Reference
Venture financing glossary: startup law terms from A to Z
How to use this glossary
Each term has a short definition you can link to directly (use the # next to the term). Definitions describe how the terms are used in US venture financings for Delaware C-Corps as of late 2026; the actual documents control. Follow the links for full guides with examples.
0-9
- 409A valuation#
An independent appraisal of a private company's common stock used to set option exercise prices at fair market value and avoid penalties under Section 409A. It is generally relied on for up to 12 months or until a material event.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- 83(b) election#
A filing with the IRS, due within 30 days after receiving restricted (vesting) stock, in which the holder elects to be taxed on the stock's value at receipt instead of as it vests. For founders who pay fair market value, it means no tax now and capital gain treatment later.
Read more: The 83(b) Election: Deadline, How to File (Including Online) and What If You Miss It
A
- Accelerated vesting#
Vesting that happens earlier than the normal schedule because of a triggering event, usually a sale of the company (single trigger) or a sale plus a qualifying termination (double trigger).
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Accredited investor#
An investor who meets SEC tests, for example an individual with income over $200,000 ($300,000 with a spouse or spousal equivalent) in each of the last two years, net worth over $1 million excluding the primary residence, or certain professional licenses.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Action by written consent#
A decision of the board or stockholders taken by signed written consent instead of at a meeting. Board consents must be unanimous; stockholder consents need the votes that a meeting would require, unless the charter says otherwise.
Read more: Post-Incorporation Checklist: Every Document a Startup Founder Needs
- Advisor agreement#
A contract with a startup advisor setting out the services, equity grant and vesting, confidentiality and IP assignment. Typical grants are 0.1% to 1% vesting over one to two years.
Read more: Startup Advisor Agreements and Advisor Equity: Market Ranges, Vesting and Key Terms
- Alternative minimum tax (AMT)#
A parallel US federal tax calculation. The spread on exercise of incentive stock options counts as AMT income even though it is not regular taxable income.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Amended and restated certificate of incorporation#
The new version of the charter adopted at a priced round, which creates the preferred stock and sets its rights, preferences and protective provisions.
Read more: Series A Readiness: What Changes From Seed and How to Prepare
- Angel investor#
An individual who invests personal money in early-stage companies, usually through SAFEs, convertible notes or small allocations of priced rounds.
Read more: Angel Investors: How to Review a SAFE or Term Sheet Before You Sign
- Anti-dilution protection#
A charter provision that lowers the conversion price of preferred stock if the company later issues shares at a lower price. Broad-based weighted average is the market form; full ratchet is investor-favorable.
Read more: Anti-Dilution Protection: Broad-Based Weighted Average vs Full Ratchet (With Examples)
- Assumed par value capital method#
The alternative Delaware franchise tax calculation based on total gross assets, issued shares and authorized shares, which usually produces a much lower tax for startups than the default authorized shares method.
Read more: Delaware Franchise Tax: Why You Got a Huge Bill and How to Fix It
The maximum number of shares of each class the certificate of incorporation allows the company to issue. Startups typically authorize 10,000,000 common shares at formation.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
The default Delaware franchise tax calculation, based only on the number of authorized shares. For 10,000,000 shares it yields $85,165, which is why startups should use the assumed par value capital method.
Read more: Delaware Franchise Tax: Why You Got a Huge Bill and How to Fix It
B
- Bad actor disqualification#
A rule that makes the Rule 506 exemption unavailable if the issuer or certain related persons have specified securities law violations or orders.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Beneficial ownership information (BOI)#
Ownership information that the Corporate Transparency Act required companies to report to FinCEN. Since FinCEN's March 2025 interim final rule, companies formed in the United States are exempt; foreign companies registered in a US state remain covered.
Read more: Post-Incorporation Checklist: Every Document a Startup Founder Needs
- Blue sky laws#
State securities laws. For Rule 506 offerings, states may require only notice filings and fees, not registration.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Board observer#
A person allowed to attend board meetings without a vote, usually under a side letter with confidentiality obligations and exclusions for privileged matters.
Read more: Startup Board of Directors at Pre-Seed, Seed and Series A: How Founders Keep Control
- Board of directors#
The body that manages the corporation, appoints officers and approves equity grants, financings and major transactions. Seat allocation is set in the charter and the voting agreement.
Read more: Startup Board of Directors at Pre-Seed, Seed and Series A: How Founders Keep Control
- Bridge round#
Short-term financing, often convertible notes or SAFEs from existing investors, that carries a company to its next priced round.
Read more: Convertible Notes vs SAFEs: Which Should a Startup Use in 2026?
