Practice startup fundraising vocabulary: Series rounds, term sheets, pre-money valuation, cap table, Tier 1 VCs, and due diligence process.
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A startup says 'we're raising a Series A round'. What does this typically mean?
A Series A is typically the first major institutional venture capital round, raised after a startup has demonstrated some traction (users, revenue, or clear PMF). It follows seed funding and is used to scale the team, product, and customer acquisition. Series B and C follow as the company grows.
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What is a 'term sheet' in fundraising?
A term sheet is a non-binding summary of the key terms of a proposed investment: valuation, investment amount, equity percentage, board seats, liquidation preferences, and anti-dilution provisions. It's signed before lawyers draft the final binding investment documents. Most terms are negotiable.
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'We're raising at a $15M pre-money valuation.' What does pre-money valuation mean?
Pre-money valuation is what the company is worth before new investment is received. If the pre-money valuation is $15M and the investor puts in $5M, the post-money valuation is $20M and the investor owns 25% ($5M / $20M). This distinction is critical in negotiating ownership percentages.
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A founder says 'the cap table shows founders at 60%'. What is a cap table?
The capitalisation (cap) table shows every shareholder (founders, employees with options, angels, VCs) and their ownership percentage or share count. As the company raises more rounds and issues options, the cap table becomes more complex. Founders track it carefully because each round dilutes their ownership.
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What is 'due diligence' in the context of a VC investment?
Due diligence is the investor's deep investigation before committing capital. It covers: reviewing financial statements, examining the technology and IP, assessing the team's background, checking legal structure and cap table, reviewing customer contracts, and validating the market claims. It can take weeks and may result in renegotiating terms or walking away.