Plain-English explanations of the startup, funding and exit terms you will meet, with UK examples, simple sketches and links to the founder tools that let you try the numbers yourself.
One company buying another, either by buying its shares or its business and assets. Tech companies also make acquisitions to grow, adding customers, products or teams.
Example
A £3m ARR company buys a £400k ARR competitor to add a product line and 60 customers.
An optional confirmation from HMRC that a company looks likely to qualify for SEIS or EIS, based on the information provided. Most angels expect it before investing.
Example
A company applies with its business plan and draft documents, receives advance assurance a few weeks later and then closes its round.
A UK agreement where an investor pays now for shares to be issued later, at the next round, usually at a discount or capped valuation. Unlike a loan, it has no interest or repayment. With the right terms, including a short long-stop date, it can be compatible with SEIS and EIS.
Example and sketch
An angel pays £50k under an ASA with a 20% discount and a six-month long-stop date. If no round happens by then, shares are issued at a pre-agreed valuation.
An individual who invests their own money in early-stage companies, often bringing experience and contacts as well as capital. In the UK most angels invest through SEIS or EIS for the tax reliefs.
Example
A former software CEO invests £25k in a pre-seed round and makes introductions to three potential customers.
The average yearly value of a customer contract, excluding one-off fees. It helps decide which sales approach is affordable: low ACV needs self-serve, high ACV can support a sales team.
Example
A three-year contract worth £90k in total has an ACV of £30k.
Recurring revenue expressed as a yearly figure, usually MRR × 12. It is the headline size measure for subscription businesses and the base for most SaaS valuations.
Example
MRR of £13,000 is ARR of £156,000. In the Techcelerate value chain, £1m ARR (about £83k MRR) is a common marker for product–market fit and Series A readiness.
Protection for investors if the company later raises at a lower share price. Investors receive extra shares (or a better conversion rate) to soften the dilution. Broad-based weighted average is standard; full ratchet is rare and harsh.
Example
Investors bought at £2.00 a share. A down round at £1.00 under full ratchet reprices them as if they had paid £1.00, doubling their shares. Weighted average adjusts by much less, depending on how many new shares are issued.
A UK company’s rulebook, filed publicly at Companies House. It sets out share classes and their rights, how directors are appointed and how shares can be transferred.
Example
Tag-along, drag-along and pre-emption rights are usually written into the articles so they bind every shareholder, including future ones.
B2B (business to business) tech startups sell to organisations; B2C (business to consumer) sell to individuals. B2B usually means fewer, larger customers and longer sales cycles; B2C usually means many small customers and marketing at scale.
Example
An HR platform sold to employers is B2B. A fitness app sold through the app stores is B2C. A marketplace that charges employers but is free for job seekers to use is B2B2C.
A board seat gives an investor a director on the company’s board, with a vote and directors’ legal duties. An observer can attend board meetings but has no vote.
Example
A Series A board: two tech founders, one investor director and an independent chair, plus an observer from a smaller investor.
Bookings are the value of contracts signed; billings are what you have invoiced; revenue is what you have earned by delivering the service, as recognised under accounting rules. They are often confused in pitch decks.
Example
A customer signs a £36k three-year contract (bookings £36k), is invoiced £12k for year one (billings £12k) and, after one month, £1k has been earned (revenue £1k). The other £11k is deferred revenue.
Building a company from personal savings and customer revenue instead of outside investment. It keeps full ownership and control, and forces focus on what customers will pay for.
Example
A tech founder keeps consulting two days a week, launches with five paying pilot customers and reinvests every pound of profit. Three years later the company raises on far better terms, or never needs to.
Short-term funding, usually from existing investors, to extend runway until a larger round or a milestone. It is often done with a convertible instrument.
Example
With four months of runway and a Series A expected in six, existing investors put in £300k through a convertible loan note.
Net burn divided by net new ARR over the same period: how many pounds you burn to add one pound of recurring revenue. Lower is better; under 1.5 is often seen as efficient.
Example
Burning £600k in a year while adding £400k of new ARR gives a burn multiple of 1.5.
A UK relief that reduces capital gains tax on selling qualifying business shares, up to a lifetime limit, for people who meet conditions such as working for the company and holding at least 5%. The rate has been rising: check HMRC for the rate that applies to your sale date.
