All the Investor lingo you need 😏

In this edition - we're talking about all the investor terms and phrases you need to know!

From cap tables, liquidation preferences, pro rata rights, to everything in between, it can feel like a lot to keep straight.

No need to stress - we've pulled together the most common terms (and what they actually mean) so you can hold your own in any investor conversation. 👀

A–Z Investor Lingo

A

ARR — Annual Recurring Revenue

Revenue that repeats every year, usually from subscriptions or contracts. Investors love ARR because it shows stable, predictable income.

Example: “Our ARR crossed $3M this quarter.”

Accelerator

A program that gives startups funding, mentorship, and network access in exchange for equity. Usually runs for a few months.

Example: “We went through Techstars to refine our go-to-market.”

Acqui-hire

When a company is bought mainly to hire its team, not for its product.

Example: “The startup was acqui-hired by a larger competitor.”

Angel Investor

High net worth individuals who invest early. They write smaller checks than VCs but move faster. Often they give advice and intros too.

Example: “We closed $100k from two angels last month.”

B

Burn Rate

How much cash you spend each month. It’s how fast you are “burning” through money.

Example: “At a $50K monthly burn, our runway is 8 months.”

Bridge Round

A small, short-term funding round to extend runway before a bigger round.

Example: “We raised a $500K bridge before our Series A.”

Bootstrapping

Growing a business without outside funding, relying only on revenue.

Example: “We bootstrapped until we hit $1M ARR.”

C

Cap Table (Capitalization Table)

A spreadsheet showing who owns what in the company. Lists shares, options, notes, and percentages. Critical for tracking dilution.

Example: “Our lawyer updated the cap table after the SAFE round.”

CAGR — Compound Annual Growth Rate

The average annual growth rate over a set period of time.

Performance over the last twelve months.

Example: “Our CAGR over 3 years is 28%.”

Churn (Revenue or Customer Churn)

Customers or revenue lost over a period. Low churn indicates sticky product. High churn erodes growth and unit economics.

Example: “Monthly churn is 2 percent, which is stable.”

Convertible Note

A loan that converts into equity later, usually with a discount or valuation cap. Lets founders raise quickly without pricing the company.

Example: “We closed $250K on a convertible note with a $10M cap.”

Crowdfunding

Raising small amounts from many people, often through platforms like SeedInvest or Crowdcube.

Example: “We hit our $200K target on crowdfunding in two weeks.”

D

Dilution

When new shares are issued, each owner’s percentage gets smaller.

Example: “Our stake diluted by 15% after the Series A.”

Down Round

A funding round at a lower valuation than the last one. Hurts morale and ownership.

Example: “The company had to raise a down round to stay afloat.”

Drag-Along Rights

A clause that lets majority investors force minority holders to sell in an exit.

Example: “The drag-along clause meant all shareholders had to sell.”

E

ENT — Enterprise

Large business clients with big contract values and longer sales cycles.

Example: “Our ENT deals average $400K ARR.”

Equity Financing

Raising money by selling ownership in the company.

Example: “We chose equity financing instead of debt to scale faster.”

Exit

How investors and founders cash out (sale, IPO, or secondary sale).

Example: “Our goal is an exit within 5 years.”

F

Founder Vesting

Shares that founders earn gradually, often over 4 years. If a founder leaves early, unvested shares return to the company.

Example: “Vesting kept both co-founders committed to the long game.”

Follow-On Investment

When an investor participates in later rounds after their initial check.

Example: “Our seed lead did a follow-on in our Series A.”

Friends and Family Round

Early funding raised from personal networks. Usually small and informal.

Example: “We raised a $50K friends and family round to build the MVP.”

G

Gross Margin

Revenue minus cost of goods sold. Shows how much profit you make after direct costs.

Example: “Our SaaS gross margin is 82%.”

Growth Equity

Investment in later-stage companies with proven traction. Used to scale faster.

Example: “We brought in growth equity at $20M ARR.”

Go-To-Market (GTM)

The plan to reach customers and convert them. Includes channels, sales motion, pricing, and onboarding. Investors want a repeatable GTM for scale.

