Acquisitions may be structured as share purchases, asset purchases, or mergers. Terms influence how proceeds are allocated and which shareholder consents are required. Drag-along rights ensure completion of the transaction, while tag-along rights protect minority holders. Regulatory approvals or due diligence findings can affect closing conditions.

An individual who invests personal funds in early-stage startups, typically before institutional investors, often providing mentorship alongside capital. Angels help validate early concepts and support with first hires or prototyping development. Their decisions are often faster and more flexible than VC funds. Angels may syndicate deals or invest through angel networks.

Annual accounts include the balance sheet, profit and loss statement, cash flow statement (where applicable), and explanatory notes. They may require audit depending on company size or jurisdiction. Filing obligations and publication deadlines vary by law. Approval at the general meeting may be tied to discharge of directors for their management.

The articles define share classes, voting rules, director appointments, decision-making processes, transfer restrictions, and procedures for meetings. Amendments require a shareholder resolution, often by qualified majority, and must typically be executed by notarial deed. The articles operate alongside shareholder agreements and statutory company law.

Bootstrapped companies prioritise cash efficiency and often grow slower but maintain full ownership control. This approach reduces dilution and investor influence but increases pressure to reach profitability quickly. Common tactics include iterative product releases and early revenue focus.

This formula considers the total number of outstanding shares on a fully diluted basis, blending the old price and the new lower price. It provides investors with partial protection while reducing excessive dilution for founders. It is the most common anti-dilution mechanism in modern venture financings.

Cap tables track ordinary shares, preferred shares, options, warrants, and convertible instruments. They are essential for modelling dilution, preparing funding rounds, and ensuring accurate reporting to investors and employees. Later-stage rounds often require fully diluted cap-table projections to understand post-conversion ownership.

The cliff protects companies from granting equity to individuals who leave early. Commonly set at 12 months, it results in a lump-sum vesting of the first tranche once completed, after which vesting continues gradually. If the person leaves before the cliff date, all unvested equity is forfeited.

Conversion usually happens during a priced round when share pricing is available. The mechanics determine the number and class of shares issued, influenced by valuation caps, discounts, accumulated interest (for notes), and conversion thresholds. Conversion can materially shift ownership percentages and requires updated cap-table modelling.

Convertible instruments bridge early funding needs and reduce negotiation complexity. They commonly include caps, discounts, or interest (if debt-based). Their conversion mechanics directly impact dilution and may convert into different share classes depending on negotiated terms.

Notes behave like loans until conversion. If a qualified financing does not occur before maturity, the company may need to repay the principal plus interest or renegotiate terms. Notes typically include caps and discounts similar to SAFEs, but also introduce creditor rights and potential insolvency consequences.

Corporate investors may invest directly or through dedicated corporate venture capital units. Their incentives extend beyond financial return—common goals include gaining insights into emerging markets, securing technology partnerships, and identifying future acquisition targets. Their involvement can influence commercial agreements or product integrations.

Debt financing provides capital without giving up ownership. Lenders receive fixed repayment terms and may require covenants or securities. In startup contexts, debt is often used later in the company’s lifecycle or via hybrid structures such as venture debt. Unlike equity, debt obligations continue regardless of company performance.

A deed is a formally executed instrument that creates, confirms, or transfers legal rights. Certain corporate acts—such as incorporation, amendments to articles, or share transfers in civil law jurisdictions—must be executed by notarial deed. Other deeds, such as certain contractual confirmations or board/shareholder resolutions, may be executed privately without a notary. Whether notarial involvement is required depends on the type of transaction and applicable statutory rules.

Depository receipts allow participants to benefit economically from share ownership while the voting rights remain with a custodian, often used to manage governance control or simplify employee equity distribution. Holders receive dividends and exit proceeds but do not hold direct shareholder voting power.

Dilution occurs during funding rounds, employee equity programmes, and conversion of SAFEs or notes. While absolute value may remain stable or increase, the proportional ownership decreases. Companies use option pool adjustments and pre-emption rights to manage dilution impact among stakeholders.