Example
A tech founder who has worked in the company for years and holds 30% may pay a reduced rate on the first part of their gain on exit.
The share of a fund’s profits that goes to its general partners, usually after investors have had their money back. It rewards the investment team for good returns.
Example
A £50m fund returns £150m. After the £50m is repaid to LPs, 20% carry on the £100m profit is £20m to the GPs.
The cash coming into and going out of the business over a period. A profitable company can still run out of cash if customers pay late or growth needs stock or hiring upfront.
Example
Winning a £120k annual contract paid quarterly in arrears means delivering for three months before the first £30k arrives. The cash flow forecast shows the gap you need to fund.
The usual basis for pricing a company sale: the buyer pays for the business as if it had no cash and no debt, then the price is adjusted up for cash left in and down for debt repaid.
Example and sketch
Headline price £10m cash-free, debt-free. The company has £1m of cash and £300k of debt, so shareholders receive about £10.7m, subject to the working capital adjustment.
The rate at which customers (logo churn) or revenue (revenue churn) are lost over a period. For subscription businesses, it is one of the most important numbers to watch.
Example
Starting the month with 200 customers and losing 6 is 3% monthly logo churn, roughly 31% a year. Even modest monthly churn removes a large share of customers over a year.
The first period of a vesting schedule during which nothing vests. If someone leaves before the cliff, they get nothing; at the cliff, a whole block vests at once.
Example and sketch
With a one-year cliff, someone leaving after 11 months receives no vested options; someone leaving after 13 months receives 13/48 of their grant.
Tracking groups of customers who started in the same period to see how their behaviour changes over time. It shows whether the product is getting better at keeping customers.
Example and sketch
If customers who joined in March keep 70% after six months, but those who joined in September keep 82%, recent product changes are working.
The share of people or deals that move from one step to the next, such as visitors to sign-ups or demos to customers. Improving the weakest step usually has the biggest effect.
Example and sketch
1,000 website visitors → 50 trial sign-ups (5%) → 10 paying customers (20% of trials). Doubling trial-to-paid conversion doubles customers without any extra marketing spend.
A loan to a company that converts into shares at the next funding round, usually at a discount and/or subject to a valuation cap, instead of being repaid. It defers agreeing a valuation.
Example and sketch
An investor lends £200k with a 20% discount. If the next round prices shares at £2.00, the loan converts at £1.60, giving 125,000 shares.
Investment arms of large companies that invest in tech startups for financial return and strategic reasons, such as access to new technology or future acquisitions.
Example
A bank’s venture arm invests in a fintech tech startup and becomes its first enterprise customer.
Structured conversations with potential customers to learn about their problems, how they solve them today and what they would pay, before building much. The aim is to learn, not to sell.
Example
Instead of asking “Would you use an app that…?”, ask “Tell me about the last time this happened. What did you do? What did it cost you?”. Past behaviour is far more reliable than predictions.
A secure online folder of the documents investors or buyers need for due diligence: company documents, cap table, financials, contracts, IP and employment records.
Example
A seed data room might include the articles of association, shareholders’ agreement, cap table, last two years of accounts, management accounts, key customer contracts and IP assignments.
Removing the biggest uncertainties about a business, such as whether customers want it, will pay for it and can be reached profitably, before asking investors to take that risk. Each stage of evidence makes the next round cheaper in equity terms.
Example and sketch
Before seed, a tech startup proves 50 paying customers and £8k MRR. The question is no longer “will anyone pay?” but “how fast can this grow?”, which supports a higher valuation and less dilution.
The fall in an existing shareholder’s percentage ownership when the company issues new shares. Dilution is not a loss in itself: a smaller share of a more valuable company can be worth much more.
Example and sketch
A tech founder owns 1,000,000 of 1,000,000 shares (100%). The company issues 250,000 new shares to investors. The tech founder now owns 80%, but if the round valued the company at £2m, that 80% is worth £1.6m.
The two usual ways convertible investors are rewarded for investing early. The discount gives them a lower price than new investors; the cap sets a maximum valuation at which they convert. They usually get whichever is better.