Example: “We changed GTM to inside sales and saw faster ramp.”

H

Headroom

How much room is left to grow within your current market.

Example: “We still have headroom in SME before moving to ENT clients.”

Hockey Stick Growth

When growth is flat / dips, then suddenly spikes upward like a hockey stick. Expected by VCs - even though they will complain about how “your graph is a perfect hockey stick.”

Example: “Our MRR hit hockey stick growth after product-market fit.”

I

IC — Investment Committee

The small group of VC fund managers that get together in an official meeting to determine whether they’ll invest. Typically one of the final steps before investment.

Example: “Make sure your story is clearly communicated, or a redteam analyst can get you torpedoed at IC.”

IPO — Initial Public Offering

When a private company lists on a stock exchange to raise money from the public.

Example: “Stripe delayed its IPO due to market conditions.”

Indication of Interest (IOI)

A non-binding note or commitment that an investor might invest.

Example: “We got three IOIs after our demo day.”

Institutional Investor

Large professional investors like VC firms, private equity, or banks.

Example: “An institutional investor joined our Series B.”

Incubator

A program that supports early-stage startups with resources, mentorship, and sometimes a little cash.

Intellectual Property (IP)

Your patents, trademarks, and trade secrets. The stuff that makes your business defensible.

J

J-Curve

Results dip at first, then rise steeply. Common in venture funds and early startups.

Example: “Our growth followed a J-curve after product launch.”

K

KPI — Key Performance Indicator

The few metrics that matter most to track success.

Example: “Our key KPI is net revenue retention.”

Key Man Clause

A clause in VC agreements that allows LPs to stop new investment if a named manager leaves the fund. In company context, similar clauses can exist for critical hires.

Example: “Investors insisted on a key man clause for our CTO.”

L

LTM — Last Twelve Months

Performance over the last twelve months.

Example: “Our LTM revenue is $10M as of March 2024.”

TTM — Trailing Twelve Months

Same as LTM, often used for EBITDA or revenue metrics.

Example: “Our TTM gross profit margin improved.”

Liquidation Preference

Defines who gets paid first in an exit. Investors often get their money back before founders and employees.

Example: “The 1x liquidation preference protected investors in a small exit.”

Lead Investor

The VC firm or angel who sets terms and usually writes the largest check in a round.

Example: “Accel came in as lead for our Series A.”

Letting the market price it

Company invites investors to submit offers based on market valuation instead of setting a fixed valuation.

Example: “We didn’t set a valuation, we’re letting the market price it.”

M

MRR — Monthly Recurring Revenue

Recurring subscription revenue each month. Shows short-term traction.

Example: “We’re at $90K MRR and growing fast.”

Market Size (TAM/SAM/SOM)

TAM = total market, SAM = serviceable market, SOM = your reachable slice.

Example: “Our SOM is $500M within a $10B TAM.”

Management Fee

Fee that VCs charge their investors (LPs) to run the fund.

Example: “The VC charges a 2% management fee.”

N

Note (Convertible Note)

A short-term debt that turns into equity later. Used when valuation is unclear.

Example: “Our first round was on notes before a priced round.”

Non-Dilutive Funding

Capital that doesn’t reduce founder ownership, like grants or revenue-based financing.

Example: “We won $200K in non-dilutive government grants.”

O

Option Pool

Shares set aside for future hires. Creates dilution when formed.

Example: “We created a 10% option pool for new employees.”

Overhang

When large pools of unissued stock (like options) dilute future ownership.

Example: “The option pool created significant overhang for new investors.”

Operating Metrics

Unit economics and operational KPIs like CAC, ARPU, retention, and payback. These prove business health and scaleability.

Example: “Operating metrics showed CAC payback under 12 months.”

P

p.a. — per annum

Per year.

Example: “Interest is 6% p.a.”

pcm — per calendar month

Per month.

Example: “Rent is $4,000 pcm.”

Post-Money Valuation

Value of the company after new money is added.

