Startup Lawyer

Startup Law Glossary

Startup Law Glossary – Startup Lawyer

This startup law glossary is a practical starting point for founders, investors, and startup teams who want a clearer understanding of startup legal terms and how they show up in formation, financing, governance, negotiations, and acquisitions. The goal is not just to define the terms, but to help readers understand how they matter in real startup decisions.

Some of these terms appear directly in legal documents. Others come up more often in investor conversations, diligence calls, board discussions, and negotiations. Together, they make up much of the vocabulary founders need to follow what is happening, ask better questions, and make better sense of deals and company decisions as they move forward.

These definitions are not meant to be rigid rules. Context matters. Leverage matters. Timing matters. Market practice matters. The point is to help readers get oriented faster, make better sense of what they are hearing, and make better decisions when these concepts become live.

You can use this glossary to get oriented quickly, then follow the linked guides in the relevant definitions whenever you want a fuller explanation.

If you want a broader overview of the startup legal journey, start with the Startup Legal Roadmap.

-#-

4 Years with a One Year Cliff

-A-

Accelerated Vesting

Acceleration Clause

Accredited Investor

Alternative Minimum Tax (AMT)

Amended and Restated Certificate of Incorporation

Angel Financing

Articles of Incorporation

As-Converted Basis

Asset Acquisition

At-Will Employee

Authorized Shares

Automatic Conversion

-B-

Back-Up Certificate

Best Efforts Offering

Black-Scholes Option Pricing Model

Blended Preferences

Board of Directors

Bridge Financing

Broad-based Weighted Average

Buy-Sell Agreement

Buyer Optionality

-C-

Capital Account

Capital Commitment

Capital Gains Tax

Capital Interest

Capitalization Table

Cap Table Overhang

Carried Interest (Carry)

Certificate of Incorporation

Certificate of Incumbency

Change of Control

Chief Executive Officer (CEO)

Class F Common Stock

Clean Cap Table

Commercially Reasonable Efforts

Conditions Precedent

Conditions Subsequent

Confidential Information

Contingent Liability

Control Anxiety

Conversion Discount

Conversion Price Adjustment

Conversion Rights

Convertible Debt

Convertible Equity

Convertible Note

Convertible Security

Convertible Stock

Corporate Governance

Corporate Resolution

Cram Down Round

Cross-Fund Investment

Cumulative Dividend

Cumulative Voting

-D-

Debt-to-Equity Ratio

Delaware General Corporation Law

Demand Registration Rights

Directors’ and Officers’ (D&O) Insurance

Disclosure Documents

Distressed Debt

Domestic Corporation

Double Trigger Acceleration

Drag Along Rights

Duty of Loyalty

-E-

Early-Stage Financing

Economics vs. Control

Economies of Scale

Effective Pre-Money

Employee Stock Option Plan

Employment Agreement

Engagement Letter

Entrepreneur in Residence (EIR)

Equity Financing

-F-

Fair Market Value

Fairness Opinion

Federal Funds Rate

Federal Reserve Act

Fiduciary Duties

Financial Accounting Standards Board

Financing Out Clause

Financing Window

First Time Fund

Follow-on Financing

Follow‑On Strategy

Foreign Corrupt Practices Act

Foreign Qualification

Forward Stock Split

Founder Fatigue

Founder‑Friendly

Founder Misalignment

Founder Overhang

Founder’s Stock

Freedom To Operate Opinion

Friends and Family Round

Fully-Diluted Basis

Funds Flow Memo

-G-

General Partner

General Solicitation

Golden Parachute

-H-

High Resolution Financing

Holdback Escrow

Holding Company

Hostile Takeover

-I-

Incentive Misalignment

Incentive Stock Option (ISO)

Indemnification

Indemnification Cap

Independent Contractor

Independent Director

Information Rights

Initial Coin Offering (ICO)

Initial Public Offering (IPO)

In-Kind Distribution

Institutional Investor

Integration Risk

Intellectual Property

Intercreditor Agreement

Internal Rate of Return (IRR)

Inventions Assignment

Investment Adviser

Investment Banker

Investment Company Act of 1940

Investor‑Friendly

Investor Rights Agreement

-J-

-K-

Key Person Clause

Key Person Insurance

-L-

Last In, First Out (LIFO)

Later Stage Financing

Letter of Intent

Leverage (Ability)