Example and sketch
A note with a 20% discount and a £5m cap converts in a round at £10m pre-money. The cap (£5m) beats the discount (£8m effective), so the investor converts as if the valuation were £5m.
An up round is priced at a higher valuation than the last round; a flat round at the same valuation; a down round at a lower one. Down rounds dilute existing shareholders more and can trigger anti-dilution protection.
Example
Last round priced shares at £2.00. A new round at £1.50 a share is a down round.
A right letting a set majority of shareholders force the rest to sell on the same terms when the company is sold. It stops a small minority blocking a sale.
Example
If holders of 75% of shares, including a majority of the investors, accept an offer, the remaining shareholders must sell too.
The investigation an investor or buyer carries out before completing a deal: checking the financials, legal documents, contracts, IP, people and technology.
Example
A buyer’s lawyers find that a freelance developer never signed an IP assignment, so it has to be fixed before completion.
Part of the sale price paid later, only if the business hits agreed targets after the sale, such as revenue or profit. It bridges a gap between what the buyer will pay and what the seller expects.
Example
£8m paid at completion plus up to £4m over two years if revenue reaches £6m and then £8m.
Earnings before interest, tax, depreciation and amortisation: a measure of operating profit that strips out financing and accounting choices. Profitable companies are often valued as a multiple of it.
Example
Revenue £3m, operating costs £2.4m (excluding £100k depreciation): EBITDA is £600k. At a 7× multiple, enterprise value would be around £4.2m.
A UK scheme giving investors 30% income tax relief, and other tax benefits, for investing in qualifying smaller unquoted companies. Knowledge-intensive companies have higher limits.
Example
An investor puts £100k into a qualifying company and can reduce their income tax by £30k, provided they hold the shares for at least three years.
A UK tax-advantaged share option scheme for qualifying smaller companies. Employees usually pay no income tax when exercising and can pay less capital gains tax on a sale. Limits and conditions are set by HMRC.
Example
Options over shares agreed with HMRC at £0.20 a share are exercised on a sale at £4.00. The gain is usually taxed as a capital gain rather than as income.
The value of the whole business, regardless of how it is funded. Equity value (what shareholders receive) is enterprise value plus cash minus debt, adjusted for working capital.
Example and sketch
Enterprise value of £10m, plus £1.5m of cash, minus a £500k loan, gives equity value of £11m before other adjustments.
Raising investment from many members of the public through a regulated online platform, in exchange for shares. It can double as marketing to loyal customers.
Example
A consumer app raises £750k from 1,400 investors, many of them existing users.
The point at which tech founders and investors turn their shares into cash, usually through a trade sale, a private equity deal, a secondary sale or a stock market listing.
Example and sketch
Most UK tech exits are trade sales to larger companies, not IPOs.
A private company that manages the wealth of a wealthy family, sometimes investing directly in private companies with more flexible time horizons than VC funds.
Example
A family office leads a £2m round and is happy to hold for ten years, with no pressure for a quick exit.
The two main anti-dilution formulas. Full ratchet resets the investor’s price to the new, lower price, whatever the round size. Weighted average blends the old and new prices, weighted by the number of shares, so a small down round has a small effect.
Example
A tiny £50k down round at half the price triggers the full effect under full ratchet, but only a small adjustment under broad-based weighted average.
Counting not just issued shares but every share that could be issued: options (granted and in the pool), warrants and convertibles. Investors usually price rounds on a fully diluted basis.
Example
900,000 issued shares plus a 100,000-share option pool is 1,000,000 fully diluted shares. A tech founder with 450,000 shares owns 50% issued but 45% fully diluted.
In a VC fund, the general partners are the investment team who choose and manage investments; the limited partners are the investors in the fund, such as pension funds, family offices and wealthy individuals.
Example
A fund’s LPs commit £50m. The GPs charge a yearly management fee (often around 2%) and take a share of profits, called carried interest (often around 20%).
Rules on what happens to a departing tech founder’s or employee’s shares. Good leavers (for example ill health, or dismissal without cause) usually keep vested shares at fair value; bad leavers (for example misconduct) may have to sell them back at a low price.
Example
A co-founder who leaves after 18 months as a good leaver keeps 18/48 of their shares; a bad leaver might have to sell all of them back at their original nominal price.
