UK startup funding terms, in plain English.

The 24 terms every UK pre-seed and seed founder runs into, defined in plain English, with the UK-specific bits that actually matter to your round.

SEIS

Seed Enterprise Investment Scheme — a UK tax relief giving investors 50% income tax relief on up to £200k a year invested in very early-stage companies. Your company can raise up to £250k under it, which makes the earliest cheques far easier to land.

EIS

Enterprise Investment Scheme — UK tax relief offering investors 30% income tax relief on investments in qualifying companies, picking up where SEIS leaves off. The scheme is currently legislated to sunset in April 2035, so check the current rules before relying on it.

Advance Assurance

A pre-approval from HMRC confirming your company looks likely to qualify for SEIS or EIS before you take the money. UK angels often won't invest without it, so it's usually the first piece of paper you sort.

ASA

Advance Subscription Agreement — investors pay now for shares issued later, usually at your next round with a discount. UK-friendly because, unlike a convertible loan, it isn't debt and can stay SEIS/EIS-eligible if structured correctly.

SAFE

Simple Agreement for Future Equity — a US-born instrument where money converts to shares at a later priced round. Common but a poor fit for UK SEIS/EIS, where an ASA is usually the cleaner route.

Convertible Loan Note

A loan that converts into equity at a future round instead of being repaid in cash, typically with a discount or cap. Because it's technically debt, it usually breaks SEIS/EIS eligibility for that money.

Pre-money valuation

What your company is agreed to be worth immediately before the new investment goes in. It sets the share price the new money buys at.

Post-money valuation

Pre-money valuation plus the new money raised. If you're worth £4m pre-money and raise £1m, you're £5m post-money, and the investor owns 20%.

Cap (valuation cap)

The maximum valuation at which an ASA, SAFE, or convertible converts into equity. It protects the early investor by guaranteeing they don't pay an uncapped price if your next round is huge.

Discount

A percentage reduction on the next round's share price given to early convertible or ASA investors, rewarding them for going in sooner. A 20% discount means they buy at 80% of what the new round pays.

Option pool

Shares set aside to grant to future employees, usually 10-15% of the company. Watch when it's created: a pool carved out pre-money dilutes you, the founder, not the incoming investor.

EMI scheme

Enterprise Management Incentives — the UK's tax-advantaged share option scheme for employees, with favourable capital gains treatment. The standard way British startups give staff equity, and a strong hiring tool.

Fully diluted

Your share count as if every option, warrant, and convertible had already converted into shares. Investors quote ownership on a fully diluted basis, which is always a bigger denominator than just issued shares.

Liquidation preference

The investor's right to get their money back (often 1x) before founders see anything when the company is sold. A '1x non-participating' preference is the founder-friendly standard; anything above 1x or 'participating' takes a bigger bite.

Pro-rata rights

An investor's right to buy enough shares in your future rounds to keep their percentage from shrinking. Common for lead investors and a sign they intend to keep backing you.

Lead investor

The investor who sets the terms, agrees the valuation, and writes the anchor cheque in a round, usually taking a board seat. Once you have a lead, the rest of the round is far easier to fill.

Term sheet

A short, mostly non-binding document setting out the headline terms of an investment: valuation, cheque size, preferences, and rights. Signing one is the real start of a deal, but it isn't the money in the bank.

Dilution

The drop in your ownership percentage each time new shares are issued. Raising money dilutes you by design; the question is whether the cash grows the pie faster than your slice shrinks.

Runway

How many months of cash you have left at your current burn rate. Most UK investors want to see you raising with at least six months of runway in hand, not three weeks.

Bridge round

A smaller raise between two main rounds to extend runway, often from existing investors and frequently as a convertible. A bridge to a strong next round is sensible; a bridge to nowhere is a warning sign.

Down round

A new round priced lower than your last one, meaning your company is worth less than before. It dilutes everyone heavily and dents morale, but it usually beats running out of cash.

Dataroom

The organised folder of documents — cap table, accounts, contracts, metrics — you share with investors during due diligence. A clean, complete dataroom signals you run a tight ship and speeds the deal up.

Warm intro

An introduction to an investor from someone they already trust, such as a founder they've backed. It converts dramatically better than a cold pitch and is the single highest-leverage move in fundraising.

Dry powder

The committed capital a fund has raised but not yet invested. A fund with plenty of dry powder can write you a cheque; one that's run dry can take meetings but not act.

Editorial reference for UK founders — not legal, tax, or financial advice.