Funding glossary
Equity & investment terms
Every equity & investment term in our startup funding glossary, explained in plain English for Indian founders. 40 terms.
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