The plan for how you will reach, win and keep customers: who you sell to, what you offer, at what price, through which channels and with what sales process.
Example
A GTM plan for a construction-safety app might say: sell to UK contractors with 50–500 staff, through health-and-safety managers, at £8 per worker per month, found through trade shows and LinkedIn, with a two-week trial.
Money from government bodies or foundations that does not need to be repaid and does not cost equity, usually for specific research or innovation projects. In the UK, Innovate UK is a major source for tech companies.
Example
An Innovate UK grant covering a share of the costs of a 12-month research and development project, with the company funding the rest.
Revenue minus the direct costs of delivering the product (hosting, payment fees, support, third-party data), as a percentage of revenue. Software businesses often run at 70–85%.
Example
Revenue of £50k with £9k of hosting, support and payment costs gives a gross margin of 82%.
Investment in established, growing companies, usually for a minority stake, to fund expansion without a full change of control. It sits between late-stage VC and private equity.
Example
A growth fund invests £15m for 25% of a profitable company to fund international expansion.
A share class that only benefits from value created above a set threshold, so new shareholders do not take a share of value already built. Used for people who cannot get EMI options, such as non-employee directors.
Example
Growth shares with a £5m hurdle are worth nothing on a sale at £4m, and share in the value above £5m on a sale at £12m.
A short, mostly non-binding document setting out the main terms of a sale before the detailed legal work starts: price, structure, timing, exclusivity and key conditions.
Example
£12m on a cash-free, debt-free basis with normalised working capital; £9m at completion and up to £3m earn-out; 8 weeks’ exclusivity.
Under UK financial promotion rules, private companies can generally only promote investments to certain groups, including certified high net worth individuals and self-certified sophisticated investors. The exemptions are in the Financial Promotion Order and were updated in 2024.
Example
Before sending a pitch deck to an angel you do not know, check how the investor qualifies under the current rules, or work through an FCA-authorised firm or platform.
A precise description of the type of organisation (or person) that gets the most value from your product and is most valuable to you. It focuses sales and marketing on the customers most likely to buy and stay.
Example
Not “SMEs”, but “UK accountancy firms with 10–50 staff, using Xero, with a partner who owns technology decisions”.
An investor’s contractual right to receive regular financial and business information, such as monthly management accounts, an annual budget and audited accounts.
Example
Monthly management accounts within 20 days of month end, and the next year’s budget before the year starts.
Listing a company’s shares on a public stock exchange for the first time, so anyone can buy them. In London this means the main market or AIM. It is rare for early-stage companies and expensive to maintain.
Example
A scale-up lists on AIM, raising £25m of new money and letting early investors sell part of their holdings over time.
A written transfer of ownership of IP, such as code, designs or inventions, from the person who created it to the company. In the UK, freelancers and contractors own what they create unless they assign it.
Example
Every tech founder, contractor and agency that wrote code before the company existed should sign an assignment to the company, or investors will ask for it in due diligence.
A list of decisions the company cannot take without approval from investors, usually a majority of them. Also called reserved matters or protective provisions.
Example
Typical items: issuing new shares, changing the articles, selling the company, taking on large debt, changing the business, and paying dividends.
A regular (often monthly or quarterly) report to investors on progress, key metrics, challenges and specific asks. Good updates build trust and make the next raise easier.
Example
Highlights, metrics (MRR, burn, runway), lowlights, and three asks: “intro to a CFO”, “feedback on pricing”, “customers in retail”.
The investor who sets the terms of a round, usually puts in the largest amount and does the main due diligence. Other investors follow on the same terms.
Example
A seed fund leads with £800k of a £1.2m round, negotiates the term sheet and takes a board seat; angels make up the rest.
The gross profit a customer is expected to generate over their whole time with you. It is usually estimated as monthly gross profit per customer divided by monthly churn.
Example
A customer pays £100 a month at 80% gross margin (£80 profit) and monthly churn is 2.5%, so the average customer stays about 40 months. LTV ≈ £80 × 40 = £3,200.
The right of preference shareholders to be paid back first, before ordinary shareholders, when the company is sold or wound up. A 1× non-participating preference is the most common in the UK and is founder-friendly.
