability Partnership)¶

• Definition: Hybrid structure combining partnership flexibility with limited liability protection; easier compliance than Pvt Ltd.
• Example: Two founding partners create LLP for consulting business, avoiding company-level formalities while maintaining liability protection.
• Why It Matters: LLP works for services businesses but doesn't support equity investment structure VCs require. Not suitable if raising VC capital.
• See Chapter: Chapter 22: Indian Regulatory Framework

Press Note 3 of 2020¶

• Definition: Government notification requiring prior approval for foreign investment from countries sharing land border with India (primarily targeting China).
• Example: Chinese VC wanting to invest in your Series A requires government approval, adding 8-12 weeks to closing timeline.
• Why It Matters: Significantly impacted Indian startup funding from Chinese investors (Alibaba, Tencent, etc.) who were very active pre-2020.
• See Chapter: Chapter 22: Indian Regulatory Framework

RBI Pricing Guidelines¶

• Definition: Regulations specifying how foreign investment in Indian companies must be priced (fair value based on DCF or comparable valuation).
• Example: Foreign VC investment must be at or above price determined by independent Category-I Merchant Banker valuation report.
• Why It Matters: Can't sell shares to foreign investors at artificially low prices (potential penalty) or excessively high prices (potential revaluation). Must justify valuation.
• See Chapter: Chapter 22: Indian Regulatory Framework

Section 80-IAC Tax Benefits¶

• Definition: Income Tax Act provision offering 3-year tax holiday for DPIIT-recognized startups (10 years from incorporation, 3 consecutive years of choice).
• Example: Your DPIIT-recognized startup founded in 2023 can choose any 3 consecutive years between 2023-2033 to be 100% exempt from income tax.
• Why It Matters: Significant tax savings if you reach profitability early. Must apply to DPIIT with conditions (turnover <₹100 crore, not from restructuring, etc.).
• See Chapter: Chapter 22: Indian Regulatory Framework

SEBI (Securities and Exchange Board of India)¶

• Definition: Regulatory body governing securities markets, IPOs, mutual funds, and investor protection in India.
• Example: SEBI regulations govern IPO process, including minimum ₹25 crore issue size, ₹10 crore pre-IPO profitability, 3-year track record requirements.
• Why It Matters: Understanding SEBI requirements is critical for IPO planning. Recent reforms have made it easier for startups to go public.
• See Chapter: Chapter 21 (Exit Planning), Chapter 22 (Indian Regulatory Framework)

Singapore Flip¶

• Definition: Creating Singapore holding company as parent to Indian operating company, alternative to Delaware flip.
• Example: You create Singapore Pte Ltd that owns Indian Pvt Ltd. VCs invest in Singapore entity. Tax-efficient for Asian investors.
• Why It Matters: Singapore offers favorable tax treaty with India, easier for Asian VCs, lower setup/maintenance costs than US. But limits US M&A appeal.
• See Chapter: Chapter 22: Indian Regulatory Framework

Startup India¶

• Definition: Government initiative and portal for registering startups and accessing benefits like angel tax exemption, patent support, and funding schemes.
• Example: Register on startupindia.gov.in, upload incorporation certificate and description, get recognized as startup for benefits.
• Why It Matters: Gateway to DPIIT recognition and various government schemes. Free to register, minimal paperwork.
• See Chapter: Chapter 22: Indian Regulatory Framework

Startup India Seed Fund Scheme (SISFS)¶

• Definition: Government scheme providing seed funding up to ₹50 lakh to DPIIT-recognized startups through approved incubators.
• Example: Your DPIIT startup gets ₹20 lakh seed grant + ₹30 lakh debt from approved incubator under SISFS without giving up equity.
• Why It Matters: Non-dilutive capital for very early-stage startups. But limited availability (must apply through incubators, competitive).
• See Chapter: Chapter 16 (Alternative Funding Paths), Chapter 22 (Indian Regulatory Framework)

Valuation Report (for FEMA)¶

• Definition: Independent valuation by Category-I Merchant Banker required for foreign investment compliance under RBI pricing guidelines.
• Example: Before Series A with foreign VC, you commission valuation report from SEBI-registered Merchant Banker to support ₹40 crore valuation.
• Why It Matters: Required for FEMA compliance in foreign investment. Costs ₹50,000-2 lakh. Valuation must support or exceed investment price.
• See Chapter: Chapter 22: Indian Regulatory Framework

