7 Key Pre-seed Fundraising Terms Every Startup Founder Must Know

Buzzwords? No more! Learn key terms that every startup founder must know to start raising.

Key terms can be presented as 3 main groups:

• deal essentials — how much does it cost and who buys it,
• shares — “good” being traded in the investment deal,
• documents — papers you need to sign to get money on your bank account.

Here is a scheme with a deal essentials 👇.

Angel investor buys you startup’s stock for money via SAFE at some agreed valuation

Deal

Valuation (pre-money) — The value of a company prior to when investor money is added.

Angel Investor — A (usually) wealthy private investor in startup companies.

Shares (stock)

Equity Round — A financing round in which the investor purchases equity (stock) in the company.

Common Stock — Capital stock typically issued to founders and employees, having the fewest, or no, rights, privileges and preferences.

Preferred Stock — Capital stock issued in a company that have specific rights, privileges and preferences compared to the common stock. Convertible into common stock, either automatically (e.g., in an IPO) or at the option of the preferred stockholder (e.g., an acquisition).