Dividends are declared by the board or approved by shareholders depending on jurisdiction and the company’s articles. Preferred shares often hold priority rights to dividends, including fixed or cumulative entitlements, while ordinary shareholders receive residual distributions. Dividend decisions depend on profitability, cash reserves, and growth strategy. Startups commonly reinvest profits, delaying dividends until maturity.

Down-rounds reduce the company’s price per share, often triggering anti-dilution protections for earlier investors. They can significantly dilute founders and employees and may signal financial stress or slower-than-expected growth. Companies may use bridge financing or convertible instruments to avoid or delay down-rounds.

Drag-along rights facilitate clean exits by ensuring a buyer can acquire 100% of the company without holdout risk. When triggered, all shareholders must sell on the agreed terms. Drag-along rights often require specific majority thresholds and are coupled with protections such as minimum price or investor consent conditions.

An EIP sets out the rules for eligibility, grant processes, vesting, exercise, taxation handling, transfer restrictions, and treatment upon departure. It ensures consistent administration of equity incentives and is often implemented alongside an ESOP or other participation structures. The EIP may reference underlying legal documents such as option agreements or participation certificates.

ESOPs define the terms under which employees receive options or shares, including grant sizes, vesting schedules, leaver rules, and exercise mechanics. They help attract and retain talent by giving employees long-term upside participation. ESOPs often operate through option pools created in funding rounds and may rely on instruments such as options, RSUs, or depository receipts depending on jurisdiction.

Equity represents the residual claim on a company after all liabilities. Shareholders benefit from value appreciation, dividends, and exit proceeds but also bear dilution when new shares are issued. Equity is central to startup financing, influencing control, incentives, and participation in future rounds.

Exclusivity is common in term sheets, M&A processes, and major financing negotiations. It ensures the committing party invests time and resources into due diligence without competition from parallel negotiations. Provisions typically include duration, permitted exceptions, and consequences of breach.

Exits occur through trade sales, IPOs, mergers, secondary transactions, or buyouts. The structure of an exit affects proceeds allocation, particularly where liquidation preferences or participation rights apply. Investors often negotiate exit-related rights such as drag-along, tag-along, or veto rights on major transactions.

Financial information includes annual accounts, interim financials, budgets, forecasts, and management reports. The extent and frequency of disclosure depend on law, articles, and investor agreements. Investors often negotiate enhanced reporting obligations—monthly or quarterly updates, KPI dashboards, or audited statements—to ensure transparency and oversight.

General meetings approve annual accounts, appoint or dismiss directors, authorise share issuances, amend articles, and vote on major transactions. They may occur annually or as extraordinary meetings when decisions arise outside the regular cycle. Voting thresholds, including qualified majorities, determine which resolutions pass. Shareholder rights to attend, vote, and submit agenda items are defined in the articles and applicable law.

Grants often support innovation, research, or societal objectives. They frequently include milestones, reporting duties, or spending restrictions. Although grants reduce dilution, they may introduce administrative burden or influence project direction if tied to specific outcomes.

Indirect lock-ups close loopholes by prohibiting transfers of holding-company shares, trust interests, or other instruments that would effectively circumvent a direct lock-up. They ensure the economic and governance stability intended by the primary lock-up.

An IPO transitions a company from private to public status, providing liquidity and access to public capital. It subjects the company to ongoing disclosure, governance, and regulatory obligations. Lock-up agreements restrict early shareholders from selling immediately to maintain market stability. Post-IPO, preferred shares typically convert into ordinary shares.

Intellectual property encompasses patents, trademarks, copyrights, trade secrets, and proprietary processes. It is often a company’s most valuable asset, especially in technology or product-driven businesses. Robust IP assignments, confidentiality obligations, and invention-transfer agreements ensure that IP created by founders, employees, and contractors vests in the company. Weak IP protection can block investment or M&A transactions.