- Broad-based weighted average#
The market anti-dilution formula, NCP = OCP x (A + B) / (A + C), where A counts all outstanding shares, options and warrants. It adjusts the conversion price moderately in a down round.
Read more: Anti-Dilution Protection: Broad-Based Weighted Average vs Full Ratchet (With Examples)
- Burn rate#
The amount of cash a company spends per month, net of revenue. Runway equals cash on hand divided by net burn.
- Bylaws#
The corporation's internal rules on directors, officers, meetings, written consents, indemnification and share transfer restrictions.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
C
- Capped participation#
Participating preferred whose total return (preference plus participation) is limited to a multiple of the original price, such as 3x. Above the cap, the holder converts if that pays more.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- Cap table#
The capitalization table: a record of every security the company has issued or promised, by holder and class, on issued and fully diluted bases.
Read more: Cap Table Best Practices and Common Mistakes for Startups
- C-Corp#
A corporation taxed separately from its owners under Subchapter C of the Internal Revenue Code. Venture investors expect a Delaware C-Corp, and only C-Corp stock can be QSBS.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
- Certificate of incorporation#
The charter filed with the Delaware Secretary of State that creates the corporation and sets its name, authorized shares, par value and key governance provisions.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
- Change of control#
A sale of the company by merger, sale of a majority of voting power or sale of substantially all assets. Often a trigger for acceleration and the liquidation preference.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- CIIAA (or PIIA)#
Confidential information and invention assignment agreement (also called proprietary information and inventions agreement): the contract by which founders and employees keep company information confidential and assign inventions to the company.
Read more: IP Assignment for Startups: Founders, Employees and Contractors (CIIAA / PIIA)
- Cliff#
The initial period, usually 12 months, before any shares or options vest. At the cliff, the portion for that period (25% on a four-year schedule) vests at once.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Common stock#
The basic class of equity held by founders and employees, ranking after preferred stock in a liquidation.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- Company capitalization#
In the YC post-money SAFE, the share count used to compute the conversion price: all outstanding shares, options, promised options, the unissued pool and all converting securities, excluding new pool increases made in the priced round.
Read more: SAFE Dilution Calculator Explained: How Stacked SAFEs Convert (With Examples)
- Conversion price#
The price at which preferred stock (or a SAFE or note) converts into shares. For preferred, the conversion ratio equals the original purchase price divided by the conversion price.
Read more: Anti-Dilution Protection: Broad-Based Weighted Average vs Full Ratchet (With Examples)
- Convertible note#
A loan to a startup that converts into equity at the next priced round, usually with interest, a maturity date, a discount and a valuation cap.
Read more: Convertible Notes vs SAFEs: Which Should a Startup Use in 2026?
- Co-sale right#
A right of investors to sell a proportional part of their shares alongside a founder who sells to a third party. Also called a tag-along right.
Read more: Drag-Along, Right of First Refusal (ROFR) and Co-Sale Rights Explained
- Cumulative dividends#
Dividends that accrue each year whether or not declared and are added to the liquidation preference. Uncommon in 2026 venture deals (about 3% per Cooley).
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
D
- Data room#
An organized, access-controlled set of company documents shared with investors or acquirers for due diligence.
Read more: VC Due Diligence Data Room Checklist for Seed and Series A Startups
- Deemed liquidation event#
A merger, sale of control or sale of substantially all assets that the charter treats as a liquidation for purposes of the liquidation preference.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- Delaware franchise tax#
An annual tax on Delaware corporations, due with the annual report by March 1, calculated as the lower of the authorized shares method and the assumed par value capital method.
Read more: Delaware Franchise Tax: Why You Got a Huge Bill and How to Fix It
- Dilution#
The reduction of an existing holder's percentage ownership when the company issues new shares, options or convertible securities.
Read more: SAFE Dilution Calculator Explained: How Stacked SAFEs Convert (With Examples)
- Discount#
A SAFE or note term that lets the investor convert at a percentage below the priced round's price, typically 20%.
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
- Double trigger acceleration#
Acceleration of unvested equity that requires both a change of control and a termination without cause or resignation for good reason within a set period. The market form for founders.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Down round#
A financing at a lower price per share than the previous round. Triggers anti-dilution adjustments; 12.1% of deals in Cooley's Q2 2026 report.
Read more: Anti-Dilution Protection: Broad-Based Weighted Average vs Full Ratchet (With Examples)
- Drag-along#
A provision requiring stockholders to vote for and join a sale approved by specified holders, so a minority cannot block it.
Read more: Drag-Along, Right of First Refusal (ROFR) and Co-Sale Rights Explained
- Due diligence#
The investigation investors or buyers conduct into a company's legal, financial, commercial and technical condition before closing.
