Fundraising has its own language. And unlike most professional vocabularies, capital markets terminology is rarely explained — it is assumed. Walk into a negotiation without understanding what you are agreeing to, and you will make decisions that follow you for years: governance rights you did not fully appreciate, anti-dilution provisions you did not model, liquidation preferences that reshape your exit economics in ways you did not anticipate.
This glossary covers the terms that appear most frequently in early and growth-stage transactions in Malaysia. It is not exhaustive — deal structures are highly variable — but it covers the concepts every founder should understand before engaging in substantive investor conversations.
Ownership and equity
Cap table (capitalisation table). A spreadsheet that records who owns what percentage of the company, including founders, investors, employees with options, and any convertible instruments. Investors will request your cap table early in diligence. A messy cap table — informal agreements, missing documentation, overlapping ownership — is a significant red flag.
Pre-money and post-money valuation. Pre-money is the value of the company before new investment arrives. Post-money is the value immediately after. If a company is valued at RM 4M pre-money and raises RM 1M, the post-money valuation is RM 5M — and the investor owns 20%. The distinction matters because terms sheets sometimes state valuation ambiguously.
Dilution. When new shares are issued, existing shareholders' percentage ownership decreases. This is dilution. It is not inherently bad — if the company is worth significantly more after the raise, a smaller percentage of a larger number may be more valuable. The question is always whether the dilution is proportionate to the value created by the capital.
"Most founders focus on valuation. The sophisticated ones focus on terms. A high valuation with aggressive liquidation preferences can leave a founder with less on exit than a lower valuation with clean terms."
— BizPal Capital Markets Practice
Deal terms
Term sheet. A non-binding document that outlines the proposed terms of an investment before formal legal agreements are drafted. Do not treat it as non-binding in practice — it sets the negotiating baseline, and terms agreed here tend to survive into the final documents.
Liquidation preference. Defines the order in which investors get paid if the company is sold or wound up. A 1x non-participating preference means the investor gets their money back first; if proceeds are sufficient, remaining value goes to common shareholders pro-rata. Participating preferences allow investors to also share in the remaining proceeds — a materially more investor-friendly term.
Anti-dilution provision. Protects an investor if the company raises money at a lower valuation in a future round (a "down round"). Full-ratchet anti-dilution reprices the investor's shares to the new lower price — highly punitive for founders. Weighted average anti-dilution is more moderate and more common in founder-friendly deals.
Pro-rata rights. The right of an existing investor to participate in future funding rounds to maintain their ownership percentage. Founders should understand which investors hold these rights, as they affect the dynamics of future rounds.
Governance terms
Board seat. Investors often request a seat on the board of directors as a condition of investment. This is a significant governance commitment — board members have legal duties and fiduciary responsibilities, and board composition affects every major decision the company makes.
Drag-along rights. Allow a majority of shareholders (often investors) to compel other shareholders to approve a sale of the company. These provisions protect investors' ability to exit — but founders should understand when and how they can be triggered.
Vesting. A schedule over which founders or employees earn their equity. Standard vesting in Malaysia is typically four years with a one-year cliff — meaning no equity is earned in the first year, and the remainder vests monthly over years two through four. Investors often require founders to accept vesting terms to align long-term incentives.
A note on professional advice
Understanding these terms is necessary. It is not sufficient. Every transaction has nuances that require legal and financial advice specific to your situation. BizPal works with founders to build the operational and financial readiness that makes the legal process cleaner — but we always recommend engaging a capital markets lawyer before signing anything.
The founders who negotiate the best deals are not the ones who read the most term sheets. They are the ones who understood their own business well enough to know which terms mattered most to them — and why.