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Angel Investing Terms Explained for Beginners

Your cheat sheet for speaking fluent Angel.

Think of this as your crash course in angel investing for beginners – your roadmap for decoding all the startup jargon, from SAFE notes to SPVs, and learning how early-stage investing actually works.

By the end, you’ll understand the core mechanics of angel investing, know how deals are structured, and sound like you’ve done this before (even if you haven’t).

Because at Play Money!, we believe the best investors aren’t born – they’re built.

🚩 Basic Investment Terms

  • Angel Investor
    • An individual who invests their own money into early-stage startups, typically in exchange for equity (ownership).
  • Startup
    • A young company aiming to solve a significant problem or capture an emerging market, usually with innovative technology or a fresh business model.
  • Deal Memo
    • A structured summary explaining a startup’s idea, market, traction, team, and financial details that help you decide if you want to invest.
  • Accredited Investor
    • In the U.S., someone who meets certain financial thresholds ($200k+ in annual income individually, $300k+ jointly, or $1M in net worth excluding the primary residence) can legally invest in startups.

📈 Funding & Valuation Terms

  • Valuation
    • How much the startup is worth. Two common types:
      • Pre-Money Valuation: The company’s valuation before receiving your investment.
      • Post-Money Valuation: The valuation after your investment has been included.
  • Dilution
    • A reduction in your ownership percentage as new investors buy into the startup. It’s normal and expected as companies grow and raise more funds.
  • SPV (Special Purpose Vehicle)
  • SAFE (Simple Agreement for Future Equity)
    • A popular contract used in early-stage investing. You’re investing money today that converts to equity (ownership) later when the startup raises a priced round.
  • Priced Round
    • An investment round in which a formal valuation is set and investors directly buy equity shares at a set price.

🧮 Market & Opportunity Terms

  • TAM (Total Addressable Market)
    • The overall revenue opportunity available to a product or service if it achieved 100% market share–basically, “How big is the pie?”
  • SAM (Serviceable Available Market)
    • The segment of the TAM targeted by the company’s products or services–“The slice of pie they’re aiming for right now.”
  • SOM (Serviceable Obtainable Market)
    • The portion of the SAM a startup realistically expects to capture–“The slice of pie they actually think they’ll get.”

💼 Portfolio & Strategy Terms

  • Portfolio
    • The collection of investments you make. Think of it as your basket of startup bets.
  • Diversification
  • Pro Rata Rights
    • Rights that allow existing investors to maintain their ownership percentage by investing in future funding rounds.

📑 Deal Mechanics

  • Cap Table (Capitalization Table)
    • A table showing the ownership structure. It details who owns what percentage of the company.
  • Exit
    • When a startup is acquired by another company or goes public (IPO), turning your investment into actual returns.
  • Liquidity Event
    • Any event (acquisition, IPO, or secondary sale) that allows investors to cash out their investment.

🎯 Community & Social Terms

  • Syndicate
    • A group of investors pooling funds to invest together, often led by a more experienced investor.
  • Due Diligence
    • Research and analysis conducted before investing to evaluate risks and opportunities.
  • POV (Point of View)
    • Sharing your thoughts and analysis about a startup publicly within the Play Money community. It helps build your reputation and helps others learn.

🔑 Angel Mindset Terms

  • Risk Appetite
    • How comfortable you are with potential loss in exchange for the possibility of significant gains.
  • Dry Powder
    • The cash you keep on hand specifically to invest in future deals.
  • Check Size

🛠 Play Money Specific

  • Investment Threshold
    • The minimum amount a startup must raise for the deal to go through.
  • Commitment
    • When you signal an intent to invest by pledging an amount, it’s not a finalized investment until the threshold is met and funds are wired.

Keep this tab open.

By the time you finish your first deal, you’ll be fluent in Angel – and probably explaining it to your friends.

Angel Investing Terms Explained for Beginners