Raising capital is about more than just pitching—it’s about speaking the language of investors. In Part 1, we covered the core funding journey terms. Today, let’s dive into Part 2 of the Essential Glossary—the terms that come up as you scale, manage teams, and navigate multiple rounds.
🔹 Option Pool – A reserved percentage of equity for future hires (often 10-20%). Ensure you know how this impacts your cap table.
🔹 Vesting – How founders’ and employees’ equity ownership is earned over time (e.g., 4 years with a 1-year cliff).
🔹 Pro-rata Rights – Gives early investors the right to maintain their ownership % in future rounds.
🔹 Liquidation Preference – Defines who gets paid first (and how much) in an exit event. Commonly 1x for investors.
🔹 Drag-Along Rights – Allows majority shareholders to force minority holders to sell if an acquisition deal is approved.
🔹 Board Composition – Who holds seats at the table for key decisions? Understand how investor seats vs. founder seats are negotiated.
🔹 Anti-dilution Clause – Protects investors from ownership loss if new shares are issued at a lower valuation.
These terms shape negotiation dynamics as your startup grows. Knowing them helps protect your vision.
Check out Part 2 of the visual glossary soon—and don’t forget to share this with a founder on their fundraising journey!
StartupGlossary VentureCapital FounderToolkit OptionPool LiquidationPreference ScalingStartups NeuroTechMatters Entrepreneurship DeepTech Innovation ChaanakyaCapital
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