Example and sketch
Investors put in £2m for 20% with a 1× non-participating preference. On a £5m sale, they choose the greater of £2m back or 20% (£1m), so they take £2m and ordinary shareholders share £3m. On a £50m sale, they convert and take 20% (£10m).
Lifetime value divided by acquisition cost: how much gross profit each pound of sales and marketing brings back. A common rule of thumb is 3:1 or better.
Example
LTV of £3,200 and CAC of £800 gives 4:1, which is healthy. At 1:1, every new customer barely pays back what it cost to win them.
The point where a tech startup has paying customers and a repeatable way to win more, so the business works in miniature. In the Techcelerate value chain this comes before product–market fit, at around £100k a year in revenue, and it de-risks the company for seed investors.
Example
Twenty paying customers, each found through the same channel and each paying £400 a month, is a minimum viable business: about £96k a year, and a clear sense of how to find the next twenty.
The smallest version of a product that lets you learn whether real customers will use it, and pay for it. It is a learning tool, not a cut-down version of the full vision.
Example
A tech startup planning a booking platform for physiotherapists starts with a simple booking page and a shared calendar, run by hand behind the scenes. Ten clinics using it every week tells them more than six months of building would.
The predictable subscription revenue a business earns each month, excluding one-off fees. Its movements are usually split into new, expansion, contraction and churned MRR.
Example
40 customers on £200 a month and 10 on £500 a month gives MRR of £13,000.
Recurring revenue kept from existing customers over a year, including upgrades and minus downgrades and churn, as a percentage of what they paid at the start. Above 100% means existing customers grow revenue on their own.
Example
Customers paying £100k ARR a year ago now pay £112k (after £20k of upgrades, £3k of downgrades and £5k of churn). NRR is 112%.
An arrangement where one legal shareholder holds shares on behalf of many underlying investors. It keeps the cap table simple when many small investors take part.
Example
An equity crowdfunding platform’s nominee company appears once on the register, holding shares for 1,400 investors.
A contract to keep shared information confidential. Most VCs will not sign one for a first pitch, so share what you are comfortable with; NDAs matter more in M&A talks.
Example
A potential acquirer signs an NDA before seeing customer lists and detailed financials.
The agreed “normal” level of working capital the business needs, left in the company at sale. If actual working capital is below it, the price goes down; above it, up.
Example
Normalised working capital is set at £400k. At completion it is £350k, so the price falls by £50k.
A block of shares set aside to grant as share options to future employees. Investors often ask for it to be created or topped up before their investment, so the dilution falls on existing shareholders.
Example
A Series A term sheet asks for a 12% post-money option pool included in the pre-money valuation. Because the pool is carved out before the new money, it lowers the effective pre-money value for the tech founders. This is sometimes called the option pool shuffle.
The standard class of shares in a UK company, usually carrying votes, dividends and a share of what is left on a sale or winding up. Tech founders and employees usually hold ordinary shares.
Example
Articles might create “A ordinary shares” for investors and “ordinary shares” for tech founders, with different rights.
A liquidation preference where investors get their money back first and then also share in what is left as if they held ordinary shares. It is much less founder-friendly than non-participating, and sometimes capped.
Example and sketch
Using the £5m sale above with a participating preference: investors take £2m, then 20% of the remaining £3m (£600k), so £2.6m in total, leaving £2.4m for everyone else.
A round made up of many small investors with no clear lead. It can raise money quickly but leaves no single investor committed enough to help in difficult times.
Example
£600k from 25 investors, none investing more than £50k.
People who own or control more than 25% of a UK company’s shares or votes, or otherwise control it. Companies must record them and report them to Companies House.
Example
Two co-founders with 40% each are both PSCs; a seed investor with 15% is not.
A short presentation, usually 10–15 slides, explaining the problem, solution, market, traction, team, business model and the round. Its job is to win a meeting, not to close the deal.
Example
A typical order: problem, solution, why now, market, product, traction, business model, go-to-market, competition, team, the ask and use of funds.
A deliberate change to one part of the business model, such as the customer, the problem, the product or the way you make money, based on what you have learned. A pivot keeps what is working and changes what is not.
Example
A tech startup selling a scheduling tool to individual tutors finds that tutoring agencies are the ones willing to pay. Switching to sell to agencies, with the same core product, is a customer-segment pivot.