6. Investor & Deal Terms¶

Allocation¶

• Definition: Portion of funding round reserved for specific investor or group of investors.
• Example: Your ₹8 crore Series A: Lead gets ₹5 crore allocation, existing seed investors get ₹2 crore pro-rata allocation, ₹1 crore for new investors.
• Why It Matters: Managing allocations is critical when round is oversubscribed. Prioritize: lead investor, existing investors exercising pro-rata, strategic value-add new investors.
• See Chapter: Chapter 6 (Preparing to Fundraise), Chapter 9 (Negotiating Your Term Sheet)

BATNA (Best Alternative to Negotiated Agreement)¶

• Definition: Your best option if current negotiation fails; determines your walk-away power in negotiations.
• Example: You have competing ₹35 crore term sheet from another VC. This is your BATNA when negotiating ₹40 crore term sheet with preferred VC.
• Why It Matters: Strong BATNA gives negotiating leverage. Weak BATNA (no other options, 3 months runway) forces you to accept worse terms.
• See Chapter: Chapter 9 (Negotiating Your Term Sheet)

Cap Table (Capitalization Table)¶

• Definition: Spreadsheet showing company ownership structure, including all shareholders, share counts, ownership percentages, and investment details.
• Example: Post-Series A cap table: Founders 60% (6M shares), ESOP pool 15% (1.5M), Seed investors 10% (1M), Series A investors 15% (1.5M).
• Why It Matters: Cap table tells your equity story. Messy cap tables with too many small investors, founder disputes, or unclear ownership scare future investors.
• See Chapter: Chapter 4: Co-Founder Equity Splits and Vesting, Chapter 7: Term Sheet Analysis

Data Room¶

• Definition: Secure online repository where company stores documents for investor due diligence review.
• Example: Create data room with incorporation docs, financials, customer contracts, IP assignments, SHA, board minutes, cap table.
• Why It Matters: Well-organized data room signals professionalism and speeds due diligence. Disorganized or incomplete room raises red flags and delays closing.
• See Chapter: Chapter 8: Investor Due Diligence, Chapter 24: Templates, Checklists, and Frameworks

Deal Flow¶

• Definition: Rate at which investment opportunities come to an investor; critical metric for VC success.
• Example: Top-tier VC sees 3,000+ deals per year, takes meetings with 100, invests in 5-8. Your goal is to be in their top deal flow.
• Why It Matters: Understanding how VCs source deals (mostly warm intros) shapes your fundraising strategy. Cold emails rarely work for competitive deals.
• See Chapter: Chapter 6: Preparing to Fundraise, Chapter 14: Choosing Your Investors

Due Diligence¶

• Definition: Comprehensive investigation and verification of company's business, financials, legal, and technology before investment.
• Example: After term sheet, 30-45 days of due diligence covering: financial audit, legal review, customer calls, tech assessment, market research.
• Why It Matters: Due diligence uncovers issues that can kill deals or reduce valuation. Be transparent - material omissions discovered in DD destroy trust.
• See Chapter: Chapter 8 (Due Diligence), Chapter 9 (Negotiating Your Term Sheet)

Fund Lifecycle¶

• Definition: VC fund's lifespan from fundraising to returning capital to LPs, typically 10 years (2-4 years investing, 6-8 years managing/exiting).
• Example: Peak XV Fund VII raised in 2023, will invest 2023-2027, manage portfolio 2027-2033, with 10-year end date (possible extensions).
• Why It Matters: Funds late in lifecycle (years 7-10) have exit pressure, may push for sale when founders want more time. Consider fund vintage when choosing investors.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

LP (Limited Partner)¶

• Definition: Passive investors in VC funds (institutions, endowments, family offices) who provide capital to GPs but don't make investment decisions.
• Example: Sequoia Capital's LPs include university endowments, pension funds, sovereign wealth funds who committed capital to Sequoia funds.
• Why It Matters: VCs answer to LPs, creating pressure for returns that can misalign with founder interests. Understanding LP dynamics helps predict VC behavior.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

Letter of Intent (LOI)¶

• Definition: Non-binding document outlining preliminary agreement on key terms before detailed term sheet; less common in VC deals than M&A.
• Example: Strategic investor sends LOI indicating interest in Series B at ₹150-175 crore valuation, subject to due diligence.
• Why It Matters: LOIs are typically non-binding and less detailed than term sheets. Don't stop fundraising based on LOI alone.
• See Chapter: Chapter 6 (Preparing to Fundraise), Chapter 9 (Negotiating Your Term Sheet)

Management Fee¶

• Definition: Annual fee (typically 2-2.5% of fund size) that VCs collect from LPs to cover operational costs and salaries.
• Example: ₹1,000 crore fund charges 2% management fee = ₹20 crore per year to cover partner salaries, office, research, etc.
• Why It Matters: Management fees misalign incentives - VCs make money even without returns. Larger funds = higher fees = different incentive structure.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 14: Choosing Your Investors

