Venture Capital Glossary

Programs that provide mentorship, education, and networking to startups, typically lasting a few months, culminating in a "demo day" where startups pitch to investors.

The process of one company purchasing most or all of another company's shares to take control.

Individuals who provide early-stage capital to startups, usually in exchange for equity or convertible debt, and often offer mentorship and industry connections.

A financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue.

A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Comparing a company's performance, business model, or valuation against industry peers or standards.

Starting and growing a business without external funding, relying instead on personal savings, revenue from customers, and careful management of cash flow.

The rate at which a startup spends its cash reserves before generating positive cash flow from operations.

A spreadsheet or table that shows the equity ownership, types of shares, and dilution of shareholders in a company.

A type of loan that can be converted into equity, typically during a future financing round.

Raising small amounts of capital from a large number of people, typically via online platforms, to fund a project or venture.

The cost associated with acquiring a new customer, calculated by dividing the total cost of sales and marketing by the number of new customers acquired.

A financial statement that provides a summary of the cash inflows and outflows over a period, categorized into operating, investing, and financing activities.

The rate, volume and quality of investment opportunities presented to investors. This is important for maintaining a pipeline of potential investments.

A solvency ratio that compares a company's total liabilities to its shareholders' equity, indicating the relative proportion of debt used to finance the company’s assets.

 The reduction in existing shareholders' ownership percentage of a company due to the issuance of new equity shares.

The comprehensive process of investigating and evaluating a business before making an investment decision, including financial, legal, and operational assessments.

Venture capital funds that invest in startups during their initial stages, focusing on pre-seed, seed, and Series A rounds.

Ownership interest in a company, represented by shares of stock.

The method by which an investor intends to cash out of an investment, typically through an acquisition, merger, or initial public offering (IPO).

An entrepreneur who works temporarily within a VC or other firm to develop new ideas or help with portfolio companies, often leading to a startup they may eventually found or join.

Additional funding provided by investors to a portfolio company after the initial investment, often during subsequent financing rounds.

The process by which a startup seeks to secure capital from investors, typically involving multiple rounds (e.g., Seed, Series A, Series B).

Cash generated by a company after accounting for capital expenditures, indicating the company's ability to fund operations, pay dividends, or reduce debt.

The individuals responsible for managing a venture capital fund, making investment decisions, and guiding portfolio companies.

A profitability ratio calculated as (Revenue - Cost of Goods Sold) / Revenue, indicating the efficiency of production and pricing.

Programs that support startups in their very early stages by providing resources like office space, mentorship, and sometimes seed funding, typically over a longer period than accelerators.

The process by which a private company offers its shares to the public for the first time to raise capital.

A metric used in VC to estimate the profitability of potential investments, representing the annual growth rate an investment is expected to generate.

The investor (or investment firm) who takes the primary role in a financing round, often setting the terms and leading negotiations.

Investors who contribute capital to a venture capital fund, such as pension funds, endowments, or high-net-worth individuals, but do not manage the fund.

The process of estimating the potential size of a market, including Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM).

The combination of two companies into one entity, typically to increase market share, reduce competition, or achieve operational efficiencies.

A basic version of a product that is developed with minimal features necessary to satisfy early customers and gather feedback for future development.

A valuation method that calculates the present value of future cash flows discounted at a specific rate, minus the initial investment cost.

Building relationships with industry professionals to gain insights, deal flow, and investment opportunities.

A profitability ratio calculated as Operating Income / Revenue, reflecting the efficiency of a company's core business operations.

A portion of a company's equity set aside for future issuance to employees, advisors, or board members, often as part of a compensation package.

A significant change in a startup's business model, product offering, or strategy in response to market feedback or challenges.

The ongoing process of supporting and monitoring a VC firm's investments, including providing strategic guidance, securing additional funding, and preparing for exits.

The valuation of a company before it receives external funding in a new financing round.

A liquidity ratio calculated as (Current Assets - Inventory) / Current Liabilities, measuring a company's ability to meet its short-term obligations without relying on the sale of inventory.

A valuation method that uses a multiple of a company's annual revenue to estimate its market value.

A measure of the profitability of an investment, calculated as (Net Profit / Cost of Investment) x 100.

The process of estimating the potential size of a market, including Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM).

The amount of time a startup can continue to operate before it runs out of cash, calculated by dividing the cash balance by the monthly burn rate.

The initial round of funding used to support a startup's early-stage development, often provided by angel investors or seed-focused venture capital funds.

Sequential rounds of venture capital funding, each typically larger than the last, used to scale a company’s operations and achieve growth milestones.

The potential for a startup to grow its operations and revenue quickly without corresponding increases in operational costs.

An early-stage business that aims to develop a product or service to address a market opportunity. Startups focus on creating a scalable business model and are characterised by innovation and rapid growth potential.

The non-monetary investment that founders and employees contribute to a startup in the form of hard work and effort, often rewarded with equity.

A non-binding agreement outlining the basic terms and conditions under which an investment will be made, including valuation, ownership percentage, and board composition.

The total market demand for a product or service, representing the maximum revenue opportunity available if a company achieved 100% market share.

A privately held startup company valued at $1 billion or more.

The potential for investment gains if a startup performs well, often contrasted with the downside risk.

The process of determining the current worth of a company, often based on factors such as market potential, revenue, profitability, and investor sentiment.

An organisation that creates startups from scratch, often with in-house teams of entrepreneurs, engineers, and designers, to develop and spin off successful companies.

A form of private equity financing that provides capital to startups and early-stage companies with high growth potential in exchange for equity.

A valuation method that estimates the company's post-exit value and works backward to determine its current valuation, commonly used in Series A and later rounds.

The capital available for a company's day-to-day operations, calculated as Current Assets - Current Liabilities, essential for maintaining liquidity.

A budgeting method where all expenses must be justified for each new period, starting from a "zero base" rather than adjusting previous budgets.

A company that is able to continue operating but is unable to grow or repay its debts, often just covering interest payments without reducing the principal amount.