In venture capital, returns are dominated by a tiny number of huge winners, while most investments return little or nothing. It shapes what VCs look for.
Example and sketch
Of 30 investments, 15 fail, 10 return roughly their money and 5 do well, but one returns 40× and makes the fund.
The right of existing shareholders to be offered new shares before outsiders, in proportion to their holdings. UK companies have statutory pre-emption rights, which articles often modify or waive for specific rounds.
Example
Before a new investor joins, existing shareholders must be offered the new shares, unless they agree to waive their rights for that round.
Shares that carry extra rights over ordinary shares, most often a liquidation preference, and sometimes anti-dilution protection or priority dividends. Venture investors usually receive them.
Example
Series A investors receive “Series A preferred shares” with a 1× non-participating liquidation preference.
Pre-money is the value of the company immediately before new investment; post-money is the value immediately after, equal to pre-money plus the new money. The investor’s share is the investment divided by the post-money valuation.
Example and sketch
A £1m investment at a £4m pre-money valuation gives a £5m post-money valuation. The investor owns £1m ÷ £5m = 20%.
The earliest outside funding, often from the tech founders themselves, friends and family, angels or grants, used to validate the idea and build a first version. Typically tens to a few hundred thousand pounds.
Example and sketch
Raising £150k from four angels under SEIS to build an MVP and land the first ten customers.
Investment firms that buy stakes in, or control of, more mature, usually profitable companies, often using debt, to grow them and sell within a few years.
Example
A PE firm buys 60% of a £10m ARR profitable SaaS company, funds two acquisitions and aims to sell in four to five years.
An investor’s right to invest in future rounds to keep their percentage ownership. Under UK company law and most articles this is delivered through pre-emption rights.
Example
An investor owning 10% can choose to buy up to 10% of the next round’s new shares.
Evidence that a real, painful problem exists for a specific group of people and that your proposed solution addresses it. It comes before product–market fit and is usually proven through interviews, pre-orders or a prototype.
Example
Thirty interviews with finance managers show that 22 spend more than a day a month reconciling expenses by hand, and 9 agree to trial a prototype. That is evidence of problem–solution fit.
A growth model where the product itself drives acquisition and expansion, through a free trial, a freemium plan or self-serve sign-up, rather than a sales team leading every deal.
Example
A design tool lets anyone sign up and invite colleagues. When a team of five is active, it prompts them to upgrade to the team plan, with no salesperson involved.
When a product satisfies a clear need for a well-defined group of customers so well that growth starts to pull, rather than being pushed. Signs include strong retention, word-of-mouth referrals and customers who would be very disappointed to lose it.
Example
In the Sean Ellis test, you ask users how they would feel if they could no longer use the product. If 40% or more say “very disappointed”, that is a common rule of thumb for product–market fit.
UK tax relief for companies spending on qualifying research and development, which can reduce corporation tax or give a cash credit to loss-making companies. The scheme was redesigned in 2024, with extra support for R&D-intensive loss-makers.
Example
A loss-making tech startup spending on engineers solving genuine technological uncertainty may be able to claim a payable credit from HMRC. Routine software work does not qualify.
The share of customers or users who keep using and paying over time. Strong retention is the clearest sign that a product is valuable, and it compounds every other growth effort.
Example and sketch
Of 100 customers who joined in January, 85 are still paying in December: 85% annual logo retention.
A valuation shortcut: enterprise value divided by revenue (often ARR for SaaS). Multiples vary widely with growth, retention, margins and market conditions.
Example
£2m ARR valued at £10m is a 5× ARR multiple. A slower-growing business with weaker retention might only get 1–3×.
Funding repaid as a percentage of future monthly revenue until a fixed total is repaid. It suits businesses with predictable recurring revenue that want to avoid giving up equity.
Example
Borrowing £100k to fund marketing and repaying 8% of monthly revenue until £112k has been repaid.
A plan for what the product will deliver and roughly when, tied to customer and business goals. Good roadmaps describe outcomes and problems to solve, not just a list of features.
Example
Rather than “Q3: build reporting”, a better roadmap item is “Q3: cut the time finance teams spend on month-end reports from two days to two hours”.