Read more: VC Due Diligence Data Room Checklist for Seed and Series A Startups
E
- Early exercise#
Exercising stock options before they vest, receiving restricted stock subject to repurchase. Combined with an 83(b) election, it can start capital gain and QSBS holding periods early.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Effective pre-money valuation#
The headline pre-money valuation minus the value of new option pool shares created in the round, that is, the valuation existing holders actually receive.
Read more: The Option Pool Shuffle: How Pool Size Changes Your Real Valuation (and How to Negotiate It)
- EIN#
Employer Identification Number, the company's US federal tax ID. Founders without an SSN apply by fax or mail with Form SS-4.
- Employer of record (EOR)#
A third-party company that legally employs a worker in a foreign country on behalf of a startup, handling payroll and local labor compliance.
Read more: Hiring Your First Employees and Contractors: US and International Checklist for Startups
- Equity incentive plan#
The plan, approved by the board and stockholders, under which a company grants options, restricted stock and RSUs to employees, directors and consultants.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Exercise price#
The price per share an option holder pays to buy shares. It must be at least fair market value on the grant date. Also called strike price.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
F
- Fair market value (FMV)#
The value of a share of common stock for tax purposes, usually supported by a 409A valuation for option pricing.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Form 5472#
An IRS information return filed with Form 1120 by US corporations that are 25% or more foreign-owned, reporting related-party transactions. The penalty for not filing is $25,000.
- Form D#
The notice filed with the SEC within 15 days after the first sale in a Regulation D offering, such as a SAFE round.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Founders' agreement#
A contract among co-founders covering roles, equity, vesting, IP, decision-making and departure.
Read more: How to Split Founder Equity: Frameworks, Examples and Pitfalls
- Founder stock#
Common stock bought by founders at formation, usually at par value, subject to vesting and documented in a stock purchase agreement.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
- Full ratchet#
An anti-dilution formula that resets the conversion price to the price of any later lower-priced issuance, regardless of its size. Investor-favorable and rare.
Read more: Anti-Dilution Protection: Broad-Based Weighted Average vs Full Ratchet (With Examples)
- Fully diluted#
A share count that includes all issued shares, outstanding options and warrants, the unissued pool and shares issuable on conversion of preferred, SAFEs and notes.
Read more: Cap Table Best Practices and Common Mistakes for Startups
G
- General solicitation#
Publicly offering securities, for example by advertising a raise and its terms. Prohibited in Rule 506(b) offerings, permitted in Rule 506(c) offerings.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Good reason#
A defined set of adverse changes (such as a material cut in duties or pay or a relocation) that let an executive resign and still receive double trigger acceleration or severance.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
I
- Incentive stock option (ISO)#
A stock option for employees that receives favorable tax treatment if holding periods are met: no regular tax at exercise (AMT may apply) and capital gain on sale.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Indemnification agreement#
A contract by which the company agrees to defend and reimburse directors and officers for claims related to their service, to the extent allowed by law.
Read more: Post-Incorporation Checklist: Every Document a Startup Founder Needs
- Information rights#
The right of major investors to receive periodic financial statements, budgets and other information.
Read more: Pro Rata Rights, Information Rights and Major Investor Thresholds Explained
- Investors' rights agreement#
A Series A document granting investors information rights, pro rata rights and registration rights, plus certain company covenants.
Read more: Series A Readiness: What Changes From Seed and How to Prepare
- ITIN#
Individual Taxpayer Identification Number, issued by the IRS to individuals who need a US tax ID but cannot get an SSN. Not required to form a company or get an EIN.
L
- Lead investor#
The investor who sets the terms of a round, usually invests the largest amount and often takes a board seat.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Liquidation preference#
The right of preferred holders to receive a set amount (typically 1x their investment) before common holders in a sale or liquidation.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
M
- Major investor#
An investor holding more than a defined threshold of preferred stock, entitled to information and pro rata rights.
Read more: Pro Rata Rights, Information Rights and Major Investor Thresholds Explained
- Management rights letter#
A letter giving a venture fund rights to consult with management, which helps the fund qualify as a venture capital operating company under US pension law.
Read more: Pro Rata Rights, Information Rights and Major Investor Thresholds Explained
- Maturity date#
The date on which a convertible note becomes due if it has not converted. Often 12 to 24 months after issuance.
Read more: Convertible Notes vs SAFEs: Which Should a Startup Use in 2026?
- MFN (most favored nation)#
A provision letting an investor adopt better terms the company later gives other investors in similar securities, such as a lower cap on a later SAFE.
