Glossary
The words everyone uses and nobody explains
39 terms you will meet raising money, reading a term sheet, or working out which Indian scheme you qualify for. Each one is answered in a sentence or two. Where there is more worth saying, there is a link to the full piece.
Raising money
The vocabulary of a round - what each stage means, what you sign, and what the words in a term sheet actually do.
- Seed funding
- The first meaningful round of outside investment, usually raised to prove that people want the thing you have built. It typically comes after friends-and-family money and before a Series A, and it is expected to buy you the evidence that the next round needs. Read the full explanation.
- Series A
- The round raised once a startup has evidence that its product works and its economics could work at scale. Investors at this stage are buying a repeatable business rather than an idea, which is why traction matters more than the pitch. Read the full explanation.
- Series B
- The round that funds scaling something already proven - hiring ahead of demand, entering new markets, building out a team. The question shifts from whether it works to how big it gets. Read the full explanation.
- SAFEalso called Simple Agreement for Future Equity
- An agreement where an investor gives you money now in exchange for shares later, usually at your next priced round. It avoids having to agree a valuation today, which is why early rounds often use one. Read the full explanation.
- Convertible note
- A loan that converts into equity at a later round instead of being repaid in cash. Unlike a SAFE it is debt, so it carries interest and a maturity date - which matters if the next round is slow to arrive. Read the full explanation.
- Term sheet
- The short document setting out the terms of an investment before the full legal paperwork is drawn up. It is mostly non-binding, but in practice it decides the deal - almost nothing in it changes afterwards. Read the full explanation.
- Valuationalso called pre-money, post-money
- What a startup is agreed to be worth for the purposes of a round. Pre-money is the value before the new investment goes in; post-money is pre-money plus the amount raised, and the difference decides what percentage the investor gets. Read the full explanation.
- Dilution
- The reduction in your ownership percentage when new shares are issued. Raising money always dilutes you - the question is whether the smaller slice is of a bigger enough pie.
- Cap tablealso called capitalisation table
- The record of who owns what percentage of the company, including shares, options and anything that converts into shares later. Investors read it to understand who controls the company and how much room is left.
- Bootstrapping
- Funding growth from revenue and your own money rather than from investors. It is slower and you keep control, which is a genuine trade rather than a lesser option. Read the full explanation.
- Due diligence
- The investigation an investor runs before money moves - checking the financials, the contracts, the cap table, the IP and the claims you made in the pitch. Being ready for it shortens a round considerably.
- Funding stages
- The sequence a company typically raises through: pre-seed, seed, Series A, B, C and onward, each with a different question to answer. The labels are conventions rather than rules, and plenty of companies skip one. Read the full explanation.
The numbers investors ask about
The metrics that come up in every diligence conversation, and what each one is actually measuring.
- EBITDAalso called Earnings Before Interest, Taxes, Depreciation and Amortisation
- A measure of operating profitability that strips out financing decisions, tax position and accounting for assets. It is useful for comparing two businesses' operations, and misleading if you forget that interest and tax are still real money leaving the company. Read the full explanation.
- Burn rate
- How much cash the company spends per month beyond what it earns. Net burn is the number that matters - money out minus money in - because that is what actually depletes the bank balance. Read the full explanation.
- Runway
- How many months the company can operate before it runs out of cash, at the current burn rate. Under six months is generally the point at which fundraising stops being optional. Read the full explanation.
- CACalso called Customer Acquisition Cost
- What it costs, on average, to get one paying customer - total sales and marketing spend divided by customers acquired. It is only meaningful next to what that customer is worth.
- LTValso called Lifetime Value, CLV
- The total profit you expect from a customer over the whole time they stay. The ratio of LTV to CAC is the number investors reach for first: below three-to-one usually means the model does not work yet.
- Unit economics
- Whether a single customer, order or unit makes money once you account for what it costs to serve them. A business with bad unit economics gets worse as it grows, not better.
- Gross margin
- Revenue minus the direct cost of delivering it, as a percentage. It sets the ceiling on how profitable the business can ever be, which is why software and services are valued so differently. Read the full explanation.
