Fundraising and Equity Terms

An ownership percentage shows how much of the company a shareholder owns by comparing their shares to the total shares that exist. This percentage determines their influence in company decisions.

The P/E, or Price-to-Earnings ratio, is calculated by dividing a company's share price by its EPS, or Earnings per Share. A high P/E Ratio can mean a company is overvalued.

A pitch deck presentation, also known as a startup pitch deck, is a visual document that provides investors with essential information about your business plan, product or services, fundraising needs, and critical metrics like valuation, target market, and financial goals. The best pitch decks are brief but informative and feature simple, visually appealing slides.

Post-Money Valuation is the estimated worth of a business after a financing round is successfully finalized.

A pre-money valuation refers to the value of a company before it goes public or receives other investments such as external funding or financing.

All shareholders, including the Founders, should have the right to invest in future financing rounds. This does not mean shareholders are required to put more money in, but if they want and are able to, they have that right to maintain their ownership in any future funding round.

Pre-seed funding refers to the primary stage of funding a brand-new company. This stage mainly refers to the period when the company's founders get their operations up and running.

Preferred stock offers more rights to shareholders than common stock. Preferred stockholders receive regular dividends and are repaid first in the event of a bankruptcy or merger. Companies typically issue more common shares than preferred ones, the latter being however generally prized by investors looking for a steady income.

A price-based antidilution refers to the situation when a company raises money in a subsequent round, and that issuance is viewed as diluting the value of the stock held by the earlier investors. For that reason, investors often negotiate anti-dilution protection clauses as part of their investment contract to offset the dilutive effects of future rounds.

A PPM is a legal document provided to prospective investors when selling stock or another security in a business. It is sometimes referred to as an offering memorandum or offering document.