Example: “We raised $5M on a $25M post-money.”

Pre-Money Valuation

Value of the company before new money.

Example: “Our pre-money was $20M.”

Pro Rata Rights

The right for existing investors to maintain ownership by participating in future rounds. VCs use this to protect their initial ownership and returns.

Example: “Our seed investors exercised pro rata in Series A.”

Q

Quarterly Growth

Growth measured every three months.

Example: “We grew 30% QoQ.”

Quality of Earnings (QoE)

A due diligence report on how reliable financials are. Not quite an audit, but lays the groundwork for one. Typically required before VCs will make large investments.

Example: “Investors requested a QoE before committing.”

R

Runway

How long you can last with current cash and burn.

Example: “We have 9 months of runway left.”

Rights of First Refusal (ROFR)

Gives existing investors first chance to buy shares before outsiders.

Example: “ROFR gave our seed investors early access to the Series A.”

Running an active process

Systematically approaching prospective investors in a deliberate and time-bound way.

Example: “We’re running an active process to close the round in 90 days.”

S

SAFE — Simple Agreement for Future Equity

An agreement where investors give cash now and get shares later, usually at the next round, with a discount or valuation cap.

Example: “We raised $400K in SAFEs at a $10M cap.”

SME — Small- and Medium-Sized Enterprises

Medium-sized business clients. Smaller deals, but often faster sales cycles.

Example: “Our SME customers make up 60% of revenue.”

Soft-Circled

Investors who verbally agree but haven’t signed or wired money yet.

Example: “We have $2M soft-circled going into the round.”

Series A / B / C

Larger rounds as the company scales. Each comes with higher expectations.

Example: “We are preparing for our Series B at $15M ARR.”

T

Ticket

The total amount of your raise (or corporate action).

Example: “Average ticket size is $500K.”

Term Sheet

A short summary of investment terms. Not legally binding except for a few clauses.

Example: “We signed a term sheet with Sequoia.”

Tag-Along Rights

Lets minority shareholders sell shares if majority sells. Protects small holders.

Example: “Tag-along ensured angels sold shares in the acquisition.”

Traction

Proof your business is working. Users, revenue, growth showing momentum.

Example: "Our traction is 40% month-over-month growth for six straight months."

U

Unicorn

A private startup valued at $1B or more.

Example: “Figma became a unicorn in 2018.”

Up-Round

A funding round at a higher valuation than before.

Example: “We raised an up-round at $50M pre-money.”

V

Valuation Cap

Sets the maximum valuation at which convertible notes or SAFEs convert. Protects early investors.

Example: “The SAFE had a $12M cap.”

Venture Debt

Loans to startups, usually alongside equity funding. Less dilutive but adds repayment pressure.

Example: “We raised $2M venture debt to extend runway.”

Vesting Cliff

The initial period (commonly 12 months) before any equity vests. Prevents very short term founders from keeping equity. Standard in founder and employee agreements.

Example: “The agreement includes a one year cliff.”

W

Warrants

The right to buy shares at a set price later. Sweetens deals.

Example: “Investors got warrants along with the debt financing.”

Working Capital

The difference between current assets and liabilities. Shows short-term financial health.

Example: “We improved working capital by speeding up receivables.”

X

Exit Multiple

The sale price compared to revenue or profit at exit.

Example: “The company sold for a 6x revenue multiple.”

Y

YOY — Year-over-Year

Compares performance to the same period last year.

Example: “Our revenue grew 35% YOY compared to 2023.”

YTD — Year-to-Date

Performance from the start of the year to today.

Example: “We’ve closed $1.2M in new sales YTD.”

Z

Zero to One

Building something totally new, not just an improvement.

Example: “The founder wants a zero-to-one company, not an incremental one.”

Zombie Company

A company that survives but cannot grow or service its obligations. It burns minimal cash but has no path to scale. Investors avoid long term exposure.

Example: “Investors called it a zombie company after multiple flat years.”

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That’s your crash course in investor-speak.

Bookmark this page for your next investor meeting.

Now, go make that hockey-stick growth happen.

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