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
N
- Non-participating preferred#
Preferred stock that receives the greater of its liquidation preference or its as-converted share, but not both. Used in 96.4% of deals in Cooley's Q2 2026 report.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- Non-qualified stock option (NSO)#
A stock option without ISO tax treatment. The spread is ordinary income at exercise. Available to employees, directors, advisors and contractors.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- No-shop#
A binding term sheet clause preventing the company from negotiating with other investors for a period, typically 30 to 60 days.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
O
- Option pool#
Shares reserved under the equity incentive plan for future grants to employees and other service providers. The median seed-stage pool is 11.8% (Carta).
Read more: The Option Pool Shuffle: How Pool Size Changes Your Real Valuation (and How to Negotiate It)
- Option pool shuffle#
Increasing the option pool before a round so that it is counted in the pre-money valuation, which lowers the price per share and dilutes only existing holders.
Read more: The Option Pool Shuffle: How Pool Size Changes Your Real Valuation (and How to Negotiate It)
P
- Participating preferred#
Preferred stock that receives its liquidation preference and then also shares in the remaining proceeds as if converted to common.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- Par value#
A nominal minimum value per share set in the charter, typically $0.0001 or $0.00001 for startups. Founders pay at least par for their shares.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
- Pay-to-play#
A provision requiring investors to buy their share of future rounds to keep preferred rights; non-participants may be converted to common.
Read more: Anti-Dilution Protection: Broad-Based Weighted Average vs Full Ratchet (With Examples)
- Post-money SAFE#
The SAFE form published by Y Combinator since 2018, in which the investor's ownership is fixed at roughly purchase amount divided by the post-money valuation cap. About 82% of SAFEs on Carta.
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
- Post-money valuation#
The company's value immediately after a financing: pre-money valuation plus new money. Investor ownership equals new money divided by post-money valuation.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Preferred stock#
A class of stock sold to investors in priced rounds, with rights such as a liquidation preference, anti-dilution protection and protective provisions.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Pre-money SAFE#
A SAFE whose cap is applied to the capitalization before the SAFEs, so SAFE holders share dilution among themselves. YC's original 2013 form.
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
- Pre-money valuation#
The company's value immediately before a financing. Price per share equals pre-money valuation divided by pre-money fully diluted shares.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Priced round#
A financing in which investors buy shares at a set price per share, usually a series of preferred stock.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
In a priced round, the pre-money valuation divided by the pre-money fully diluted capitalization (including the pool and converting securities, as the term sheet defines).
Read more: The Option Pool Shuffle: How Pool Size Changes Your Real Valuation (and How to Negotiate It)
- Pro rata right#
The right of an investor to buy part of a future financing to maintain its percentage ownership.
Read more: Pro Rata Rights, Information Rights and Major Investor Thresholds Explained
- Pro rata side letter#
A side agreement to a SAFE, such as YC's, giving the SAFE holder a right to buy its pro rata share of the priced round in which the SAFE converts.
Read more: Pro Rata Rights, Information Rights and Major Investor Thresholds Explained
- Protective provisions#
Actions the company cannot take without the approval of a specified majority of preferred stock, such as selling the company or creating senior stock.
Read more: Protective Provisions and Investor Vetoes: What Founders Should Accept
Q
- QSBS#
Qualified small business stock under Section 1202. For stock acquired after July 4, 2025, holders may exclude 50%, 75% or 100% of gain after 3, 4 or 5 years, up to the greater of $15M or 10x basis.
Read more: QSBS (Section 1202) After the July 2025 Changes: What Founders and Angels Must Know
- Qualified financing#
The priced round that triggers automatic conversion of convertible notes, usually defined by a minimum amount of new money.
Read more: Convertible Notes vs SAFEs: Which Should a Startup Use in 2026?
R
- Redemption right#
A right of preferred holders to require the company to buy back their shares after a period. Uncommon (5.4% of deals in Cooley's Q2 2026 report).
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Registered agent#
The person or company with a Delaware address designated to receive legal process for a Delaware corporation.
Read more: How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
- Registration rights#
Rights of investors to require or join an SEC registration of their shares after an IPO. Standard and low-priority at early stages.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Regulation D#
The SEC rules providing the main exemptions for private offerings, including Rules 504, 506(b) and 506(c).
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Regulation S#
The SEC safe harbor for offers and sales made outside the United States to non-US persons, with resale restrictions for a distribution compliance period.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Repurchase right#
The company's right to buy back unvested shares, usually at the lower of cost and fair market value, when a founder or employee stops providing services.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Restricted stock#
Shares issued subject to vesting through a company repurchase right. Holders typically file an 83(b) election.
