Startup funding explained
Startup funding has its own language: 91 terms in this guide alone, from VC and SAFE to MOIC and runway. Each of the ten sections below explains its terms in plain English and ends with a calculator, so you can put in your own startup's numbers and see what they mean.
New to this? Start with the 15 acronyms to learn first, or find out which funding stage you are at.
Ten sections, each with a calculator
They follow the order most founders meet them in. Every calculator starts with a worked example, and nothing you type leaves your browser.
- Section 1 · 11 termsEssential startup funding termsThese are the words you will hear most often from founders, angel investors and venture capital firms.How much should you raise?
- Section 2 · 11 termsValuation, equity and ownershipThese decide how much of your company you give up in return for investment.Valuation and dilution calculator
- Section 3 · 17 termsRevenue, growth and performance metricsInvestors use these to judge growth, what a customer is worth and how dependable your revenue is.SaaS metrics calculator
- Section 4 · 10 termsCash flow, burn rate and runwayCash measures tell you how long the business can keep going before it needs more money.Runway calculator
- Section 5 · 15 termsInvestor meetings and negotiationsThese come up during a fundraise, in the legal documents and across the negotiating table.Liquidation preference and vesting calculators
- Section 6 · 8 stagesStartup funding stagesFunding stages are conventions, not rules. Companies raise different amounts at each one and some skip a stage altogether.What stage is your startup at?
- Section 7 · 12 termsUK funding schemes and startup abbreviationsYou will hear these when you talk to UK angel investors and startup support organisations.SEIS and EIS planner and market size calculator
- Section 8 · 15 termsAdvanced investor termsThese come up when you talk about funds, follow-on rounds and exits.MOIC and IRR calculator
- Section 9 · 5 calculationsFive funding calculations every founder should knowThe figures are illustrative and simplify real deals. Change any number to try your own.Your fundraising snapshot
- Section 10 · 15 termsThe 15 abbreviations to learn firstStart with these if you are going to a founder event, speaking to investors or getting ready to raise.Flashcards and quiz
How a funding round works, in five steps
From the first pitch to the money arriving. Select a document to see what it means.
- 1
Pitch deck
You pitch. Investors who are interested ask for more detail, such as your financial model and, in later rounds, an information memorandum.
- 2
Term sheet
The lead investor sets out the main terms. A term sheet is not necessarily binding as a whole, but some clauses can be if they are drafted that way.
- 3
Due diligence
The investor checks your finances, contracts, intellectual property, cap table and team. Having the documents ready in one place speeds this up.
- 4
Legal agreements
Lawyers turn the term sheet into the subscription agreement, the shareholders' agreement and usually new articles of association.
- 5
Completion
Everyone signs, the money arrives and the company issues the new shares, then reports the share issue to Companies House.
Before your next investor meeting
Tick off what you can explain without notes. Your ticks stay in this browser.
And be ready to answer
- 1How much funding you need
- 2What milestones it will get you to
- 3How much equity you are offering
- 4How the business will grow
Investors care more that you understand your business numbers than whether you can recite acronyms.
Keep going
The glossary covers UK company, tax and visa terms too. Start Here walks through the five steps to starting a UK startup.
Last checked . A general guide, not financial, tax or legal advice: deal terms vary, so check your documents and take advice before you sign.