Startup
Glossary

A fixed-term, cohort-based program that provides startups with mentorship, education, and often seed funding in exchange for equity. Examples include Y Combinator and Techstars.

An individual or entity that meets SEC requirements to invest in unregistered securities. Typically requires $1M+ net worth or $200K+ annual income.

An acquisition where the primary goal is to hire the target company's team rather than obtain its products or services.

When one company purchases another company, either through buying its stock or assets. A common exit path for startups.

The percentage of users who complete a key action that indicates they've experienced the product's core value.

Users who have engaged with a product within a specific time period (DAU = daily, MAU = monthly, WAU = weekly).

An experienced individual who provides guidance to a startup, often in exchange for equity (typically 0.25-1%).

Average Revenue Per User. Total revenue divided by the number of users, measuring monetization efficiency.

Annual Recurring Revenue. The yearly value of recurring subscription revenue, normalized to a one-year period. A key metric for SaaS companies.

A high-net-worth individual who provides capital for startups, usually in exchange for equity or convertible debt. Often invests at pre-seed or seed stage.

A provision that protects investors from dilution if shares are later sold at a lower price. Can be full ratchet or weighted average.

Annual Contract Value. The average annualized revenue per customer contract, excluding one-time fees.

Business-to-Business. A business model where companies sell products or services to other businesses rather than consumers.

Business-to-Business-to-Consumer. A model where a company partners with another business to reach end consumers.

Business-to-Consumer. A business model where companies sell directly to individual consumers.

Prioritizing speed over efficiency in the face of uncertainty, to achieve massive scale. Coined by Reid Hoffman.

A group of individuals elected to represent shareholders and oversee company management. Usually includes investors and founders.

Building a company without external funding, relying solely on personal savings and revenue from the business.

A smaller funding round meant to provide runway until a larger round can be raised. Often structured as convertible notes.

The rate at which a company spends its cash reserves before generating positive cash flow. Usually measured monthly (monthly burn).

Net burn divided by net new ARR. Measures how efficiently a company converts cash into revenue growth. Lower is better.

The plan for how a company creates, delivers, and captures value. Includes revenue streams, cost structure, and value proposition.

Customer Acquisition Cost. The total cost of acquiring a new customer, including marketing, sales, and related expenses.

The number of months it takes to recover the cost of acquiring a customer. Ideally under 12 months for SaaS.

Capitalization table. A spreadsheet showing equity ownership, dilution, and value of equity in each round of funding.

The share of profits (typically 20%) that fund managers receive from successful investments. Also called 'carry'.

The percentage of customers who stop using a product or service during a given time period. Critical for subscription businesses.

A period (usually one year) during which no equity vests. After the cliff, a portion of shares vest immediately.

Analyzing groups of users who share a common characteristic (like signup date) to understand behavior over time.

Unsolicited email outreach to potential customers or investors. A common early-stage sales and fundraising tactic.

Shares typically held by founders and employees, with fewer rights than preferred stock held by investors.

A condition that puts a company in a favorable business position relative to competitors.

The percentage of users who complete a desired action, such as signing up or making a purchase.

A form of short-term debt that converts into equity, typically at a discount, during a future financing round.

A person who starts a company alongside one or more other founders, sharing equity and responsibility.

Customer Relationship Management. Software used to manage interactions with customers and track sales pipeline.

Raising small amounts of money from a large number of people, typically via online platforms like Kickstarter or Republic.

Direct-to-Consumer. A business model where brands sell directly to customers, bypassing traditional retail channels.

Daily Active Users. The number of unique users who engage with a product on a given day.

A secure digital repository where companies share confidential documents with potential investors during due diligence.

The rate at which investors receive investment opportunities. Quality deal flow is critical for VC success.

Short for pitch deck. A presentation summarizing a startup's business for investors.

A privately held startup valued at over $10 billion. Examples include Stripe and SpaceX.

A startup that will become profitable before running out of money at current growth rates. Term coined by Paul Graham.

A startup that will run out of money before becoming profitable at current growth rates.

The reduction in ownership percentage that occurs when new shares are issued, typically during funding rounds.

A funding round where a company raises capital at a lower valuation than its previous round.

A provision allowing majority shareholders to force minority shareholders to join in the sale of a company.

The investigation or audit of a potential investment to confirm facts, financials, and other material information.

Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of operating profitability.

Shares reserved for future employee grants, typically 10-20% of the company. Created before funding rounds.

How actively users interact with a product, measured through metrics like session length, actions per session, or return visits.

Ownership interest in a company, typically represented as shares of stock.

Raising money from the public in exchange for equity, regulated by the SEC under Regulation CF or Regulation A+.

The method by which investors realize a return on their investment, typically through acquisition or IPO.

Additional revenue from existing customers through upsells, cross-sells, or increased usage.

A private wealth management firm that invests on behalf of a single wealthy family. Often invests in startups.

The competitive advantage gained by being the first to enter a market. Can include brand recognition and customer loyalty.

A self-reinforcing business model where each component feeds into the next, creating momentum. Popularized by Amazon.