Read more: The 83(b) Election: Deadline, How to File (Including Online) and What If You Miss It
- Restricted stock unit (RSU)#
A promise to deliver shares (or cash) in the future when vesting conditions are met. Taxed on settlement; more common at later-stage companies.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Right of first refusal (ROFR)#
The right of the company, and often major investors, to buy shares a stockholder wants to sell to a third party, on the same terms.
Read more: Drag-Along, Right of First Refusal (ROFR) and Co-Sale Rights Explained
- Rule 506(b)#
A Regulation D exemption allowing unlimited sales to accredited investors (and up to 35 sophisticated non-accredited investors) without general solicitation.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Rule 506(c)#
A Regulation D exemption permitting general solicitation if all purchasers are accredited and the issuer takes reasonable steps to verify their status.
Read more: Securities Law for Startup Fundraising: Reg D 506(b) and 506(c), Form D, Reg S and Rule 701
- Rule 701#
The SEC exemption for compensatory equity grants to employees, directors, consultants and advisors by private companies, within annual limits.
Read more: Stock Options 101 for Startups: ISO vs NSO, 409A Valuations and Early Exercise
- Runway#
The number of months a company can operate before running out of cash at its current net burn rate.
S
- SAFE#
Simple agreement for future equity: a contract in which an investor pays now and receives shares at a future priced round, usually under a valuation cap and sometimes a discount. No interest and no maturity.
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
- Section 351#
The tax rule allowing property, such as IP or cash, to be contributed to a corporation for stock without immediate tax if the contributors control at least 80% after the exchange.
Read more: How to Split Founder Equity: Frameworks, Examples and Pitfalls
- Seed round#
Early financing, either on SAFEs or notes or as a priced round of seed preferred stock. Median priced seed dilution was 19.5% in 2025 (Carta).
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
- Series A#
Usually the first significant priced venture round, documented with NVCA-style agreements. Median software Series A in the six months to July 2026: $14.4M at an $80M valuation (Carta).
Read more: Series A Readiness: What Changes From Seed and How to Prepare
- Shadow series#
A sub-series of preferred stock issued to converting SAFE or note holders with a liquidation preference based on their conversion price, avoiding a preference windfall.
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
- Side letter#
A separate agreement giving an investor rights not in the main document, such as pro rata, information rights or MFN, so the standard form stays unmodified.
Read more: Pro Rata Rights, Information Rights and Major Investor Thresholds Explained
- Single trigger acceleration#
Acceleration of unvested equity upon a single event, typically a change of control. Less common for founders than double trigger.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Stock purchase agreement#
The contract under which an investor buys shares in a priced round (or a founder buys founder stock), with representations, conditions and closing mechanics.
Read more: Series A Readiness: What Changes From Seed and How to Prepare
T
- Term sheet#
A short, mostly non-binding summary of the key economic and control terms of a financing. Confidentiality and no-shop clauses are usually binding.
Read more: How to Read a Seed Term Sheet: Every Clause and What Is Market in 2026
U
- Unissued pool#
Shares reserved under the equity plan that have not been granted. Counted in fully diluted shares for pricing, ignored in exit waterfalls.
Read more: The Option Pool Shuffle: How Pool Size Changes Your Real Valuation (and How to Negotiate It)
V
- Valuation cap#
The maximum valuation at which a SAFE or note converts. Median post-money caps in 2025 were about $10M for $250K to $1M rounds and $15M for $1M to $2.5M rounds (Carta).
Read more: SAFE Explained: Post-Money vs Pre-Money, Valuation Cap, Discount, MFN and Pro Rata
- Vesting#
The process by which equity is earned over time (or on milestones). Market schedule: four years with a one-year cliff, monthly thereafter.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Vesting commencement date#
The date from which vesting is measured. Can be set before the grant date to give credit for time already worked.
Read more: Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
- Voting agreement#
A contract among stockholders to vote for specified board designees and, usually, to support approved sales (drag-along).
Read more: Startup Board of Directors at Pre-Seed, Seed and Series A: How Founders Keep Control
W
- Waterfall#
A calculation of how sale proceeds are distributed among creditors, preferred classes and common holders under the liquidation preferences.
Read more: Liquidation Preference Explained: 1x Non-Participating vs Participating (With Waterfall Examples)
- Work made for hire#
A US copyright concept under which the employer owns works created by employees within the scope of employment. For contractors it applies only in limited categories with a signed writing, so assignments are needed.
Read more: IP Assignment for Startups: Founders, Employees and Contractors (CIIAA / PIIA)