--- title: "Venture capital | Altss Taxonomy" description: "Venture capital is equity financing for young, high-growth private companies, usually provided through closed-end funds in exchange for minority stakes.…" canonical: "https://altss.com/taxonomy/venture-capital" --- Topic hub # Venture capital [Venture capital](https://altss.com/glossary/venture-capital) is equity financing for young, high-growth private companies, usually provided through closed-end funds in exchange for minority stakes. This hub covers the financing rounds a startup raises, the instruments and shareholder rights negotiated in each round, the cap table, and the operating metrics investors use to judge progress. Sections follow a company's financing path: stages and rounds from [pre-seed](https://altss.com/glossary/pre-seed) to Series C and later; instruments such as the [SAFE](https://altss.com/glossary/safe-simple-agreement-for-future-equity) and [preferred stock](https://altss.com/glossary/preferred-stock); the rights set out in a [term sheet](https://altss.com/glossary/term-sheet); the [cap table](https://altss.com/glossary/cap-table-capitalization-table) and valuation; startup metrics; and the companies and investors involved. A final section covers how venture funds plan initial and [follow-on](https://altss.com/glossary/follow-on-reserves) investments. Not in this hub: control investing in mature companies is in [Private equity](https://altss.com/taxonomy/private-equity). [Venture debt](https://altss.com/glossary/venture-debt) is listed here and covered with other lending strategies in [Private credit](https://altss.com/taxonomy/private-credit). Fund-level economics are in [Fund terms and economics](https://altss.com/taxonomy/fund-terms-and-economics). Publisher: Altss LLCPublished 2026-01-07Content modified 2026-10-01 25 concepts ## Reference index Definition: [Venture Capital (VC)](https://altss.com/glossary/venture-capital) — Venture capital (VC) is equity financing for young, high-growth private companies, usually provided through closed-end funds in exchange for minority stakes, with fund returns driven by a small number of very large exits. ### Stages and rounds 5 concepts - [Pre-Seed](https://altss.com/glossary/pre-seed) Pre-seed is the earliest stage of startup financing, used to turn an idea or prototype into a first product and initial evidence of demand, typically funded by founders, angels, accelerators and specialist pre-seed funds. - [Seed Round](https://altss.com/glossary/seed-round) A seed round is an early startup financing, often the first led by an institutional investor, used to build and sell the product until the company has the evidence of product-market fit needed to raise a Series A. - [Series A](https://altss.com/glossary/series-a) Series A is conventionally a startup's first major priced round: it sells a new class of convertible preferred stock at a negotiated price per share, usually led by a venture firm, to scale a product that has found product-market fit. - [Priced Round](https://altss.com/glossary/priced-round) - [Down Round](https://altss.com/glossary/down-round) A down round is a financing in which a company sells shares at a lower price per share than it charged in its previous round. ### Instruments 4 concepts - [Simple Agreement for Future Equity (SAFE)](https://altss.com/glossary/safe-simple-agreement-for-future-equity) A simple agreement for future equity (SAFE) is a contract, introduced by Y Combinator in 2013, under which an investor pays a startup now for the right to receive shares later, normally in a priced preferred stock round. - [Convertible Note](https://altss.com/glossary/convertible-note) A convertible note is a short-term loan to a startup that accrues interest and normally converts into shares at the next qualifying equity round, usually at a discount and subject to a valuation cap, rather than being repaid. - [Preferred Stock (Venture Convertible Preferred)](https://altss.com/glossary/preferred-stock) Preferred stock is a class of shares with rights senior to common stock; in venture financing it is convertible preferred issued in priced rounds, carrying a liquidation preference, conversion rights, anti-dilution protection and separate class voting rights. - [Venture Debt](https://altss.com/glossary/venture-debt) Venture debt is a loan, usually senior secured and amortising, to a venture-capital-backed company with little or no positive cash flow, underwritten mainly on its equity backers and ability to raise further rounds, with warrants for equity upside. ### Term sheet and shareholder rights 4 concepts - [Term Sheet](https://altss.com/glossary/term-sheet) A term sheet is a short document setting out the main economic and control terms of a proposed investment, agreed before definitive documents are drafted; most terms are non-binding, but some, such as exclusivity and confidentiality, usually bind. - [Liquidation Preference](https://altss.com/glossary/liquidation-preference) A liquidation preference is the right of preferred stockholders to receive a set amount, usually a multiple of their purchase price, from the proceeds of a sale, liquidation or other deemed liquidation event before common stockholders receive anything. - [Anti-Dilution Protection](https://altss.com/glossary/anti-dilution) Anti-dilution protection is a term of convertible preferred stock that lowers its conversion price when the company later issues shares at a lower price, so the preferred holder receives more common shares on conversion. - [Pro Rata Rights](https://altss.com/glossary/pro-rata-rights) Pro rata rights are an existing investor's entitlement to buy enough of a company's newly issued shares in later financings to keep its percentage ownership, usually measured on a fully diluted basis. ### Cap table and valuation 5 concepts - [Cap Table (Capitalization Table)](https://altss.com/glossary/cap-table-capitalization-table) A capitalization table (cap table) is a schedule of a company's securities and their holders, covering common and preferred shares, options, warrants and convertible instruments, that shows each holder's ownership on an issued and a fully diluted basis. - [Employee Option Pool](https://altss.com/glossary/option-pool) An employee option pool is the block of a company's shares reserved under its equity incentive plan for future grants of stock options and other equity awards to employees, directors and advisers. - [Dilution](https://altss.com/glossary/dilution) Dilution is the reduction in an existing shareholder's percentage ownership when a company issues new shares, including through financing rounds, conversion of simple agreements for future equity (SAFEs) and notes, option grants, warrants and anti-dilution adjustments. - [Pre-Money and Post-Money Valuation](https://altss.com/glossary/pre-money-and-post-money-valuation) Pre-money valuation is the value a financing round places on a company's existing fully diluted equity before the new money; post-money valuation adds the new investment and equals the round price per share times all shares afterward. - [409A Valuation](https://altss.com/glossary/409a-valuation) A 409A valuation is an appraisal of the fair market value of a private company's common stock, used in the US to set option exercise prices so the options fall outside Internal Revenue Code section 409A. ### Startup metrics 2 concepts - [Annual Recurring Revenue (ARR)](https://altss.com/glossary/annual-recurring-revenue) Annual recurring revenue (ARR) is the annualised value of a company's recurring subscription contracts at a point in time, often monthly recurring revenue (MRR) times twelve; it is an operating metric, not an accounting revenue measure. - [Net Revenue Retention (NRR)](https://altss.com/glossary/net-revenue-retention) Net revenue retention (NRR) is the recurring revenue at the end of a period from the customers a company had at the start, after expansion, contraction and churn, divided by those customers' recurring revenue at the start. ### Companies and investors 2 concepts - [Lead Investor](https://altss.com/glossary/lead-investor) - [Angel Investor](https://altss.com/glossary/angel-investor) ### Venture fund portfolios 2 concepts - [Venture Portfolio Construction](https://altss.com/glossary/venture-portfolio-construction) - [Follow-On Reserves](https://altss.com/glossary/follow-on-reserves) ## Canonical URL https://altss.com/taxonomy/venture-capital