- Cash flow vs profit
- Profit is what the accounts say you earned; cash flow is what actually moved through the bank. A profitable company can still fail, because invoices you have raised do not pay salaries until somebody settles them. Read the full explanation.
- Revenue model
- How the business charges - subscription, transaction fee, marketplace commission, licence, advertising, or something else. It shapes everything downstream, from how you sell to how you are valued. Read the full explanation.
- Financial model
- The spreadsheet projecting revenue, costs and cash over the next few years, built from assumptions you can defend. Investors read the assumptions more carefully than the outputs. Read the full explanation.
Indian schemes and registrations
The government programmes and registrations founders in India are expected to know about, and what each one actually gets you.
- DPIIT recognitionalso called Startup India recognition
- Official recognition as a startup by the Department for Promotion of Industry and Internal Trade. It is the gateway to most central government startup benefits, including tax exemptions and easier public procurement. Read the full explanation.
- SISFSalso called Startup India Seed Fund Scheme
- A central scheme that provides seed funding to early-stage startups through approved incubators, rather than directly. You apply to an incubator that holds the funds, which is why incubator selection matters so much. Read the full explanation.
- Udyam registrationalso called MSME registration
- The registration that formally classifies a business as a micro, small or medium enterprise. It unlocks priority-sector lending, protection against delayed payments, and preference in many government tenders. Read the full explanation.
- CGSSalso called Credit Guarantee Scheme for Startups
- A scheme under which the government guarantees a portion of loans made to DPIIT-recognised startups, so lenders can advance money without collateral. It changes what a bank is willing to lend against. Read the full explanation.
- MUDRA loan
- Collateral-free loans for small and micro enterprises under the Pradhan Mantri MUDRA Yojana, in three tiers by size. Widely used by very early businesses that are not venture-fundable. Read the full explanation.
- AICalso called Atal Incubation Centre
- An incubator set up under the Atal Innovation Mission, funded by NITI Aayog to support early-stage startups. They run their own cohorts and often administer central seed funding. Read the full explanation.
- TBIalso called Technology Business Incubator
- An incubator, usually attached to a university or research institution, that supports technology startups with space, mentoring and access to funding. Many hold government scheme funds on behalf of the startups they select. Read the full explanation.
- Private Limited vs LLP vs OPC
- The three structures most Indian startups choose between. A Private Limited company is what investors expect and what allows share issuance; an LLP suits partnerships that are not raising; a One Person Company suits a single founder testing something. Read the full explanation.
- ESOPalso called Employee Stock Option Plan
- A scheme giving employees the right to buy shares at a fixed price after a vesting period. It is how early startups compete for people they cannot outbid on salary, and the tax treatment in India is worth understanding before you grant any. Read the full explanation.
Programmes and the people around them
Incubators, accelerators and the words used to describe how they work with startups.
- Incubator
- An organisation that supports very early startups over a long, open-ended period - often with space, mentoring and access to funding, and frequently attached to a university or a government scheme. Read the full explanation.
- Accelerator
- A fixed-length, cohort-based programme - typically three to six months - that ends in a demo day, usually taking equity in exchange for a small investment and intensive support. Read the full explanation.
- Cohortalso called batch
- The group of startups going through a programme together, starting and finishing at the same time. Programmes run in cohorts because a lot of the value comes from the other founders rather than the curriculum.
- Demo day
- The event at the end of an accelerator where each startup presents to investors and the wider ecosystem. It is the deadline the whole programme is structured around.
- Tranche
- One instalment of funding released against agreed milestones rather than paid as a lump sum. Grant and government schemes are usually structured this way, so the money arrives as the work is evidenced.
- Disbursement
- The actual transfer of committed funds to a startup. The gap between an approved amount and a disbursed one is where most grant reporting problems live.
- Deal flow
- The stream of investment opportunities an investor sees, and the process of tracking them from first contact to a decision. Good deal flow is mostly a function of who sends things your way.
- Pitch deck
- The short slide deck used to explain the business to investors, usually ten to fifteen slides. It exists to get the next meeting rather than to answer everything. Read the full explanation.
Most of these have a full article behind them
Funding stages, the Indian schemes, the metrics investors ask about - written properly rather than summarised.
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