Definitions are an introduction, not a substitute for the instrument or agreement in front of you. Each term links to a topic guide with a fuller explanation and relevant reading.
Common stock
An equity security that participates in the residual economics of a company. Voting rights and other terms depend on the share class and governing documents. It is not a guaranteed claim to the company’s assets or future profits.
Explore Stock Equity ↗Preferred stock
Equity with specified rights that may include priority for distributions or liquidation proceeds. Conversion, participation, and governance terms can differ. Read the security’s actual terms rather than assume every preferred share works the same way.
Explore VC Equity ↗Fully diluted capitalization
A defined ownership view that includes specified potential shares as well as existing shares. The inclusion rules can vary by document and purpose. Always identify which awards, reserves, and conversions are included.
Explore Cap Tables ↗Pre-money valuation
A valuation stated before the new investment in a financing. Its relationship to price per share depends on the agreed capitalization and other terms. A headline value does not describe every economic right in the deal.
Explore VC Equity ↗Post-money valuation
In a simplified primary financing, pre-money valuation plus the new investment. The term must be read in context: a post-money SAFE and a completed priced round refer to different capitalization points.
Explore Equity Dilution ↗Dilution
A reduction in an owner’s percentage as the relevant denominator expands. The owner can retain the same number of shares. A percentage reduction alone does not establish the change in economic value or potential proceeds.
Explore Equity Dilution ↗Option pool
A reserve used for equity compensation under the applicable plan and approvals. Granted awards and the remaining unallocated reserve need distinct tracking so that a fully diluted model does not count the same potential shares twice.
Explore Startup Equity ↗Stock option
A contractual right to buy a specified quantity of shares at a stated exercise price, subject to terms. An unexercised option is not the same as ownership of the underlying shares.
Explore Stock Options ↗Exercise price
The price paid per underlying share when an option is exercised, under its terms. Exercise cash, any tax consequence, and potential future sale proceeds should be modeled separately.
Explore Stock Options ↗Vesting
The satisfaction of specified conditions for earning or retaining an award. The practical consequence depends on the instrument. Vesting does not automatically establish that an option was exercised or that shares can be sold.
Explore Vesting ↗Cliff
An initial vesting point before which no portion vests under the stated schedule, followed by the first specified installment. A cliff can be followed by smaller installments, but the actual agreement determines the sequence.
Explore Vesting ↗Acceleration
A provision that can make some or all unvested equity vest earlier when defined conditions occur. Labels such as single-trigger and double-trigger do not replace reading the event definitions and award documents.
Explore Vesting ↗Liquidation preference
A provision affecting the priority or amount received by a preferred holder in specified outcomes. Participation, conversion, competing classes, debt, and fees can change the resulting payout calculation.
Explore VC Equity ↗SAFE
A simple agreement for future equity with conversion or other rights governed by its form and terms. A cap or discount is not a universal fixed ownership percentage after every future transaction.
Explore Equity Dilution ↗Cap table
A capitalization table: an ownership record or a clearly labeled scenario describing holders and instruments. Its percentages should be traceable to transaction history and a defined denominator.
Explore Cap Tables ↗Book equity
An accounting residual based on recorded assets and liabilities. It is not the same as market capitalization, a financing valuation, or a guaranteed amount available to shareholders in a sale.
Explore Types of Equity ↗Equity market capitalization
For a simple company with one common class, the share price multiplied by outstanding common shares. It is a market-value measure, not cash held by the company or a promise that all shares can trade at that price.
Explore Stock Equity ↗Fund interest
An investment at the fund level governed by the fund’s terms. It is different from directly holding each portfolio company’s shares. Fees, cash contributions, distributions, and liquidity restrictions need their own review.
Explore Private Equity ↗