Updated 28 August 2026 · 15 terms
Fundraising vocabulary has a particular problem: it mixes everyday words used in a precise technical sense, French acronyms with no Anglo-Saxon equivalent, and anglicisms with no stable translation. The result is that two people at the same table can use the same term meaning different things — and sign anyway.
This glossary treats every term the same way: a short definition, what it actually means in practice, then a worked example. The example is the point. Knowing that a liquidation preference "determines the order of distribution of sale proceeds" helps nobody; seeing that it is worth €1.5M on an €8M exit changes how you read a term sheet.
Fundraising process
The steps and documents between a first investor coffee and money landing on the account.
Term sheet
A term sheet is the two- to five-page document in which an investor sets out the conditions under which they propose to invest: valuation, amount, governance and protections. Apart from exclusivity and confidentiality it is not legally binding — but in practice what it contains is almost never renegotiated.
Read the full definition →Due diligence
Due diligence is the audit an investor runs after the term sheet to confirm the company is what it claimed to be. It covers legal, financial, product, commercial and team, and typically takes four to eight weeks on a European seed round.
Read the full definition →Data room
A data room is the secure online space where a startup gathers the documents investors review during due diligence. It replaces emailed attachments with traceable, revocable, organised access, so you know who read what and for how long.
Read the full definition →Lead investor
The lead investor sets the price of the round, runs due diligence, drafts the term sheet and usually writes the largest cheque. The other investors, called followers, accept the terms the lead negotiated without redoing the audit work.
Read the full definition →Shareholders' agreement
A shareholders' agreement is the private contract governing the relationship between a startup's shareholders: who can sell shares and on what terms, who decides what, and what happens when a founder leaves. It sits alongside the public articles of association and covers what those cannot.
Read the full definition →Funding instruments
The legal vehicles used to invest before or during a priced round.
SAFE
A SAFE (Simple Agreement for Future Equity) is a contract under which an investor pays money now in exchange for shares issued later, at the next priced round. Created by Y Combinator in 2013, it is neither debt nor equity: no interest, no maturity date, only a promise to convert.
Read the full definition →BSA AIR
The BSA AIR (Bon de Souscription d'Actions – Accord d'Investissement Rapide) is the French instrument for investing in a startup without setting its valuation immediately. The investor pays now and receives shares at the next round, at a price bounded by a valuation floor and a valuation cap.
Read the full definition →Convertible note
A convertible note is a loan to a startup that turns into shares on a trigger event, usually the next funding round. Until it converts it remains debt: it accrues interest and must be repaid at maturity if no conversion occurs.
Read the full definition →Equity and dilution
Who owns what, at what price, and what founders keep after each round.
Cap table
A capitalisation table, or cap table, records who owns what in a startup: every shareholder, their share count, their percentage and the class of shares held. It is the first document an investor asks for, and the most revealing about how the company has been run.
Read the full definition →Dilution
Dilution is the fall in an existing shareholder's percentage when a company issues new shares. It does not reduce how many shares you own, only their relative weight: owning 20% of a €10M company beats owning 100% of a €1M one.
Read the full definition →Pre-money and post-money valuation
Pre-money valuation is what the company is worth before the round's money arrives; post-money is that same value plus the amount raised. The formula is direct — post-money = pre-money + amount raised — and an investor's stake is always computed against the post-money figure.
Read the full definition →BSPCE (French startup stock options)
A BSPCE (Bon de Souscription de Parts de Créateur d'Entreprise) is the French scheme granting an employee the right to buy shares in their company at a price fixed in advance. If the share value rises, the holder buys at the old price and keeps the difference.
Read the full definition →Liquidation preference
A liquidation preference sets the order and the amount each shareholder receives when the company is sold. A 1x non-participating preference guarantees the investor gets their money back before founders receive anything.
Read the full definition →Metrics
The numbers an investor checks before even opening your deck.
Runway
Runway is the number of months a startup can operate before running out of cash at its current spending rate. It is cash available divided by monthly net burn — spending after receipts are deducted.
Read the full definition →ARR and MRR
MRR (Monthly Recurring Revenue) is a subscription business's recurring monthly revenue; ARR (Annual Recurring Revenue) is its annual projection, twelve times MRR. Only contractual, repeatable revenue counts: one-off services are excluded.
Read the full definition →Frequently asked questions
Which term should you start with if you have never raised?+
Pre-money and post-money valuation, then dilution. Those two shape how everything else reads: without them a term sheet is a list of numbers whose consequences you cannot evaluate.
Which terms are specific to France?+
BSPCE, BSA AIR and the pacte d'associés have no strict equivalent in US law. SAFEs and stock options are their functional cousins, but the legal and tax regimes differ enough that you cannot substitute one for the other.
Does this glossary replace a lawyer?+
No. It exists so you understand what is being discussed and can ask the right questions. Drafting and negotiating a term sheet, a shareholders' agreement or a convertible instrument is work for counsel who takes responsibility for your specific situation.
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