Fear Of Missing Out. In investing, the anxiety that drives investors to act quickly on deals.

A person who starts a new company. Can be sole founder or co-founder.

A schedule by which founders earn their equity over time, protecting the company if a founder leaves early.

A business model offering a free basic product while charging for premium features or services.

The earliest funding from personal connections, typically before institutional investors.

A company that controls every aspect of its product or service, from development to customer delivery.

The journey users take from first awareness to becoming customers, with conversion rates at each stage.

The managing partner(s) of a venture capital fund who make investment decisions and manage operations.

Gross Merchandise Value. The total value of merchandise sold through a marketplace, before fees and returns.

The strategy and plan for launching a product and acquiring customers in the market.

Revenue minus cost of goods sold, divided by revenue. Shows profitability before operating expenses.

Creative, low-cost strategies to acquire and retain customers rapidly. Focuses on experimentation and virality.

The phase when a startup has achieved product-market fit and is focused on scaling operations and revenue.

A growth pattern showing slow initial progress followed by sudden, rapid acceleration. The ideal startup trajectory.

The length of time an investor holds an investment before exiting. Typically 5-10 years for VC.

A highly sought-after investment opportunity with multiple investors competing to participate.

Extremely rapid growth, typically defined as a compound annual growth rate (CAGR) of 40% or more.

An organization that helps early-stage startups develop by providing resources, mentorship, and sometimes office space.

Investor rights to receive regular financial and business updates from the company.

Intellectual Property. Patents, trademarks, copyrights, and trade secrets that provide competitive advantage.

Initial Public Offering. The process of offering shares of a private company to the public for the first time.

Internal Rate of Return. The annualized return on an investment, accounting for timing of cash flows.

The process of continuously improving a product based on user feedback and data.

The typical return pattern of a VC fund, showing initial losses before eventual gains as portfolio companies exit.

A provision requiring specific individuals to remain with the company for investors to maintain their commitment.

Key Performance Indicator. A measurable value that demonstrates how effectively a company is achieving objectives.

Keep Thinking Score. A proprietary metric that measures startup quality based on expert jury evaluations across multiple criteria.

A sales strategy of starting with a small initial deal and growing the account over time.

The investor who contributes the largest amount in a funding round and typically sets the terms and leads due diligence.

A methodology for developing businesses by using validated learning, experimentation, and iterative product releases.

The order and amount investors get paid in an exit event. 1x non-participating is most founder-friendly.

The percentage of customers (not revenue) lost during a period. Compare to revenue churn.

Limited Partner. An investor in a venture capital fund who provides capital but doesn't participate in management decisions.

Lifetime Value. The total revenue expected from a customer throughout their relationship with the company.

Lifetime Value divided by Customer Acquisition Cost. Should be 3:1 or higher for a healthy business.

Mergers and Acquisitions. The consolidation of companies through various financial transactions.

Net new ARR divided by sales and marketing spend. Measures sales efficiency. Above 0.75 is good.

Monthly Active Users. The number of unique users who engage with a product in a given month.

Marketing Qualified Lead. A lead that has shown interest and meets criteria indicating potential to become a customer.

A competitive advantage that protects a company from competitors. Can be based on technology, network effects, brand, or scale.

Month-over-Month. A comparison of a metric from one month to the previous month.

Monthly Recurring Revenue. The predictable revenue a business can expect every month from active subscriptions.

The return multiple on an investment (e.g., 3x means tripling the investment). Also refers to valuation multiples.

Minimum Viable Product. The simplest version of a product that can be released to test a business hypothesis with real users.

Non-Disclosure Agreement. A legal contract that protects confidential information shared between parties.

When expansion revenue from existing customers exceeds lost revenue from churned customers. A sign of strong product-market fit.

The percentage of recurring revenue retained from existing customers, including upsells and downgrades. Over 100% indicates growth.

When a product becomes more valuable as more people use it. A powerful form of competitive moat.

Capital that doesn't require giving up equity, such as grants, loans, or revenue-based financing.

Net Promoter Score. A measure of customer loyalty based on likelihood to recommend. Ranges from -100 to +100.

Objectives and Key Results. A goal-setting framework used to define and track objectives and their outcomes.

The process of getting new users started with a product, teaching them how to get value.

Shares reserved for future employee equity grants. Typically 10-20% of the company.

Proactively reaching out to potential customers rather than waiting for them to come to you.

When investor demand exceeds the amount a company is raising, allowing the company to be selective.

Acquiring customers through paid advertising channels like Google, Facebook, or influencer marketing.

Investor rights to participate in future funding rounds, often with pro rata rights.

The time required to recover the cost of an investment. For CAC, typically measured in months.

A presentation that provides an overview of a startup's business plan, used to attract investors.

A fundamental change in a startup's business model or product direction based on market feedback.

Product-Led Growth. A strategy where the product itself drives customer acquisition, conversion, and expansion.

Product-Market Fit. When a product satisfies strong market demand. The most important milestone for startups.

