149 fundraising terms in plain English

Never nod along to a term you don't understand. Grouped the way they come up in a raise: what you sell, how it shows in your numbers, how you raise, the deal, and running the company afterwards.

Revenue & SaaS metrics

ARR (Annual Recurring Revenue): MRR x 12. The headline size metric for subscription businesses.Example: 16,000 MRR = 192,000 ARR.
MRR (Monthly Recurring Revenue): Subscription revenue you can expect every month from current customers, excluding one-off fees.
New MRR: MRR added by customers who joined this month.
Expansion MRR: Extra MRR from existing customers upgrading, adding seats or buying add-ons.
Contraction MRR: MRR lost when existing customers downgrade but do not leave.
Churned MRR: MRR lost from customers who cancelled.
Net new MRR / ARR: New + expansion - contraction - churned. The real growth in recurring revenue.
ARPA / ARPU: Average Revenue Per Account (or User) per month. Total MRR / number of customers.Example: 16,000 MRR / 40 customers = 400.
ACV (Annual Contract Value): Average yearly value of one customer contract. Common in B2B sales-led companies.
Bookings: The value of contracts signed in a period, whether or not the revenue has been earned yet.
Run-rate: Current monthly figure x 12. Shows annual scale, but is not the same as actual annual revenue.
GMV (Gross Merchandise Value): Total value of transactions through a marketplace, before the platform's cut.
Take rate: The share of GMV a marketplace keeps as revenue.Example: 10% take rate on 1M GMV = 100k revenue.
Revenue recognition: The accounting rule for when revenue counts as earned, which is when the service is delivered, not when the cash arrives.
MoM / YoY growth: Month-over-month and year-over-year growth rates.
T2D3: An aspirational SaaS growth path: triple, triple, double, double, double revenue over five years.

Customers & retention

Churn rate (logo churn): Share of customers lost in a period, usually monthly.Example: 2 of 100 customers leave = 2% monthly churn.
Revenue churn: Share of MRR lost to cancellations and downgrades.
Net negative churn: When expansion from existing customers exceeds churn, so revenue from the existing base grows.
GRR (Gross Revenue Retention): Revenue kept from existing customers over a year, ignoring upsell. Cannot exceed 100%.
NRR (Net Revenue Retention): Revenue kept from existing customers including expansion. Above 100% means the base grows on its own.
Cohort: A group of customers who started in the same period, tracked over time.
Cohort analysis: Comparing how different cohorts retain or spend over their lifetime. Shows whether the product is improving.
Customer lifetime: How long a typical customer stays. Roughly 1 / monthly churn.Example: 2.5% churn = 40 months.
Activation: The point where a new user first gets real value from the product.

Unit economics & efficiency

Unit economics: The revenue and costs tied to one customer. Shows whether growth creates or destroys value.
CAC (Customer Acquisition Cost): Sales and marketing cost divided by new customers won.
Blended CAC: CAC using all S&M costs and all new customers, including organic ones.
Paid CAC: CAC for paid channels only (ads, sponsorships).
LTV (Lifetime Value): Gross profit a customer generates over their lifetime. ARPA x gross margin / churn.
LTV : CAC: Customer value divided by acquisition cost. 3x or more is a common target.
CAC payback: Months of gross profit needed to recover the cost of acquiring a customer.
Contribution margin: Revenue minus all variable costs of serving a customer, before fixed overheads.
Burn multiple: Net burn / net new ARR. How many dollars you burn to add one dollar of ARR. Under 2x is efficient.
Magic number: Annualised new revenue in a quarter divided by the previous quarter's S&M spend.
Rule of 40: Revenue growth % + profit margin %. 40% or more is considered healthy for scaling SaaS.
Revenue per employee: Annual revenue / headcount. A measure of team productivity.
Capital efficiency: How much growth a company achieves per dollar raised.

