Funding terms explained
Startup funding glossary
Plain-English definitions of the terms you'll meet while raising money — from grants and subsidies to SAFEs, dilution and runway. Free, no jargon, written for Indian founders.
Grants & non-dilutive
DisbursementThe actual transfer of approved funds from a grantor or lender to the recipient startup, which may happen in one payment or multiple scheduled tranches.Learn more DPIIT recognitionAn official certification from India's Department for Promotion of Industry and Internal Trade that qualifies a business as a startup and unlocks regulatory and financial benefits.Learn more Fund of Funds for Startups (FFS)A government-backed corpus managed by SIDBI that invests in SEBI-registered venture capital funds, which in turn invest equity into Indian startups.Learn more GrantA sum of money given to a startup by a government body or institution that does not need to be repaid and does not involve giving up equity.Learn more Interest subventionA government subsidy that reduces the effective interest rate on a loan by having the government pay part of the interest directly to the lender on the borrower's behalf.Learn more Matching grantA grant where the funding body provides money only if the applicant also contributes an equal or proportional amount from its own or other private sources.Learn more Milestone-based fundingA funding structure where capital is released in stages, with each subsequent payment contingent on the startup achieving predefined, verifiable outcomes.Learn more Non-dilutive fundingCapital received by a startup that does not require giving up any ownership stake or equity in the company.Learn more Production Linked Incentive (PLI)A central government scheme offering financial incentives to manufacturers based on incremental sales over a base year, designed to boost domestic production in targeted sectors.Learn more ReimbursementA grant structure in which the startup pays for an approved expense first, then applies to the funding body for refund of all or part of that cost.Learn more Section 80-IAC tax holidayAn Income Tax Act provision granting eligible startups a 100% deduction on profits for three consecutive years out of their first ten years of incorporation.Learn more Startup India Seed Fund Scheme (SISFS)A government grant scheme that channels non-dilutive seed capital to early-stage DPIIT-recognised startups via empanelled incubators.Learn more SubsidyA financial benefit provided by the government that reduces a startup's costs — either as a direct payment, a discount on a purchase, or a lower interest rate on a loan.Learn more TrancheOne scheduled portion of a larger funding amount, released at a specific point in time or upon meeting a defined condition.Learn more
Equity & investment
Alternative Investment Fund (AIF)A SEBI-regulated pooled investment vehicle that raises capital from sophisticated investors and deploys it into assets beyond conventional stocks and bonds — including startups.Learn more Angel investorA high-net-worth individual who invests personal capital in early-stage startups, often before institutional investors enter.Learn more Anti-dilutionA contractual investor right that adjusts their ownership upward if the company later raises money at a lower price per share.Learn more Board seatAn investor's contractual right to appoint one or more directors to the company's board, giving them formal governance participation alongside voting rights.Learn more BootstrappingBuilding and growing a company using only personal savings and internal revenue, without raising external equity or debt capital.Learn more Bridge roundA small interim funding raise that extends runway while a startup prepares for or negotiates its next full round.Learn more Cap tableA spreadsheet or register listing every shareholder, the number and class of shares they hold, and their resulting ownership percentage.Learn more Compulsorily Convertible Debentures (CCD)Debentures that must convert into equity shares on a fixed date or event, treated as equity under FEMA and commonly used by Indian VCs alongside CCPS.Learn more Compulsorily Convertible Preference Shares (CCPS)A preference share class that must convert into ordinary equity shares on a fixed date or trigger event, widely used by Indian VCs as the standard investment instrument.Learn more Convertible noteA short-term debt instrument that converts into equity at a future financing round, typically at a discount or valuation cap, rather than being repaid in cash.Learn more DilutionThe reduction in an existing shareholder's ownership percentage caused by issuing new shares to investors or employees.Learn more Down roundA funding round in which a company raises capital at a lower valuation than its previous round, diluting existing shareholders more than expected.Learn more Drag-along rightsA provision allowing majority shareholders to compel minority shareholders to join and vote in favour of a sale of the company on the same terms.Learn more Due diligenceThe structured investigation an investor conducts into a startup's legal, financial, technical, and commercial standing before committing capital.Learn more Equity financingRaising money by selling a percentage ownership stake in your company rather than taking on debt.Learn more ESOP (Employee Stock Option Plan)A formal scheme that grants employees the right to purchase company shares at a pre-set price after satisfying a vesting schedule, aligning team incentives with long-term value creation.Learn more Growth capitalEquity or equity-like capital raised by companies that have proven their model and need fuel to scale faster than profits allow.Learn more Information rightsContractual rights that entitle investors to receive regular financial reports, operating updates, and access to company records for monitoring their investment.Learn more Lead investorThe investor who sets the terms, anchors the round with the largest cheque, and typically takes a board seat.Learn more Liquidation preferenceA contractual right that gives certain investors priority to receive a specified return before common shareholders are paid in a sale, merger, or winding-up.Learn more Option poolA block of shares reserved in the cap table for future grants to employees and advisers under an ESOP scheme, typically 10–20% of the fully diluted share count.Learn more Post-money valuationThe agreed value of a company immediately after a new investment is closed, equal to pre-money valuation plus the new capital invested.Learn more Pre-money valuationThe agreed value of a company immediately before a new investment round is closed, used to calculate how much equity