Question 1

What is a pre-seed round?

Accepted Answer

Pre-seed is the earliest stage of startup funding, typically raised before a company has a fully developed product or meaningful revenue. Used to validate an idea, build an initial team, and develop a prototype or MVP.

Question 2

What is a seed round?

Accepted Answer

A seed round is the first significant institutional funding a startup raises, typically used to grow the team, refine the product, and acquire early customers. Usually led by seed-stage venture capital funds.

Question 3

What is a Series A round?

Accepted Answer

A Series A is the first major institutional venture capital round, raised after a startup has demonstrated meaningful product-market fit and early traction. Used to accelerate growth, expand the team, and invest in sales and marketing.

Question 4

What is a Series B round?

Accepted Answer

A Series B is raised by companies that have proven their business model and are ready to scale aggressively. Companies typically have significant revenue and an established customer base.

Question 5

What is a unicorn startup?

Accepted Answer

A unicorn is a privately-held startup valued at $1 billion or more. The term was coined by venture capitalist Aileen Lee in 2013. NYC has over 200 unicorn companies.

Question 6

What is a SAFE agreement?

Accepted Answer

A SAFE (Simple Agreement for Future Equity) is an investment instrument that converts into equity at a future priced round. Created by Y Combinator in 2013, commonly used in pre-seed and seed rounds.

Question 7

What is the difference between pre-money and post-money valuation?

Accepted Answer

Pre-money valuation is the value of a company before new investment is added. Post-money valuation includes the new capital. If a company raises $10M at a $40M pre-money valuation, the post-money is $50M and investors own 20%.

Question 8

What is a lead investor?

Accepted Answer

The lead investor is the primary VC firm in a funding round. The lead sets the valuation and terms, contributes the largest check, takes a board seat, and shepherds the round to close.

Question 9

What is cap table dilution?

Accepted Answer

Dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. Every funding round dilutes founders and early investors, though the value of their smaller percentage hopefully grows as the company becomes more valuable.

Question 10

What is a convertible note?

Accepted Answer

A convertible note is a short-term debt instrument that converts into equity at a future funding round. Similar to a SAFE but structured as a loan with an interest rate and maturity date.

NYC Startup Funding Glossary