Financial statements & accounting

P&L (Profit & Loss / income statement): Revenue, costs and profit over a period.
Balance sheet: What the company owns (assets), owes (liabilities) and the owners' stake (equity) at a point in time.
Cash flow statement: How cash moved in a period: operations, investing and financing.
Three-statement model: A model where the P&L, balance sheet and cash flow are linked so they always reconcile.
COGS (Cost of Goods Sold): Costs directly tied to delivering the product: hosting, payment fees, support.
Gross profit / gross margin: Revenue minus COGS, in money or as a % of revenue.
OpEx (Operating expenses): Running costs: Sales & Marketing, R&D and G&A.
EBITDA: Earnings before interest, tax, depreciation and amortisation. A proxy for operating profit.
Net income: Profit after all costs, interest and tax.
Depreciation: Spreading the cost of a physical asset over its useful life.
Amortisation: The same idea as depreciation, for intangible assets or loans.
Accounts receivable (AR): Money customers owe for invoices not yet paid.
Accounts payable (AP): Money the company owes suppliers.
Deferred revenue: Cash received for service not yet delivered. A liability until earned.
Working capital: Short-term assets minus short-term liabilities. Explains gaps between profit and cash.
CapEx (Capital expenditure): Spending on long-lived assets such as equipment.
Accrual accounting: Recording revenue and costs when earned or incurred, not when cash moves.
Retained earnings: Cumulative profits (or losses) kept in the company.
Loss carry-forward (NOL): Past losses that can reduce future taxable profit.

Cash & runway

Burn rate: How fast the company spends cash, usually per month.
Gross burn: Total cash spent in a month.
Net burn: Cash spent minus cash collected. How fast the bank balance falls.
Runway: Months until cash runs out at the current net burn.Example: 600k cash / 50k net burn = 12 months.
Default alive: The company reaches profitability before running out of cash, with no new funding.
Break-even: The point where revenue covers all costs.
Cash-flow positive: Generating more cash than spending in a period.
13-week cash flow: A short-term, week-by-week cash forecast used to manage tight cash periods.

Funding instruments

Equity: Ownership in the company, represented by shares.
Common stock: Shares usually held by founders and employees. Paid after preferred stock in a sale.
Preferred stock: Shares sold to investors with extra rights, such as liquidation preference.
SAFE: Simple Agreement for Future Equity. Investor money now, converted into shares at a later priced round.
Post-money SAFE: A SAFE where the cap is a post-money valuation, so the investor's ownership at conversion is fixed (amount / cap).Example: $250k on an $8M cap = 3.125%.
Pre-money SAFE: An older SAFE form where the cap is pre-money. Ownership depends on how much else is raised.
Valuation cap: The maximum valuation at which a SAFE or note converts.
Discount: A % discount to the next round's price that a SAFE or note holder receives on conversion.
MFN (Most Favoured Nation): A clause giving an investor the best terms later offered to others in the same instrument.
Convertible note: A short-term loan that converts into equity at the next round, usually with interest, a cap and a discount.
Priced round: A round where shares are sold at a set price per share, usually Seed or Series A onward.
Venture debt: Loans for venture-backed startups, usually alongside an equity round.
Revenue-based financing: Funding repaid as a % of future revenue.
Non-dilutive funding: Money that doesn't require selling equity: grants, debt, revenue-based financing.
Bridge round: A small round to extend runway until the next major round.

Valuation & cap table

Pre-money valuation: The company's value agreed before new investment.
Post-money valuation: Pre-money valuation + new money invested.Example: 8M pre + 2M = 10M post.
Price per share: Pre-money valuation / pre-money fully diluted shares.
Cap table: The table of who owns which shares, options and convertible instruments.
Fully diluted: Counting all shares, options (granted and available) and converting securities as if exercised or converted.
Dilution: The fall in existing owners' percentage when new shares are issued.
ESOP / option pool: Shares reserved for employee stock options.
Option pool shuffle: Increasing the option pool inside the pre-money valuation, so the dilution falls on existing holders rather than new investors.
Vesting: Earning shares or options over time.Example: 48 months with a 12-month cliff.
Cliff: The initial period before any vesting happens. Leave before the cliff and nothing vests.
Acceleration: Faster vesting triggered by an event such as an acquisition (single or double trigger).
409A valuation: A US independent valuation of common stock used to set option strike prices.
Strike price: The price an employee pays to exercise an option.
Revenue multiple: Valuation / revenue (or ARR). A common shorthand for comparing company valuations.

