Bootstrapping, angel and venture rounds, term sheets, dilution, valuation and cap tables.
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- What does bootstrapping mean in a startup context?
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Starting and growing a company using personal savings and revenue, without outside investment.- What is an angel investor?
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An individual who provides capital to early-stage startups, typically before venture capitalists get involved.- What is a Series A round?
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The first institutional venture capital investment, usually $1 million to $15 million, used to scale a proven product.- What is a Series B round?
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A later-stage funding round used to expand market reach and accelerate growth, typically $15 million to $50 million.- What is a Series C round?
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Additional funding for proven, fast-growing companies to pursue acquisitions, enter new markets, or prepare for exit.- What is a term sheet?
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A non-binding document outlining the main terms and conditions of a venture capital investment.- What is equity dilution?
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The reduction in a founder's ownership percentage when new shares are issued in a funding round.- What is pre-money valuation?
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The value of a company before a new investment round is completed.- What is post-money valuation?
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The company's value after a new investment is added, calculated as pre-money valuation plus the investment amount.- What is a cap table?
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A record showing all equity ownership in a company, including shares held by founders, employees, and investors.- What percentage equity do founders typically retain after a Series A?
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Around 70 to 80 percent combined, with the VC round taking roughly 20 to 30 percent.- What is a typical founder equity split between co-founders?
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Equal splits (50/50) are common, though splits can range from 50/50 to 60/40 depending on contribution and negotiation.- What is a vesting schedule?
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A plan that specifies when employees or founders earn their equity over time, typically over 4 years.- What is a cliff period in vesting?
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A waiting period, usually 1 year, before any equity vests; if an employee leaves before the cliff, they forfeit all equity.- What is a liquidation preference?
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The order in which investors are paid in an exit event, with preferred stockholders paid before common stockholders.
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