S&I Gazette #37: If you could know only these terms, you’d be way ahead of the herd

The VC world, like any other complex field, is filled with technical jargon. 

If you want to dive in but don’t understand the terms, you’ll have a tough time.

But rest assured, because in today’s newsletter edition, I’ll break down this jargon into simple, easy-to-understand terms.

Let’s dive in:

1. Valuation:

• Pre-Money Valuation: The company’s value before receiving the investment.
• Post-Money Valuation: The company’s value after the investment is included.

2. Equity Stake:

The percentage of the company the investor will own based on their investment amount.

3. Control Terms:

• Board Seats: Representation investors may seek on your board.
• Voting Rights: Decision-making power over key company actions.

4. Liquidation Preferences:

Specifies how proceeds are distributed in the event of a sale or liquidation of the company.

5. Anti-Dilution Provisions:

Protects investors from dilution if the company raises future rounds at a lower valuation.

6. Other Clauses:

• Founder Vesting: Ensures founders remain committed to the company for a specified period.
• Exit Provisions: Conditions under which the investor can exit, such as an acquisition or IPO.
• Drag-Along Rights: Enables majority shareholders to force minority shareholders to participate in a sale.
• Pro-Rata Rights: Allows investors to maintain their ownership percentage by participating in future funding rounds.
• Convertible Notes and SAFEs: Debt instruments that convert into equity at a future funding round, often used in early-stage investments.

Although there are many more complicated terms to explore, for now, let’s stick to the basics and focus on the term sheet when the time comes.

Did I mention that we at Utopia Pitch can help you evaluate your term sheet? 

Let’s talk about for that, but first ⬇️

P.S. We just launched a new service. It's called 'Roast My Deck' for those of you who aren't 100% confident in your pitch deck and want a second opinion! DM me and let’s get started.