Startup equity glossary
The terms that appear on a term sheet, explained in plain language with a worked example on every page. Written for someone reading their first one.
Term sheet and cap table terms, explained
1x non-participating preference
The founder friendly liquidation preference: money back once, or the percentage, whichever is larger, never both.
Advance subscription agreement (UK)
The UK instrument for money paid now against shares issued later, built to stay eligible for SEIS and EIS relief.
Dead zone
The band of exit values across which the common shareholders receive nothing extra, however much the price rises.
Double trigger acceleration
Unvested equity vests early only if two things happen: the company is acquired and you are then let go.
Full ratchet vs weighted average
Two anti-dilution formulas with very different severity. One reprices everything, the other reprices in proportion.
Fully diluted shares
The share count that assumes every option and every convertible has already converted. The only number worth quoting.
Liquidation preference stack
The order in which several rounds of preferred shares get paid when there is not enough to pay them all.
Option pool shuffle
Placing the option pool before the money, so the founders fund all of it and the incoming investor funds none.
Participating preferred stock
Preferred shares that take their liquidation preference and then also share in what is left over.
Pre-money vs post-money SAFE
Which of the two SAFE forms you signed decides whether your other convertibles dilute the investor or dilute you.
SAFE vs convertible note
Both defer the price to a later round. Only one of them is a debt that can fall due.