Leaver provisions distinguish between good leavers—who typically retain their vested equity—and bad leavers, who may be required to transfer vested equity at a discount or lose unvested equity entirely. These provisions manage long-term cap table stability and discourage misconduct. Definitions vary but often include cause, notice, non-competition breaches, and specific termination scenarios.

In liquidation, assets are sold and proceeds are used first to satisfy creditors, then preferential shareholders, and finally ordinary shareholders. Liquidation may be voluntary, court-ordered, or triggered by insolvency. Liquidation rights in shareholder agreements or articles—especially liquidation preferences—can materially change how proceeds are shared.

Liquidation preferences determine how proceeds are distributed when a company is sold or wound up. A standard “1×” preference returns the investor’s original investment before ordinary shareholders receive anything. Preferences may be non-participating or participating and can include multiples (e.g., 1.5× or 2×). The structure of preferences strongly influences exit outcomes and founder payouts.

Liquidity may arise from exits, secondary share sales, buyback programs, or public market trading after an IPO. Private company shares are generally illiquid due to transfer restrictions, approval requirements, or lack of a trading market. Liquidity mechanisms are often negotiated in later-stage financing rounds to facilitate partial shareholder exits.

Lock-ups stabilise ownership during sensitive periods such as post-IPO trading, major fundraising rounds, or restructurings. They prevent insiders or large shareholders from selling immediately and influencing market perception or control. Lock-up terms specify duration, exceptions, and enforcement mechanisms.

The management board handles operational decision-making, budgeting, hiring, commercial strategy, and risk management. It is accountable to shareholders and, in two-tier systems, supervised by a supervisory board. Its authority and duties are typically defined in the articles, internal governance rules, and employment or service agreements of its members.

Mandatory offer rules, common in public markets and some private frameworks, ensure that minority shareholders receive an exit opportunity when control changes. Thresholds vary by jurisdiction (often around 30%). The offer must typically be made on fair or equivalent terms to those offered to the controlling seller.

Maturity applies primarily to convertible notes and other debt instruments. If no qualifying financing or other conversion event occurs before this date, the company may be required to repay the principal plus accrued interest. In practice, early-stage startups often renegotiate, extend, or convert the note at or near maturity, as repayment is usually impractical. Maturity timing influences leverage between investors and founders and can affect the structure of subsequent funding rounds.

Full ratchet protection recalculates all protected preferred shares as if they had been purchased at the new lower price. This maximises investor protection and sharply increases dilution for founders and employees. It is less common in contemporary venture deals but may appear in distressed situations or highly investor-favourable terms.

Non-compete clauses may apply to founders, employees, or shareholders, restricting participation in businesses that compete with the company. Their enforceability depends heavily on jurisdiction and context. In many jurisdictions, employee non-competes are limited or require compensation, whereas non-competes tied to shareholder agreements or exit transactions are more likely to be enforceable.

Under non-participating preferred, investors receive either their liquidation preference (e.g., 1× return of capital) or the value they would receive by converting into ordinary shares—but not both. This is more founder-friendly than participating structures. Investors typically convert when the company valuation at exit is high enough to exceed their preference amount.

Non-solicitation provisions protect against poaching of staff or clients after departure or during a transaction process. They often apply for a defined period and may distinguish between active solicitation and passive acceptance of incoming approaches.

In civil law jurisdictions, notaries prepare and execute deeds for actions such as share transfers, incorporation, amendments to articles, and certain restructurings. Their involvement provides legal certainty, ensures compliance with statutory requirements, and enables registration with authorities. Notarial deeds are binding once executed.

Notice periods apply to employment contracts, service agreements, or board mandates. They provide stability and allow parties to prepare for transition, handover responsibilities, or initiate replacement processes. Contractual notice periods may override statutory minimums if permitted by law.

Ordinary shares represent the core ownership held by founders, employees, and sometimes early investors. They are the baseline against which preferred share rights are compared. Their value depends heavily on company performance since they receive proceeds only after creditors and preferred shareholders.

