Exploring the world of startup fundraising terms and definitions can feel like you’re learning a foreign language, as VC terminology and financial intricacies are like a complex whirlwind. Mastering these terms is crucial for securing funding and ensuring your paperwork is top-notch. On this page, you’ll find the most often-used startup words associated with funds and money.
Getting a handle on finance lingo for startups is vital if you want to find common ground with investors and steer your company to success. A solid grasp of the key financial terms can not only boost your communication but also help to make accurate financial projections, keep your finance documents in order, and select the most suitable funding options.
To help you master the most commonly used VC terms, we’ve put together a mini dictionary. Let’s take your financial literacy skills to the next level by exploring the top fundraising terminology with definitions.
Must-Know Financial Terms for Entrepreneurs 💡
1️⃣ Burn Rate
The rate at which a startup is spending its capital before reaching profitability. It’s typically expressed as a monthly figure and helps determine how long a company can operate before needing additional funding.
2️⃣ Cap and Cap Table
Capitalization, often shown in a financial document known as the cap table, details the total number of a company’s outstanding shares and how they are distributed among shareholders. It outlines a company’s ownership structure, detailing the percentages of equity owned by each shareholder.
3️⃣ Cash Flow
The movement of money into and out of a business. Positive cash flow indicates that a company is generating more money than it is spending, while negative cash flow can signal financial trouble. It’s crucial for managing daily operations and planning for growth.
4️⃣ Dilution
The reduction in ownership percentage of existing shareholders when new shares are issued. Dilution can, for instance, occur during funding rounds when new investors are granted equity in exchange for capital, which can decrease the value of existing shares.
5️⃣ Runway
The amount of time a startup can continue operating before it runs out of cash, given its current burn rate. Runway is a critical metric for assessing how long a company has to achieve its financial goals or secure additional funding.
There’s a lot more to cover. Keep reading to find 25 more finance startup terms here ⇢