Deal terms

Term sheet: A short, mostly non-binding summary of the key terms of an investment.
Lead investor: The investor who sets terms and usually invests the most in a round.
Liquidation preference: Investors' right to get their money back (often 1x) before common holders in a sale.
Participating preferred: Preferred stock that takes its preference and then also shares in the remaining proceeds.
Pro-rata rights: An investor's right to invest in future rounds to keep their ownership %.
Anti-dilution: Protection that adjusts an investor's conversion price if a later round is priced lower (a down round).
Down round: A round priced below the previous round's valuation.
Board seat: A seat on the company's board of directors, often requested by lead investors.
Information rights: An investor's right to receive regular financial reports.
Drag-along: A clause that lets a majority force minority holders to join a sale.
Waterfall: The order and amounts in which sale proceeds are paid to each class of shareholder.

Investors & process

Pre-seed / Seed / Series A: Successive funding stages, from idea and early product to proven product-market fit and scaling.
Angel investor: An individual investing their own money, usually at early stages.
VC (Venture capital): Firms investing pooled funds in high-growth startups for equity.
Accelerator: A programme offering funding, mentorship and a demo day in exchange for equity.
Due diligence: The investor's detailed review of your business, financials and legal documents before investing.
Data room: A shared folder of documents for due diligence.
Use of funds: How the money raised will be spent, usually split by department or milestone.
Milestones: Measurable goals the round should reach, such as ARR, customers or product launches.
Product-market fit (PMF): Strong evidence that a market wants your product: retention, growth and pull from customers.
TAM / SAM / SOM: Total, serviceable and obtainable market. The market size story in a pitch.
Investor update: A regular email to investors reporting progress, metrics and asks.
Exit: A sale of the company or IPO, which turns shares into cash.

Marketplace terms

GMV: Gross merchandise value - total value of orders placed through the marketplace.
Liquidity: How reliably buyers find what they want and sellers find buyers.

E-commerce / DTC terms

AOV: Average order value.
Repeat purchase rate: Orders per active customer per month after the first order.

AI Startup (usage-based) terms

Inference cost: Cost of running the AI model for each request (API fees or GPU time).
Usage-based pricing: Customers pay per unit consumed (requests, tokens, minutes).
Gross margin (AI): Often lower than classic SaaS because compute scales with usage.

Fintech (payments) terms

TPV: Total payment volume processed.
Interchange: Fees paid to card issuers on each transaction.
Net revenue (payments): Gross revenue minus interchange, scheme fees and losses.

Services / Agency terms

Retainer: A fixed monthly fee for ongoing work.
Utilisation: Share of available hours that are billable.
Delivery margin: Revenue minus the cost of the people doing client work.

Hardware + subscription terms

BOM: Bill of materials - the cost of components in one device.
Attach rate: Share of device users who pay for the subscription.
Installed base: Devices in active use.

Operating & reporting

Budget: Your plan for the year, month by month, line by line.Example: Revenue budget $1.2M for FY2027
Actuals: What really happened, taken from your books after month-end close.Example: June revenue was $33.7k
Variance: Actual minus budget, in money and as a %.Example: -$1.9k (-5%) on revenue
Favourable / unfavourable variance: Better or worse than budget. Revenue above budget and costs below budget are favourable.Example: Costs $2k below budget = favourable
Year to date (YTD): From the first month of the financial year to the latest month with actuals.Example: YTD revenue $164k
Reforecast: Actuals for the months that have happened plus budget (or a new forecast) for the rest of the year.Example: Full-year reforecast $439k
Month-end close: Reconciling accounts and recording everything for the month so the numbers are final.Example: Close within 7 days
Minimum cash buffer: The lowest balance you're prepared to hold. Weeks below it are a warning.Example: $150k buffer
Cash lever: An action that improves cash: collecting faster, delaying a hire, cutting a cost.Example: Delay one hire by 6 weeks
Forecast accuracy: How close last week's forecast was to what actually happened.Example: Above 95% is good
RAG status: Red, amber or green against target - a quick way to show which KPIs need attention.Example: 2 KPIs RED this month
Board pack: The document sent to the board before each meeting: KPIs, financials, narrative and decisions needed.Example: Send a week before the meeting
Readiness score: How much of the fundraising checklist is complete.Example: 88% ready
Weighted pipeline: Expected cheques multiplied by the probability of each investor's stage.Example: $1.9M weighted
Data room completeness: The share of listed documents that are final and ready to share.Example: 78% complete
Advisor licence: Permission to use the kit with the client companies you advise.Example: Premium edition