A quick health check for SaaS businesses: revenue growth rate plus profit margin should be at least 40%. It balances fast growth against profitability.
Example and sketch
Growing 60% a year with a −20% profit margin scores 40. Growing 15% with a 25% margin also scores 40. Growing 20% with a −30% margin scores −10, which is a warning sign.
How many months a company can keep going before its cash runs out at the current net burn rate. Tech founders usually start raising, or cutting costs, with at least 6–9 months left.
Example and sketch
£420k in the bank and a net burn of £35k a month is 12 months of runway. Raising typically takes 3–6 months, so the latest sensible start is around month 6.
A simple agreement for future equity: a US instrument, popularised by Y Combinator, similar in purpose to a UK advance subscription agreement. UK tech startups more often use ASAs because of SEIS and EIS rules.
Example
A UK company raising from US angels might be asked for a SAFE; check with a lawyer how it interacts with UK tax reliefs before signing.
All the open sales opportunities, grouped by stage from first conversation to signed contract. Tracking it shows how much revenue is likely to close and when.
Example and sketch
Stages might be: qualified, demo done, proposal sent, negotiation, closed. Twenty deals worth £5k each in “proposal sent”, with 40% typically closing from that stage, is about £40k of weighted pipeline.
A growth model where salespeople find, qualify and close customers. It suits higher-priced, more complex products where buyers need demos, proposals and negotiation.
Example
An enterprise compliance platform priced at £60k a year sells through account executives who run discovery calls, security reviews and procurement.
A UK scheme giving investors 50% income tax relief, and other tax benefits, for investing in very young, small companies. HMRC sets limits on the company’s age, size and how much it can raise, and these are reviewed from time to time.
Example
An angel invests £20k in a qualifying company and can claim £10k off their income tax bill. Companies usually apply for advance assurance from HMRC before raising.
Funding to turn early traction into a repeatable business: building the team, product and go-to-market. In the UK this is commonly from several hundred thousand pounds to a few million.
Example and sketch
A tech startup with £15k MRR raises £1.2m from a seed fund and angels to hire four people and reach £80k MRR.
The first major venture capital round, used to scale a business that has shown product–market fit. Investors usually expect strong recurring revenue, often around £1m ARR or more for SaaS, and efficient growth.
Example and sketch
Raising £6m led by a VC fund, with a new board seat for the lead investor, to expand sales into Europe.
Later venture rounds (Series B, C and beyond) that fund scaling: new markets, products, acquisitions and larger teams. Each is larger and priced on more mature metrics.
Example and sketch
A Series B of £20m to open US offices and acquire a smaller competitor.
The right to buy shares in the future at a fixed price (the exercise or strike price). They let employees share in the company’s growth without buying shares upfront.
Example
An employee is granted options over 10,000 shares at £0.50. Years later, at a sale for £5 a share, they pay £5,000 to exercise and receive shares worth £50,000.
A private contract between shareholders and the company setting out how the company will be run and how shares can be transferred, including investor consents, information rights and leaver provisions.
Example
It might require investor approval before taking on debt above £250k, issuing new shares or selling the company.
The negative message sent when an existing, well-known investor chooses not to invest in a company’s next round. New investors may wonder what the insider knows.
Example
A VC that led the seed round declines to follow on at Series A, and other funds become hesitant.
Software that customers use online and pay for by subscription, usually monthly or yearly, rather than buying a licence once. Revenue is recurring, so retention matters as much as winning new customers.
Example
A practice-management tool charging each clinic £150 a month is SaaS. Every clinic that stays for three years is worth £5,400 in revenue.
A right letting minority shareholders join a sale on the same terms if a majority shareholder sells their shares. It protects minorities from being left behind with a new owner.
Example
If the tech founders sell a controlling stake to a buyer, angel investors can insist on selling their shares at the same price.
Shortcuts taken in code or architecture to ship faster, which have to be “repaid” later with rework. Some is healthy early on; too much slows every future change.
Example
Hard-coding prices into the app saves a week at launch. Six months later, every pricing experiment needs a developer and a release, which is the interest on that debt.
A short document setting out the main terms of an investment: amount, valuation, share class, investor rights and conditions. It is mostly non-binding, apart from points such as confidentiality and exclusivity.