Leverage (Debt)

Leveraged Buyout (LBO)

Lifestyle Company

Light Preferred

Limited Liability Company (LLC)

Limited Liability Partnership (LLP)

Limited Partners

Limited Partnership

Liquidation Event

Liquidation Preference

Liquidity Event

-M-

Majority Shareholder

Management Buyout

Management Carveout Plan

Management Rights

Mandatory Redemption

Marked to Market

Market (as used by VCs)

Market Standard

Material Adverse Change Clause

Materiality Qualifier

Materiality Scrape

Mergers and Acquisitions (M&A)

Mezzanine Financing

Mezzanine Level

Most Favored Nation Clause

-N-

Narrow-Based Weighted Average

National Venture Capital Association

Negative Control

Negotiation Leverage

No-Action Letter

No-Par Value Stock

Non-Accredited Investor

Non-Cumulative Dividends

Non-Participating

Non-Qualified Stock Option (NSO)

Non-Solicitation

Non-Voting Stock

-O-

Offering Documents

Operating Agreement

Operating Expenses

Option Pool Overhang

Ordinary Income Tax

Outstanding Shares

Oversubscription

Oversubscription Privilege

-P-

Paid-In Capital

Parachute Payment

Participating Preferred Stock

Participation Rights

Pass Through Entity

Payment in Kind (PIK)

Perpetual Warrant

Personal Guaranty

Piggy-Back Rights

Placement Agent

Portfolio Company

Portfolio Construction

Post-Money Valuation

Pre-Money Shares

Pre-Money Valuation

Preemptive Rights

Preferred Return

Preferred Stock

Price Per Share

Private Company

Private Investment in Public Equities

Private Offering

Private Placement

Private Placement Memorandum

Profits Interest

Promissory Note

Proprietary Rights

Protective Provisions

Public Benefit Corporation

Public Benefit LLC

Public Offering

Purchase Agreement

-Q-

Qualified Financing

Qualified Small Business Stock (QSBS)

Quasi-Public Corporation

-R-

Reasonable (Deal Context)

Recapitalization

Redemption Right

Registered Agent

Registered Offering

Registrable Securities

Registration Rights

Regulation Crowdfunding

Reincorporation Merger

Representations and Warranties

Repurchase Option

Reserved Shares

Residuals Clause

Restricted Stock

Restricted Stock Purchase Agreement

Restriction on Sales

Return on Investment

Reverse Break Up Fee

Reverse Dilution

Reverse Engineer

Reverse Stock Split

Reverse Vesting

Right of First Offer

Right of First Refusal

Right of First Refusal and Co-Sale Agreement

Right of Rescission

Rights Offering

Runway vs. Leverage

-S-

Sarbanes-Oxley Act of 2002

Second Bite of the Apple

Secondary Buy-Out

Secondary Market

Securities Act of 1933

Securities and Exchange Commission (SEC)

Securities Exchange Act of 1934

Security Interest

Senior Securities

Series A Preferred Stock

Series AA Round

Series FF Stock

Series Pre-Seed

Series Seed Financing

Shareholders’ Agreement

Shell Corporation

Single Trigger Acceleration

Sliding Fee Scale

Small Business Administration

Small Business Innovation Research Program

Small Business Investment Company

Soft Control vs. Hard Control

Sole Proprietor

Special Purpose Acquisition Company

Special Purpose Vehicle

Stacked Preference

Staggered Board

Stock Purchase Agreement

Stockholders’ Consent

Strategic Investment

Subordinated Debt

Subscription Agreement

Super Pro Rata Rights

Supermajority Voting

-T-

Tag Along Rights

Tax-Free Reorganization

Technology Transfer Agreement

Terms of Service

Time Value of Money

-U-

UCC Financing Statement

Unrelated Business Taxable Income

-V-

Venture Capital

Venture Capital Financing

Venture Capitalist (VC)

Venture Capital Limited Partnership

Venture-Backed Startup

Vesting Schedule

Voluntary Redemption

Voting Agreement

-W-

Weighted Average Anti-Dilution

Working Capital Adjustment

Workout Agreement

-Z-

Zone of Insolvency

Ryan Roberts Startup Lawyer

Ryan Roberts is a startup lawyer with more than two decades of experience advising on venture financings and M&A transactions totaling more than $1 billion. He is the author of the Amazon bestselling startup law book Acceleration.