Business finance terms, explained simply.

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Advisory shares

Advisory shares are equity grants, typically stock options, issued to advisors in exchange for guidance, introductions, or domain expertise rather than employment.

Anti-Dilution

Anti-dilution provisions protect investors from future funding rounds priced below their original price per share (a down round).

Burn Multiple

Burn multiple is a capital efficiency metric that measures how much net cash a startup burns for every dollar of net new ARR it generates.

Burn rate

Burn rate is the amount of cash a startup consumes each month, net of any revenue it generates.

Client Retainer

A client retainer is an arrangement in which a client pays a recurring fee to secure ongoing access to services or to reserve capacity, typically providing the firm with predictable revenue and the client with priority access.

Data room

A data room (or virtual data room) is a secure, access-controlled document repository that a startup shares with investors, acquirers, or lenders during due diligence.

Down Round

A down round occurs when a startup raises new equity capital at a valuation lower than its last round.

Option Pool

An option pool (also called an employee stock option pool or ESOP pool) is a portion of a company's fully diluted equity set aside exclusively for future grants to employees, advisors, and contractors.

Post-Money Valuation

Post-money valuation is the total agreed value of a company immediately after a new funding round closes.

Pre Money Valuation

Pre-money valuation is the agreed value of a company immediately before a new round closes.

Pro Rights data

Pro rata rights (also called pre-emptive rights or participation rights) give an existing investor the right, but not the obligation, to invest in a future funding round in proportion to their current ownership stake.

Stock Options (Startup)

Stock options are a contractual right to purchase company shares at a predetermined strike price at a future date.

Vesting cliff

A vesting cliff is the earliest date on which any equity under a vesting schedule can vest.

Waterfall Analysis

A waterfall analysis is a financial model that maps how proceeds from a company sale or liquidation event flow through the cap table, respecting the priority order set by each share class's liquidation preferences.