Advisory Shares
A form of equity compensation typically given to non-employees in exchange for their expertise and insights.
Angel Investor
Investors who show up to fund startups at a very early stage and get them going.
Clawback
A clause or provision in a compensation agreement that allows a company to take back money or equity from a former employee.
Cliff
A common part of most vesting schedules, the cliff typically occurs one year after stock options are granted, which is when the options first start vesting.
Common Stock
A type of equity that represents ownership in a company.
Dilution
Decrease in ownership percentage for existing shareholders when additional shares are issued to incoming investors during a new funding round.
ESOP
An Employee Stock Ownership Plan is often used by companies to to hire and retain key talent whilst sharing ownership in the form of equity.
ESOP Pool
A pool of stock options earmarked by founders for employees.
Equity
Used interchangeably with shares or stock, it represents ownership in a company.
Exercise
Exercising a stock option means purchasing the company’s shares.
Exercise Period
The period during which one can exercise their right to buy the company’s shares.
Exercise Price
The predetermined price at which one can purchase company stock.
Exit Event
This refers to several events such as a new fundraise, an acquisition or an initial public offering, wherein existing shareholders of the company can sell their shares and exit the company.
Grant
The award of stock options to an employee.
Grant Date
The date on which stock options are granted.
IPO
An Initial Public Offering is when a private company offers a part of the company’s stock for sale to the public, and starts trading on an exchange.
Liquidity
The ability to have ready access to the invested money. Mutual funds are liquid because their shares can be redeemed for current value (which may be more or less than the original cost) on any business day.
Phantom Equity
Under this scheme, employees are allotted notional shares of the company at a predefined discounted price. On the vesting date, the employee is paid the profit they would have earned on exercising the shares. Thus, the employee does not exactly get the possession of shares but earns a profit from the notional buying of shares at a discounted price.
Preferred Stock
This differs from common stock such that it gives holders certain preferential rights over those that hold common stock.
Post-Exit Exercise Window
If you leave your job, you’ll often have just 90 days to decide if you want to exercise your options. This varies and can often extend to an unlimited time frame as well.
RSU
Restricted Stock Units are a form of stock options that do not require purchasing upon vesting and can immediately be exchanged for company shares.
Seed Investment
Investment made before the company has a viable product out in the market
Share
A unit of ownership in a company.
Stock
Same as equity and share.
Stock Options
They represent the right to buy shares in a company.
Strike Price
Same as Exercise Price.
Vesting
The process through which option holders earn the right to sell their stock options.
Vesting Schedule
The stipulated period of time over which stock options vest.
VC
Short for Venture Capital, this form of investment comes from firms who invest large amounts of money into startups in return of equity, typically over a long timeframe.
Volatility
The amount and frequency with which an investment fluctuates in value.