overhang

Definition

Excess stock options or debt that will dilute existing shareholders, hanging over the cap table like a financial storm cloud. Future pain that everyone pretends isn't there.

Example Usage

We have serious overhang from convertible notes that will crush our valuation when they convert in the Series A.

Origin

Stock market terminology adopted by startup finance

Fun Fact

Large option pools and convertible notes create overhang that can make companies uninvestable despite good traction.

Source: Startup finance and cap table terminology

Related Terms

Intermediate

TAM

Total Addressable Market -- the theoretical maximum revenue if you sold your product to every possible customer on Earth, including people who don't want it, can't afford it, and live in places without internet. It's the biggest number in every pitch deck and the most fictional.

🚀 Startup / VC

Intermediate

ARR

Annual Recurring Revenue -- the amount of subscription money a company expects to collect over a year, assuming nobody cancels, which they will. It's the startup metric most likely to appear in fundraising decks and least likely to match reality.

🚀 Startup / VC

Beginner

Elevator Pitch

A 30-second summary of your startup that you deliver to investors in elevators, coffee lines, and restraining-order-adjacent proximity. If you can't explain your company in the time it takes to ride an elevator, your company is either too complicated or the elevator is too fast.

🚀 Startup / VC

Beginner

Founder

The person who started a company and will remind you of this fact in every meeting, email signature, and LinkedIn post until the heat death of the universe. They wear the title like a crown, even when the kingdom is a WeWork desk and two interns.

🚀 Startup / VC

Intermediate

Product-Market Fit

The mythical moment when your product perfectly matches what customers want, described by VCs as essential but defined by no one in any useful way. It's like obscenity -- you know it when you see it, and most startups never see it.

🚀 Startup / VC

Intermediate

vesting cliff

The sadistic waiting period before any of your stock options actually belong to you, typically one year. It's designed to prevent you from taking the job and immediately quitting, essentially holding your compensation hostage for good behavior.

🚀 Startup / VC

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