Glossary of terms

The cap table and fundraising terms Promythia uses, in plain language. Nothing here is legal advice — confirm specifics with your own advisors.

Anti-dilution: A provision that adjusts an investor’s conversion price if the company later raises at a lower valuation. Weighted average moves the price partway, in proportion to how much was raised at the lower price; full ratchet resets it all the way down to that lower price.
Cap table: A record of who owns what in a company — founders, investors, and the option pool — usually expressed as shares and percentages on a fully diluted basis.
Convertible note: Like a SAFE, but structured as debt that converts into shares at a future round — often carrying interest and a maturity date in addition to a cap and discount.
Dilution: The reduction in your ownership percentage when new shares are issued — in a financing round, from an option-pool top-up, or when convertibles convert.
Discount: A price break (often 10–20%) that lets a SAFE or note holder convert at a lower price than the new investors in the round, rewarding them for coming in early.
Founder: Anyone who started the company and holds shares. Employees with stock options are not founders.
Fully diluted: A way of counting ownership that includes all issued shares plus everything that could become shares — the option pool and any convertible instruments — so percentages reflect the whole pie.
Liquidation preference: The amount an investor is paid back first, before common shareholders, if the company is sold. The multiple (1×, 2×) sets how much comes back before common shareholders receive anything.
Option pool: A slice of the company reserved to grant to future employees as stock options. It sits on the cap table before anyone is hired, and investors usually want it topped up right before a round.
Option-pool shuffle: When investors require the option pool to be expanded before they invest. Because the increase comes out of the pre-money valuation, the resulting dilution lands on existing shareholders, not the new investor.
Participating vs. non-participating: With a non-participating preference, an investor takes either their preference or their converted-to-common share, not both. A participating preference lets them take both — sometimes called the ‘double dip’ — so more of the proceeds go to the investor before common shareholders.
Post-money SAFE: A SAFE that fixes the investor’s ownership as a percentage of the company after all SAFEs convert, so later SAFEs don’t dilute earlier ones. It pushes more dilution onto founders than the cap alone suggests — always confirm which kind you signed.
Post-money valuation: Pre-money valuation plus the money raised in the round. An investor’s percentage equals their cheque divided by the post-money valuation.
Pre-money valuation: What a company is worth before new investment goes in. Investor ownership is calculated relative to the post-money value, so the pre-money number sets how much you give up.
Pro-rata rights: An investor’s right to invest in future rounds to maintain their ownership percentage.
SAFE: A Simple Agreement for Future Equity: money an early investor gives you now in exchange for shares later, at your next priced round.
Term sheet: A short, mostly non-binding document setting out the key economic and control terms of a proposed investment, ahead of the full legal agreements.
Valuation cap: The highest company valuation at which a SAFE or note converts into shares. A lower cap means the early investor gets a better price — and a bigger slice — when they convert.
Valuation step-up: How much a company’s valuation rises from one round to the next — for example, a Series A priced at three times the seed valuation is a 3× step-up.
Vesting: Earning shares or options over time, typically over four years with a one-year cliff. Founder shares are often re-vested at a financing.