Example
Headline items: £1.5m at £6m pre-money; Series A preferred shares with a 1× non-participating preference; one investor director; a 10% option pool; 60 days’ exclusivity.
TAM is the total revenue available if every possible customer bought your product. SAM (serviceable available market) is the part you can reach with your product and channels. SOM (serviceable obtainable market) is the share you can realistically win in the next few years.
Example and sketch
A UK veterinary software tech startup: TAM is all vet practices in Europe; SAM is the roughly 5,000 independent practices in the UK it can sell to; SOM is the 300 practices it expects to win in three years. Investors look most closely at SOM and how you will reach it.
Evidence that the business is working: paying customers, revenue growth, usage, retention or signed pilots. Investors weight real traction far above plans and projections.
Example
“£12k MRR, growing 9% month on month for six months, with 96% gross revenue retention” is traction. “2,000 newsletter sign-ups” is interest.
Selling the company to another business, often a competitor, customer or larger player in the same market. It is the most common exit for UK tech companies.
Example
A Manchester HR tech company is acquired by a US payroll provider that wants a UK foothold.
The revenue and costs tied to one unit of the business, usually one customer or one order. If each unit makes money, growth can be profitable; if not, growth makes losses bigger.
Example
A meal-kit delivery earns £40, costs £24 in food and packaging and £9 in delivery: £7 contribution per box before marketing. If winning a customer costs £60, they need to order nine boxes to pay back.
How the money from a round will be spent, and what milestones it should reach. Investors want to see that the plan reaches the evidence needed for the next round.
Example
“£1.2m: 55% product and engineering, 30% sales and marketing, 15% operations; target £80k MRR in 18 months.”
What a company is agreed to be worth, either in a funding round or a sale. Early valuations are negotiated, not calculated; later ones lean on revenue, growth, margins and comparable deals.
Example
Two companies with £1m ARR: one growing 120% a year with 85% gross margin, the other growing 15% with 50% margin. The first can command a far higher multiple.
Professional investment funds that invest other people’s money into high-growth private companies in exchange for equity, aiming for a few very large returns to cover the many that fail.
Example and sketch
A £100m VC fund might make 30 investments. It needs one or two of them to return the whole fund, which is why VCs look for companies that could become very large.
Loans to venture-backed companies, usually alongside or soon after an equity round, often with warrants attached. It extends runway with less dilution but must be repaid.
Example
After a £5m Series A, a company takes £1.5m of venture debt repayable over three years, plus warrants over 0.3% of the company.
Earning shares or options gradually over time, so that someone who leaves early does not keep a full share. Four years with a one-year cliff is common.
Example and sketch
Options over 4,800 shares vesting over 48 months with a 12-month cliff: nothing vests in the first year, 1,200 vest at month 12, then 100 a month until month 48.
Promises sellers make to a buyer about the state of the business (warranties), and specific promises to cover losses from known issues (indemnities). Breaches can reduce what sellers keep.
Example
Sellers warrant that the accounts are accurate and that the company owns its IP, and give an indemnity for a known tax issue.
The order in which money from a sale is paid out: debts and costs first, then preference shareholders according to their rights, then ordinary shareholders.
Example and sketch
On a £20m sale: £1m of debt is repaid, £500k of deal costs, £4m to preference shareholders, then £14.5m to ordinary shareholders (shared with preference shareholders too if they convert or their preference is participating).
The value of open deals multiplied by the chance each one closes, usually based on its stage. It gives a more realistic forecast than adding up every open deal.
Example
A £10k deal at demo stage (20% likely) counts as £2k. The same deal at negotiation (70%) counts as £7k.
Current assets (cash, money owed by customers) minus current liabilities (money owed to suppliers, tax due). It is the cash tied up in running day-to-day operations.
Example
Customers who pay in 60 days while you pay staff monthly increase the working capital the business needs as it grows.
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This glossary is general information to help tech founders understand common terms. It is not legal, tax, financial or investment advice, and UK rules and limits (for example SEIS, EIS, EMI and capital gains tax reliefs) change over time. Take professional advice before acting, and check GOV.UK for current HMRC rules.
Learn it with tech founders who have done it.
Execution Sprints turn these terms into decisions, worked through together with other members.
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