investors receive.Learn more Pre-seedThe earliest formal funding stage, raised before a seed round to build a prototype or validate core assumptions.Learn more Preference sharesShares that carry preferential rights over ordinary equity in dividends and liquidation proceeds, commonly used as the base instrument in VC and PE investment rounds.Learn more Pro-rata rightsAn investor's right to maintain their ownership percentage in future funding rounds by investing a proportional share of the new capital raised.Learn more Right of first refusal (ROFR)A contractual right giving existing shareholders the option to purchase shares being sold by another shareholder before those shares are offered to outside buyers.Learn more SAFE (Simple Agreement for Future Equity)A convertible investment contract that grants an investor the right to receive equity at a future priced round, without accruing interest or a maturity date.Learn more Seed roundThe first meaningful institutional funding round, raised to build product and find early product-market fit.Learn more Series AThe first major institutional venture round, raised to scale a business model that has demonstrated early product-market fit.Learn more Series BA growth-stage equity round raised to aggressively scale a business model that Series A already validated.Learn more Series CA late-stage equity round raised by high-growth companies to dominate their market, expand internationally, or prepare for an IPO.Learn more Share Subscription Agreement (SSA)The legal contract under which an investor commits to subscribe to newly issued shares of a company at an agreed price and on agreed conditions.Learn more Shareholders' Agreement (SHA)The primary legal contract between a company's shareholders that governs ownership rights, governance, exits, and protections after an investment closes.Learn more Tag-along rightsA minority shareholder right that allows them to join a majority shareholder's share sale on the same price and terms, preventing the majority from exiting alone.Learn more Term sheetA non-binding document that outlines the key commercial and legal terms of a proposed investment before formal agreements are drafted.Learn more Valuation capThe maximum company valuation at which a SAFE or convertible note will convert into equity, protecting early investors from excessive dilution.Learn more Venture capitalInstitutional funds that invest in high-growth startups in exchange for equity, aiming for outsized returns at exit.Learn more VestingThe process by which an employee or founder earns the right to their allocated shares or options over time or upon milestone achievement, preventing immediate full ownership.Learn more WarrantA right to purchase a company's shares at a pre-agreed price within a specified period, commonly issued alongside debt or as a sweetener in bridge and growth rounds.Learn more
Debt & loans
Collateral-free loanA business loan extended without requiring the borrower to pledge any asset as security against default.Learn more Credit Guarantee Scheme for Startups (CGSS)A government-backed guarantee scheme that covers lenders against default risk when they extend collateral-free loans to DPIIT-recognised startups.Learn more Invoice discountingA facility where a business sells unpaid invoices to a financier at a discount to receive immediate cash instead of waiting for customer payment.Learn more Mezzanine financingA hybrid layer of financing between senior debt and equity, combining fixed-income features with equity-upside rights.Learn more NBFCA company registered with the RBI that offers lending and financial services but cannot accept demand deposits like a bank.Learn more Revenue-based financing (RBF)A loan repaid as a fixed percentage of monthly revenue until a predetermined total amount is returned to the lender.Learn more Term loanA lump-sum loan repaid in fixed instalments over a defined period, typically used to fund capital expenditure or growth.Learn more Venture debtDebt financing designed for venture-backed startups, typically structured with warrants to compensate lenders for higher risk.Learn more Working capitalShort-term financing that bridges the gap between money owed to suppliers and money received from customers.Learn more
Metrics
ARR (Annual Recurring Revenue)The annualised value of all active, recurring subscription contracts — the standard top-line metric for SaaS and subscription businesses.Learn more Burn rateThe rate at which a startup spends its cash reserves each month, before or after accounting for revenue.Learn more Customer Acquisition Cost (CAC)The total cost — sales, marketing, and related overhead — incurred to acquire one new paying customer.Learn more Gross Merchandise Value (GMV)The total value of all goods or services transacted through a marketplace or platform in a given period, before deducting any fees or refunds.Learn more Lifetime Value (LTV)The total gross profit a business expects to generate from a single customer over the entire duration of the relationship.Learn more MRR (Monthly Recurring Revenue)The predictable, recurring revenue a subscription business collects or contractually commits to in a single month.Learn more RunwayThe number of months a startup can operate before running out of cash at its current burn rate.Learn more TractionMeasurable evidence that a startup's product is solving a real problem and gaining adoption in its target market.Learn more Unit economicsThe revenue, costs, and profit attributable to a single unit of a business — typically one customer or one transaction — used to judge whether the model scales profitably.Learn more
Programmes & process
AcceleratorA fixed-term, cohort-based programme that intensively prepares startups for fundraising or market growth, often in exchange for a small equity stake.Learn more CohortA group of startups admitted together to a programme and progressing through it on the same schedule, creating a peer learning community.Learn more IncubatorA support programme that helps early-stage startups develop their ideas into viable businesses through workspace, mentorship, and resources.Learn more
Exits & liquidity
IPO (Initial Public Offering)The first sale of a company's shares to the public on a regulated stock exchange, giving early investors and founders a path to liquidity.Learn more Merger & Acquisition (M&A)A transaction in which a company is purchased by or combined with another entity, providing founders and investors with a liquidity event.Learn more Secondary saleA transaction in which existing shareholders sell their shares to a new buyer without the company issuing new shares or receiving any of the proceeds.Learn more