Participating preferred—sometimes called “double-dip”—benefits investors twice: first through their priority return, and second through proportional participation with ordinary shareholders. Some agreements cap participation at a multiple or total return threshold to balance investor protection and founder incentives.

Post-money valuation equals pre-money valuation plus the new capital. It determines the investor's resulting equity stake and influences future dilution modelling and cap-table planning. It also shapes how convertibles convert during subsequent rounds.

Pre-emption rights protect shareholders from dilution by giving them the opportunity to subscribe to newly issued shares before they are offered to outsiders. These rights may be statutory, included in the articles, or set out in a shareholders’ agreement. Waivers, exclusions, or carve-outs (e.g., for ESOP pools or certain strategic investors) are often negotiated in funding rounds.

Pre-money valuation is the baseline used to calculate investor ownership. The numbers often include assumptions about option pool expansion or existing convertible instruments. Negotiation usually centres on how much dilution founders accept for the incoming capital.

Preferred shares are typically issued to institutional investors during priced rounds. They may include liquidation preferences, anti-dilution protection, participation features, veto rights, and conversion rights. These terms influence exit outcomes and shareholder voting dynamics. Preferred shares often convert into ordinary shares at IPO.

Unlike convertibles, priced rounds issue actual equity at closing, defining ownership immediately. They involve more extensive legal work—share purchase agreements, shareholder agreements, and updated company articles. Institutional investors often require a priced structure for larger rounds.

A Profit Share Certificate ("Winstbewijs") is a contractual or statutory right used in certain jurisdictions (notably the Netherlands) to distribute economic value separate from share ownership. Holders participate in dividends or exit proceeds based on predefined terms but do not receive governance rights or influence over corporate decisions. These certificates are often used for rewarding contributors, aligning incentives, or granting participation to individuals who should not obtain shareholder status.

A Profit Share Certificate ("Winstbewijs") is distinct from a Depository Receipt:

Depository Receipt (DR) / Certificaat van Aandelen

• Represents the economic rights of an underlying share.
• Issued by a STAK, which holds the legal shares.
• The holder effectively has the economic benefit of share ownership but not the voting rights.
• The underlying instrument is still a share.

Profit Share Certificate (Winstbewijs)

• Represents only a right to share in profits or distributions.
• Not linked to any underlying share, and does not represent ownership.
• Typically granted by the company itself (not by a STAK).
• No shareholder rights—no ownership, no voting, no claim on underlying shares.

The underlying contractual agreement defines the profit-sharing entitlement, while the token represents the quantitative measure used to allocate distributions among participants. These tokens are typically issued on distributed ledger infrastructure to enable transparent tracking, transferability, and automated distribution calculations.

Profit shares provide economic participation through dividends or exit proceeds while excluding governance rights. They are often used for employee or advisor incentives, or in structures where founders wish to preserve control while enabling broader economic participation. Profit-sharing rights may be issued through special share classes, depository receipts, or contractual arrangements depending on the jurisdiction.

Certain decisions—such as amendments to articles, major share issuances, liquidation, or mergers—often require enhanced approval levels such as 66.67% or 75%. These thresholds protect minority shareholders by preventing fundamental changes from being made by a simple majority. The exact percentage is set in the articles or shareholder agreements.

Residual value becomes relevant during exits, liquidation, or distribution events. Preferred shareholders with liquidation preferences are paid first, after which any remaining proceeds go to ordinary shareholders. The presence of multiple preference layers or participating preferred shares can significantly affect the residual value available to junior classes.

Reverse-vesting is commonly used for founders to ensure continued commitment while avoiding the procedural complexity of issuing shares later. Although founders technically hold all shares from day one, unvested portions can be repurchased at nominal value if they leave prematurely. This structure mirrors the economic effect of standard vesting while maintaining clean share issuance at incorporation.

When a shareholder intends to sell shares, a ROFR gives the company or other shareholders the ability to purchase those shares on the same terms offered by an outside buyer. It helps maintain ownership stability and prevent unwanted parties from entering the cap table. ROFRs often work alongside tag-along and drag-along rights.

