Showing 13 terms
An independent appraisal of your company's common stock fair market value, required by IRS regulations to set stock option strike prices.
An independent appraisal of your company's common stock fair market value, required by IRS regulations. This determines the strike price for stock options and must be updated after material events like funding rounds.
Speeding up vesting, typically triggered by acquisition or termination. Single-trigger accelerates on one event; double-trigger requires two events.
A provision that speeds up equity vesting based on trigger events. Single-trigger acceleration happens on one event (like acquisition). Double-trigger requires two events (acquisition AND termination). Double-trigger is standard for employees to prevent immediate post-acquisition departures.
A comprehensive record of who owns what in your company — including founders, investors, employees, and advisors.
A comprehensive record of who owns what in your company — including founders, investors, employees, and advisors. The cap table tracks all securities (shares, options, warrants, convertible instruments) and shows ownership percentages.
A period at the start of a vesting schedule where no equity vests. Standard is 1 year—if you leave before the cliff, you get nothing.
A waiting period before any equity vests. The standard cliff is 1 year, meaning if you leave before your first anniversary, you forfeit all unvested equity. After the cliff, you typically vest the full cliff amount at once (25% for a 4-year schedule), then continue vesting monthly.
The standard equity ownership in a company. Founders and employees typically receive common stock or options to buy common stock.
Basic ownership shares in a company. Common stockholders have voting rights and receive dividends (if issued), but are last in line during liquidation—after debt holders and preferred stockholders. Founders hold common stock, and employee stock options convert to common stock.
A debt instrument that converts to equity at a future financing round, typically with a valuation cap and/or discount rate.
A short-term debt instrument that converts into equity (usually preferred stock) at a qualified financing. Unlike SAFEs, convertible notes have interest rates and maturity dates. If the company doesn't raise within the maturity period, the note becomes due.
A type of stock option with favorable tax treatment, available only to employees and subject to specific IRS rules.
A type of stock option with favorable tax treatment, but only available to employees (not contractors or advisors) and subject to specific rules including $100K annual vesting limits and 90-day exercise windows after termination.
Stock options without special tax treatment. Available to employees, contractors, and advisors, but taxed as ordinary income when exercised.
Stock options that don't qualify for ISO tax benefits. NSOs can be granted to anyone (employees, contractors, board members, advisors), have no $100K vesting limit, and can have extended exercise windows. However, the spread at exercise is taxed as ordinary income.
A class of stock with special rights and preferences, typically issued to investors in priced rounds. Has priority over common stock in liquidations.
Stock with enhanced rights compared to common stock. Investors receive preferred stock in priced rounds (Series Seed, Series A, etc.). Key features include liquidation preferences (get money back first), anti-dilution protection, and sometimes voting controls or board seats.
A fundraising round where investors purchase equity at a specific price per share with a defined company valuation (e.g., Series A, Series B).
A traditional equity financing where the company's valuation is explicitly set and investors purchase preferred stock at a defined price per share. Priced rounds (Series Seed, A, B, C, etc.) involve term sheets, due diligence, and legal documentation. More complex than SAFEs or convertible notes.
An investment instrument where investors give you money today in exchange for equity later (usually at your next priced round). Not debt—no interest or maturity date.
An investment instrument created by Y Combinator where investors give you money today in exchange for equity later. SAFEs convert at your next priced round, and the investor gets the better deal between the valuation cap and discount rate.
The price you pay to exercise your stock options. Set at grant based on the 409A valuation's fair market value.
The price per share you must pay to convert your stock options into actual shares. The strike price is locked in at grant date and must equal or exceed the fair market value (from 409A valuation) to qualify for ISO treatment. A lower strike price means more potential profit.
The process by which you earn the right to keep your equity over time. Unvested equity can be repurchased by the company if you leave.
The process by which you earn the right to keep your equity over time. Most vesting schedules are 4 years with a 1-year cliff, meaning you must stay for one year to earn any equity, then earn the rest monthly or quarterly.