Startup funding terms: who invests, the rounds and how much to raise
These are the words you will hear most often from founders, angel investors and venture capital firms. This section explains 11 of them in plain English. Jump to the calculator to try it with your own numbers.
Section 1 of 10
11 terms explained
VC
Venture capital
Firms that invest money from pension funds, institutions and wealthy individuals in young companies that could grow very large, in return for shares.
PE
Private equity
Investment in private companies, usually more established businesses than VCs back, often taking a controlling stake.
Angel investor
A person who invests their own money in a startup, usually at the earliest stages. Many UK angels invest through SEIS or EIS for the tax relief.
HNI
High-net-worth individual
A wealthy person who may invest in startups or private companies, often through an angel network or a fund.
UHNI
Ultra-high-net-worth individual
A person with very large wealth who may make bigger private investments, often through a family office.
Pre-seed
The first outside money, used to turn an idea into a prototype or minimum viable product.
Seed
Money to prove the product works for customers and to build early traction.
Series A
Usually the first large round led by a venture capital firm, raised once there is evidence of traction, to scale the business.
Series B
A later round to grow faster: more hiring, new markets and bigger operations.
IPO
Initial public offering
When a company first offers its shares to the public and lists them on a stock exchange, such as the London Stock Exchange.
M&A
Mergers and acquisitions
Deals where two companies combine (a merger) or one buys another (an acquisition). A sale to a bigger company is one of the main ways startup investors get their money back.
Try it with your numbers
How much should you raise?
Raise enough to reach the milestone the next investors will pay for, plus a buffer, then see what that costs in equity. It starts with an example: change any figure.
How much to raise
£550,000
24 months at £25,000 a month is £600,000, less the £50,000 you have.
- New investors20%
- Existing shareholders80%
- At Seed the money usually comes from: angels, seed funds.
- Post-money valuation
- £2,750,000
- raise divided by the share sold
- Pre-money valuation
- £2,200,000
- post-money less the raise
- Runway it buys
- 24 months
- milestone plus buffer
- Cash needed in total
- £600,000
Last checked . Estimates only, not financial, tax or legal advice: deal terms vary, so check your documents and take advice before you sign. More terms in the startup glossary.