Scout Program¶

• Definition: VC program where successful founders/operators get capital allocation to make small angel investments, sourcing deals for the VC.
• Example: Sequoia's Scout program gives successful founders $100K-500K to make angel investments. If scout invests, Sequoia can follow.
• Why It Matters: Scout investments can be great first checks with path to institutional VC. But scout has limited capital for follow-on, so need other funding sources.
• See Chapter: Chapter 1: Understanding the Funding Ecosystem, Chapter 6: Preparing to Fundraise

Term Sheet¶

• Definition: Summary document outlining key terms of investment deal (valuation, amount, board seats, preferences, veto rights, etc.); mostly non-binding except no-shop.
• Example: 5-10 page document specifying: ₹10 crore investment at ₹40 crore pre-money, 1x non-participating liquidation preference, 2-2-1 board, 45-day no-shop.
• Why It Matters: Term sheet is the negotiation document. Once signed, hard to change terms. This is where deal is really done - SHA just implements term sheet.
• See Chapter: Chapter 7: Term Sheet Analysis, Chapter 9 (Negotiating Your Term Sheet)

Vintage Year¶

• Definition: Year a VC fund began operations and started making investments; important for evaluating fund performance.
• Example: 2020 vintage funds invested during COVID at low valuations and may perform better than 2021 vintage (peak valuations).
• Why It Matters: Funds from bad vintages (peak markets) may underperform, creating pressure for aggressive terms or exits. Consider vintage when choosing investors.
• See Chapter: Chapter 14 (Choosing Your Investors)

Warm Introduction¶

• Definition: Introduction to investor through mutual connection (portfolio founder, another VC, industry expert) rather than cold outreach.
• Example: Your seed investor introduces you to Series A VC partner with personal email: "This is the best founder I've backed, you should meet."
• Why It Matters: Warm intros convert 100x better than cold emails. Most successful fundraises come from warm intros. Invest in network to get intros.
• See Chapter: Chapter 6 (Preparing to Fundraise)

Conclusion¶

This glossary covers 190 essential terms across six categories critical to startup fundraising. Key takeaways:

1. Funding Terms: Understand instrument types (SAFE vs convertible note vs priced round), valuation concepts (pre vs post-money, fully diluted), and round stages (pre-seed through Series A/B/C).

2. Legal & Structural Terms: Focus on founder-unfriendly terms to avoid (full ratchet anti-dilution, participating preferred uncapped, redemption rights) and standard protections (broad-based anti-dilution, 1x non-participating preference, balanced board).

3. Financial & Metrics Terms: Master the metrics investors care about for your business model (ARR/MRR for SaaS, GMV for marketplaces, CAC/LTV universally) and unit economics that prove scalability.

4. Startup Lifecycle Terms: Understand the journey from MVP to product-market fit to scaling to exit, and the unique challenges at each stage.

5. Indian-Specific Terms: If raising in India, master FEMA compliance, CCPS structure, DPIIT recognition, RBI pricing guidelines, and Companies Act requirements. These aren't optional - they're mandatory.

6. Investor & Deal Terms: Learn VC incentive structures (management fees, carry, fund lifecycle), negotiation concepts (BATNA, term sheets vs SHA), and due diligence processes.

Using This Glossary Effectively:

• When reviewing a term sheet, look up every unfamiliar term and understand its implications
• Before fundraising conversations, review relevant categories to speak the language fluently
• Cross-reference terms to relevant chapters for deeper understanding
• Focus first on terms marked as "red flags" or "founder-unfriendly" in their definitions
• Share this glossary with co-founders, advisors, and early employees to build shared understanding

What This Glossary Doesn't Replace:

• Legal counsel reviewing your specific agreements
• Financial advisors helping with valuation and modeling
• Deep chapter content explaining concepts in context
• Experience learning through actual fundraising cycles

Remember: Understanding these terms is necessary but not sufficient. You must understand the terms, their implications in combination, and how they play out across multiple scenarios (different exit values, down rounds, etc.). Use this glossary as your reference, but invest time in the full chapters for comprehensive understanding.

Disclaimer: This glossary provides educational information only and does not constitute legal, financial, or investment advice. Every company's situation is unique. Term definitions and examples are simplified for clarity - actual implementation is more complex. Always consult qualified legal and financial advisors before making fundraising decisions or signing agreements. Regulatory requirements (particularly Indian regulations) change frequently - verify current law before relying on any Indian-specific information.

Disclaimer¶

This chapter provides educational information about startup funding and is not legal, financial, or investment advice. Every startup situation is unique. Consult qualified professionals (lawyers, accountants, financial advisors) before making any funding decisions.

Last Updated: November 2025