Angel Investing Glossary
38 key terms every UK founder and angel investor should know. From SEIS tax relief to liquidation preferences.
A
Angel Investor
A high-net-worth individual who invests their own money in early-stage startups, typically in exchange for equity. UK angels often invest £10k–£250k per deal and may qualify for SEIS/EIS tax relief.
Anti-dilution
A protective clause that adjusts an investor's equity if the company raises a future round at a lower valuation (a 'down round'). Full ratchet and weighted average are the two main types.
Articles of Association
The legal document that governs how a UK company is run — including share classes, voting rights, and director powers. Filed at Companies House and publicly available.
ASA (Advanced Subscription Agreement)
The UK-friendly version of a convertible note. The investor subscribes for shares in advance at terms set by the next qualifying round. Compatible with SEIS/EIS (unlike convertible loans).
B
Bridge Round
A small funding round designed to sustain a company until a larger round closes. Often structured as convertible notes or ASAs to avoid setting a new valuation.
Burn Rate
The rate at which a startup spends money, typically measured monthly. Net burn = monthly expenses minus revenue. A key metric angels evaluate to estimate runway.
C
Cap Table
A spreadsheet showing who owns what percentage of a company — founders, employees (options), and investors. Updated after each funding round.
Carried Interest (Carry)
The share of profits that a fund manager or syndicate lead takes from successful investments, typically 20%. Not usually relevant for direct angel deals.
Convertible Note
A loan that converts into equity at the next funding round, usually at a discount (10–25%) to the new round's price. Common for bridge rounds. The UK equivalent is often an ASA.
Companies House
The UK government registry where all limited companies must file accounts, officer appointments, and share allotments. BackerIQ analyses this data to identify and rank angel investors.
D
Dilution
The reduction in existing shareholders' ownership percentage when new shares are issued. If you own 100% and raise a round giving away 15%, you're diluted to 85%.
Drag-Along Rights
A clause that allows majority shareholders to force minority shareholders to sell their shares in an acquisition. Protects founders from holdout investors blocking an exit.
Due Diligence
The investigation an investor does before committing capital — reviewing financials, legal structure, IP ownership, team background, and market size. Typically 2–6 weeks for angel rounds.
E
EIS (Enterprise Investment Scheme)
A UK government tax relief scheme offering 30% income tax relief on investments up to £1m/year in qualifying companies. Shares must be held for 3+ years. Companies can raise up to £12m lifetime.
Equity
Ownership stake in a company, represented by shares. When an angel 'takes equity', they receive shares in exchange for their investment.
F
Follow-on Investment
An additional investment in a company you've already backed, usually in a later funding round. Super angels often reserve capital for follow-on rounds in their best performers.
I
L
Lead Investor
The investor who sets the terms (valuation, share class, rights) for a funding round and often invests the largest amount. Other investors then 'follow' on the same terms.
Liquidation Preference
A term that determines payout order in an exit. '1x non-participating' means the investor gets their money back first before remaining proceeds are split. Standard in UK angel rounds.
M
N
Nominal Value
The par value of a share as stated in the company's articles. UK shares often have a nominal value of £0.001 or £0.01. The actual price paid per share (the premium) is much higher.
O
Option Pool
Shares reserved for future employee stock options, typically 10–15% of equity. Often created before a funding round, so the dilution comes from the founders' share rather than the investors'.
P
Persons with Significant Control (PSC)
Anyone who holds more than 25% of shares or voting rights, or exercises significant influence over a UK company. Filed at Companies House and publicly visible.
Pitch Deck
A presentation (typically 10–15 slides) that founders use to explain their business to potential investors. Covers problem, solution, market, traction, team, and the ask.
Post-money Valuation
The company's value immediately after investment. Post-money = pre-money + investment amount. If pre-money is £1m and you raise £250k, post-money is £1.25m.
Power Law
The principle that most angel portfolio returns come from a tiny number of investments. Typically 1–2 investments out of 20+ generate most of the total return.
Pre-money Valuation
The agreed value of a company before new investment is added. Determines what percentage of equity the investor receives. Early-stage UK startups typically have pre-money valuations of £500k–£3m.
Pre-emption Rights
The right for existing shareholders to invest in future rounds before new investors, maintaining their ownership percentage. Standard in most UK shareholder agreements.
R
Runway
How many months a startup can operate at its current burn rate before running out of cash. Angels generally want to see 12–18 months of runway after investment.
S
SEIS (Seed Enterprise Investment Scheme)
A UK government tax relief scheme offering 50% income tax relief on investments up to £200k/year in qualifying early-stage companies. Companies can raise up to £250k total under SEIS.
SH01
A Companies House filing form used when a company allots new shares. Contains share class, number of shares, nominal value, and amount paid. BackerIQ parses SH01 filings to track funding rounds.
Super Angel
An angel investor who has backed 8+ companies, typically investing £50k–£250k per deal. They often lead rounds, sit on boards, and have a track record of successful exits.
Syndicate
A group of investors who pool capital to invest together, usually led by an experienced angel. The lead does due diligence and negotiates terms; others follow. Common UK syndicates operate on platforms like SyndicateRoom.
T
Tag-Along Rights
A clause giving minority shareholders the right to sell their shares on the same terms if a majority shareholder sells. The inverse of drag-along rights.
Term Sheet
A non-binding document outlining the key terms of an investment — valuation, investment amount, share class, investor rights. The starting point for legal negotiations.
V
Vesting
The process by which founders or employees earn their equity over time. Standard vesting: 4-year schedule with a 1-year cliff. If a founder leaves before the cliff, they forfeit unvested shares.
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