You’re watching Shark Tank. A founder drops words like valuation and burn rate. Sharks nod. Deals move fast. If the terms feel confusing, you’re not alone. This guide explains them in simple, everyday language.
Valuation is what a company is worth. Pre-money valuation is the value of the business before the Sharks invest. Post-money valuation is the value after their investment is added.
Dilution happens when founders give part of their company to investors. Their ownership reduces, but the business can grow faster with the right money and support.
A term sheet is a clear summary of the deal. It shows how much money is being invested, how much ownership is shared, and the main conditions both sides agree on.
A cap table shows who owns the company. It lists founders, investors, and employees, and changes as new investments come in.
Unit economics looks at one simple question: Does one sale of your product make any money? If one sale loses money, growth will only increase losses.
Gross margin shows how much money remains after making a product. It helps understand how well a business controls its production and pricing.
Net profit is the money left after all expenses are paid. This includes rent, salaries, marketing, and taxes. A positive number means the business earns money.
EBITDA stands for Earnings Before Interest, Tax, Depreciation, and Amortisation. It shows how much a business earns from its core operations, without counting loans, taxes, or accounting costs.
Burn rate is how much money a startup spends each month. A high burn rate means the business needs strong planning to sustain growth and avoid running out of cash.
Runway tells how long a startup can survive with the cash it has today. More runway gives founders time to grow, improve the product, or raise the next round of funding.
Working capital is the money used for daily operations. It covers paying suppliers, staff salaries, and routine bills, hence keeping the business running without stress.
The inventory cycle tracks how quickly a business turns raw materials or stock into sold products and replaces them. If the inventory cycle is short, it signals a healthier cash flow.
A royalty deal means investors earn a fixed percentage of sales. Founders keep ownership, while investors receive regular payouts linked to revenue.
MOAT stands for ‘Meaningful, Owned, and Tough-to-copy’. It refers to what makes a business hard for others to copy, like a strong brand, loyal customers, or a unique way of working.
An exit is how investors make money in the end. This happens when the company is sold, merged, or listed on the stock market.