Glossary

A cohort is the batch of companies admitted to an accelerator for the same session. Members move through the program in parallel, share mentors and events, and often present together at a demo day. Programs may run one or more cohorts per year, and cohort size ranges from a handful of teams to several dozen.

Common stock is the basic ownership unit of a company. Founders and employees typically hold common stock. It sits behind preferred stock (what most investors hold) in the payout order, so in a sale, preferred holders are often paid first. When an accelerator takes common stock, it holds the same class as the founders.

A convertible note is short-term debt that an investor expects to turn into equity rather than have paid back in cash. Like a SAFE, it usually converts when you raise a priced round, and it can carry a valuation cap and a discount. Unlike a SAFE, it is a loan, so it accrues interest and has a maturity date by which it must convert or be repaid.

Demo day is the showcase that usually closes an accelerator program. Each company in the cohort presents its progress to an audience of investors, partners, and press, often to build momentum for a fundraise. The format ranges from a large public event to a smaller private session, and some programs run it online.

Dilution is the reduction in your ownership percentage that happens when a company issues new shares, for example in a funding round or when a SAFE converts. Owning a smaller slice is not automatically bad: the goal is for the whole pie to grow enough that your smaller slice is worth more.

A discount lets a SAFE convert at a reduced share price compared to new investors in the priced round. A 20 percent discount means the SAFE holder pays 80 percent of the round price per share. When a SAFE has both a cap and a discount, it usually converts at whichever gives the investor more shares.

Equity is ownership in a company, usually expressed as a percentage of total shares. When an accelerator takes equity, it receives shares and becomes a part owner, so its stake rises and falls with the company's value. Equity can be held as common stock or as a right that converts into shares later, such as a SAFE or a convertible note.

Follow-on funding is capital an investor provides after its initial investment, typically to keep or increase its stake in a later round. Some accelerators reserve money for follow-on investments in their strongest companies and may use pro rata rights to do so. Follow-on is not promised, and its terms are set at the time of the later round.

A liquidation preference decides who gets paid first if a company is sold or wound down. A common form is a 1x preference, which returns the investor's original amount before common shareholders receive anything. Higher multiples or participating terms pay investors more, which can leave less for founders and employees in a modest sale.

A Most Favored Nation (MFN) clause lets an early investor adopt the most favorable terms you grant to any later investor on a similar instrument. If you issue a SAFE with no cap under an MFN, and later issue another SAFE with a low cap, the MFN holder can take that lower cap. It protects early backers from being undercut by better deals offered afterward.

Non-dilutive funding is capital that does not require giving up ownership. Common forms include government grants, competition prizes, tax credits, and cloud or service credits. Because no shares change hands, your cap table stays the same. The tradeoff is that it often comes with reporting requirements, milestones, or a narrower use of funds.

An option pool is a block of shares reserved for future hires through stock options. Creating or enlarging the pool issues new shares, which dilutes existing holders. Investors often ask for the pool to be set up before their money goes in, so the dilution falls on the founders rather than being shared with the new investors.

Post-money valuation is the value of a company immediately after new money comes in. It equals the pre-money valuation plus the amount invested. Your ownership percentage sold is roughly the investment divided by the post-money valuation. Post-money SAFEs fix the investor's ownership percentage, which makes dilution easier to predict.

Preferred stock is the class of shares most investors receive in a priced round. It sits ahead of common stock in the payout order and often carries added rights, such as a liquidation preference and certain approvals over company decisions. Founders and employees usually hold common stock, so preferred holders are typically paid before them when the company is sold.

A pro rata right lets an investor put more money into a future round to maintain their ownership percentage. Without exercising it, an investor's stake shrinks as new shares are issued. Accelerators and early investors often negotiate pro rata rights so they can keep pace with later rounds.

A SAFE (Simple Agreement for Future Equity) is a contract where an investor gives you money now in exchange for the right to shares later, usually when you raise a priced round. It is not debt, so there is no interest and no maturity date. The number of shares it converts into depends on its valuation cap and discount.

SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) are US federal programs that fund early research and development at small companies with non-dilutive awards. They run in phases: a small feasibility award, a larger development award, and a commercialization phase that uses non-program funding. STTR additionally requires partnering with a research institution.

A valuation cap is the maximum company valuation at which a SAFE converts into equity. If your next priced round values the company above the cap, the SAFE investor converts as if the value were the cap, so they get more shares for their money. A lower cap is better for the investor and more dilutive for founders.

A warrant is a contract that gives the holder the right to buy shares at a fixed price within a set time. Investors or partners sometimes receive warrants in addition to, or instead of, direct equity. When exercised, warrants create new shares, which dilutes existing holders.