Financial lingo that all Startup Founders must know.

Starting a company is exhilarating, but raising capital can feel like stepping into a foreign country where everyone speaks a different language. If you’re a startup CEO trying to navigate the venture capital world, learning the lingo isn’t optional—it’s essential. Understanding these key terms gives you the confidence to negotiate better deals, make smarter decisions, and build lasting partnerships. Here’s your cheat sheet to the most important concepts you need to know as you step into the world of venture capital.

Essential Terms for Startup Founders Raising Capital

Cap Table: The cap table is the ownership map of your company—who holds shares and how much. As you bring in investors, this table will evolve, and understanding it is key to knowing your stake in the business.

Dilution: Every new round of investment means your ownership will decrease unless you buy more shares. Dilution is not bad if it’s part of growth, but you need to be aware of it at every stage.

ESOP (Employee Stock Option Pool): Setting aside equity for future hires ensures you can attract top talent. Just know this usually comes out of your share, not the investors’.

Vesting Period: Typically, employees earn their shares over four years, with a one-year cliff. It ensures commitment and reduces the risk of someone leaving with too much too soon.

Pre-Money Valuation: This is your company’s value before new investments. It’s a critical number in every fundraising conversation.

Post-Money Valuation: The value of your company after a new investment. Pre- and post-money valuations help determine how much of the company you’re giving up.

GPs (General Partners): These are the decision-makers at a venture capital fund. They manage investments and make the calls on where to place bets.

LPs (Limited Partners): LPs are the ones who supply the money to the GPs. They don’t make day-to-day decisions but are essential to the VC ecosystem.

Fund of Funds: Some investors don’t invest directly in startups but in VC funds themselves. This strategy spreads risk across multiple funds and sectors.

Capital Call: A capital call is when the VC fund asks its LPs to contribute part of their committed capital, often done in stages as investments arise.

Subscription: The investor’s official commitment to put money into your company or fund. Once they subscribe, you can count on their backing.

Follow-On: When investors from previous rounds reinvest in future ones, showing faith in your company’s growth.

Carry (Carried Interest): This is the share of the profits that GPs take after they’ve delivered returns to the LPs. It’s a big incentive for the fund managers to push for strong returns.

DPI (Distributions to Paid-In Capital): This metric tells you how much of the LPs’ initial investment has been returned to them. It’s an important measure of success.

MOIC (Multiple on Invested Capital): Another measure of success, this shows how much the total investment has grown in value over time.

TVPI (Total Value to Paid-In Capital): TVPI gives you the complete picture of a fund’s value relative to what was invested, including unrealized gains.

IRR (Internal Rate of Return): This is the annual growth rate of an investment. It helps investors compare different opportunities based on projected returns.

SAFE (Simple Agreement for Future Equity): SAFEs give investors the right to buy shares in the future, typically at the next funding round. They’re simple, fast, and founder-friendly.

Convertible Note: Like a loan that turns into equity down the line, convertible notes are a flexible way for startups to raise money without setting a valuation too early.

Liquidation Preference: This determines who gets paid first in the event of a sale or bankruptcy. Investors with higher liquidation preferences get their money before anyone else.

Anti-Dilution/Ratchet: Protects early investors by adjusting their ownership if a future round is raised at a lower valuation.

Pay-to-Play: This provision requires investors to contribute to future rounds or risk losing their preferred status. It’s a way to ensure long-term commitment.

Drag-Along: Majority shareholders can force minority holders to sell their shares if a sale is in the best interest of the company.

Tag-Along: Ensures minority shareholders get the same deal as majority shareholders in a sale.


Raising venture capital can be complex, but it doesn’t have to be confusing. Mastering these terms will give you the clarity and confidence to grow your company without losing control. When you speak the language of investors, you become a partner they trust.