Seed rounds often involve angels, micro-VCs, or seed funds. Funds are typically used for product development, initial marketing, and early team hires. Terms may vary widely, ranging from SAFEs and notes to priced equity rounds depending on the startup’s maturity.

Series rounds begin with Series A and continue through later stages (B, C, and beyond). Each round is a priced equity financing involving preferred shares with negotiated rights such as governance provisions, liquidation preferences, and protective voting thresholds. Earlier rounds (A) focus on validating scalable growth, while later rounds (B, C, …) emphasise market expansion, operational maturity, and preparation for major milestones like international growth, acquisitions, or eventual exit. Valuation, dilution impact, and investor expectations typically increase with each round.

SAFEs simplify early investing by avoiding debt classification and removing repayment risk. Conversion usually occurs at the lower of the valuation cap or discounted price. Multiple SAFEs from different investors may convert differently depending on their individual caps and discounts, affecting the cap table at the next round.

This structure is often used for small or straightforward investments where both parties prefer immediate equity ownership. It requires determining a valuation upfront and signing the necessary corporate approvals and share documents.

A STAK centralises voting control while distributing economic value through depository receipts. It is used to separate governance from ownership, commonly in employee participation schemes or founder-control structures. The STAK board exercises voting rights, while receipt holders receive financial benefits from exits, dividends, or liquidity events.

The subscription agreement specifies the number and class of shares purchased, price per share, payment mechanics, closing conditions, warranties, investor eligibility confirmations, and obligations of both company and investor. It is executed alongside corporate approvals and, where required, a notarial deed issuing the shares. It implements the terms negotiated in the term sheet and forms part of the core transaction documents for a priced equity round.

Common in two-tier governance systems, the supervisory board appoints and evaluates management board members, reviews strategy, approves major decisions, and ensures sound governance. It does not engage in day-to-day operations. Supervisory board composition, appointment rules, and powers are established in the articles and relevant corporate law.

Tag-along rights protect minority shareholders from being left behind in a sale. If a controlling shareholder receives an offer to sell their stake, minority holders can “tag” onto the transaction and participate proportionally, ensuring they receive equivalent price and conditions. These rights are central to fair exit outcomes in venture-backed companies.

Term sheets define valuation, investment size, share class terms, governance rights, liquidation preferences, anti-dilution protection, and closing conditions. They are usually non-binding except for confidentiality, exclusivity, and sometimes cost-reimbursement. Once agreed, lawyers draft definitive agreements mirroring the term sheet.

Trigger events commonly include a qualified priced round, change of control, dissolution, or reaching a maturity date (for debt instruments). When triggered, a convertible instrument may convert into equity, repay, or follow specific payout mechanics depending on the agreement. Clear trigger definitions prevent disputes and ensure predictable treatment across SAFEs, notes, and other structured instruments.

Startup valuations consider traction, market size, comparables, and investor expectations. In early stages, they are often negotiated rather than scientifically derived. Valuation anchors key terms such as equity percentage, option pool size, and conversion mechanics for SAFEs or notes.

Venture capital firms raise money from limited partners and invest it in startups with strong growth potential. They typically take preferred shares, negotiate governance rights, and support the company through scaling, follow-on financing, and exit planning. VC involvement often influences strategy, hiring, and future fundraising dynamics.

Vesting aligns participation with continued contribution. Typical schedules include four years with a one-year cliff, after which vesting occurs monthly or quarterly. Unvested equity is usually forfeited or repurchased if someone leaves early. Vesting may accelerate upon certain events, such as change of control or termination without cause, depending on contract terms.

Voting shares allow holders to influence corporate decisions such as board appointments, amendments to articles, major transactions, or issuance of new shares. They are typically issued as ordinary shares but may also exist within preferred share classes depending on negotiated terms. Companies may use different voting structures—such as one-share-one-vote or multiple-voting shares—to balance founder control and investor participation.