The value of a company immediately after receiving investment. Pre-money + Investment = Post-money.

The distribution in VC where a small number of investments generate the majority of returns.

The value of a company before receiving new investment. Used to calculate ownership percentages.

The earliest stage of startup funding, typically used to develop an initial product or validate an idea. Usually $50K-$500K.

Shares with special rights (liquidation preference, anti-dilution) typically held by investors.

The degree to which a product satisfies strong market demand. A key milestone indicating the product meets real customer needs.

The right of an investor to participate in future funding rounds to maintain their ownership percentage.

Quarter-over-Quarter. A comparison of a metric from one quarter to the previous quarter.

New MRR + Expansion MRR divided by Churned MRR + Contraction MRR. Measures growth efficiency. Above 4 is excellent.

When a startup makes just enough profit to cover the founders' basic living expenses.

Revenue that is expected to continue in the future, typically from subscriptions or contracts.

The percentage of customers or revenue that remains over time. Critical for subscription businesses.

The income generated from normal business operations, typically from sales of products or services.

A loan repaid as a percentage of monthly revenue, providing flexible, non-dilutive capital.

A strategic plan outlining the vision and direction for a product over time.

Return on Investment. The gain or loss from an investment relative to its cost.

A VC fund structure that accepts new investors on a quarterly basis, popularized by AngelList.

The amount of time a company can continue operating at its current burn rate before running out of cash.

Software as a Service. A software distribution model where applications are hosted and provided to customers over the internet.

Simple Agreement for Future Equity. A financing instrument that converts to equity in a future priced round. Simpler than convertible notes.

Serviceable Addressable Market. The portion of TAM that your product can realistically target.

The ability to grow a business significantly without proportionally increasing costs.

The capability of a system or business to handle growth without significant changes or additional cost.

When existing shareholders sell their shares to new investors, rather than the company issuing new shares.

An early funding round used to support initial operations and growth, typically ranging from $500K to $3M.

A go-to-market model where customers can sign up and use the product without sales involvement.

The first significant round of venture capital financing, typically used to scale a proven product. Usually $5M-$20M.

A funding round focused on scaling the business after achieving significant traction. Usually $20M-$50M.

A later-stage funding round for companies with strong traction, often for rapid expansion. Usually $50M+.

Small and Medium-sized Businesses. Companies with fewer than 500 employees, a common target market for startups.

Serviceable Obtainable Market. The realistic portion of SAM you can capture in the near term.

Special Purpose Vehicle. A legal entity created for a specific investment, allowing multiple investors to participate.

Sales Qualified Lead. A lead that has been reviewed by sales and deemed ready for direct sales engagement.

How likely users are to return to and continue using a product. High stickiness indicates strong retention.

The right to purchase shares at a fixed price (strike price), typically given to employees as compensation.

A group of investors who pool resources to invest in a deal, often led by an experienced angel investor.

A provision allowing minority shareholders to join in when majority shareholders sell their stakes.

The percentage of GMV that a marketplace keeps as revenue. Typically 5-30% depending on the industry.

Total Addressable Market. The total market demand for a product or service if 100% market share were achieved.

Total Contract Value. The total value of a contract over its full term, including one-time fees.

A non-binding document outlining the basic terms and conditions of an investment. The foundation for final legal documents.

Triple Triple Double Double Double. A growth benchmark for SaaS: 3x, 3x, 2x, 2x, 2x annual revenue growth.

Evidence of customer demand and growth, such as revenue, users, or engagement metrics. Proof that the business is working.

A privately held startup company valued at over $1 billion. Originally rare, now more common.

The direct revenues and costs associated with a single unit of a product or service. Shows if the business model works.

A funding round at a higher valuation than the previous round, indicating positive company progress.

Selling additional features or higher-tier products to existing customers.

The process of determining the current worth of a company or asset. Critical for funding negotiations.

The maximum valuation at which a SAFE or convertible note will convert to equity, protecting early investors.

The unique value a product or service provides to customers, differentiating it from alternatives.

Venture Capital. A form of private equity financing provided to startups with high growth potential in exchange for equity.

Loans provided to venture-backed companies, often used to extend runway between equity rounds.

The process by which an employee earns rights to employer-provided stock over time, typically over 4 years with a 1-year cliff.

The number of new users that each existing user brings in. A coefficient above 1 means organic exponential growth.

A mechanism where users naturally invite or share with others, creating self-sustaining growth.

The rights of shareholders to vote on company matters. Preferred stock may have enhanced voting rights.

An introduction to an investor facilitated by a mutual connection, significantly increasing response rates.

Securities that give the holder the right to purchase shares at a specific price within a certain time frame.

The most influential startup accelerator, founded in 2005. Has funded Airbnb, Stripe, DoorDash, and 4,000+ other startups.

Year-over-Year. A comparison of a metric from one period to the same period in the previous year.

Creating something entirely new that didn't exist before, as opposed to incremental improvements. Term popularized by Peter Thiel.

A company that is neither growing enough to attract investment nor failing completely. Stuck in limbo.