Startup Glossary
Your go-to dictionary for navigating startup jargon.
A
Acquisition:
When one company purchases another.
Annual Contract Value (ACV):
The average annual revenue per customer contract, typically used in subscription businesses.
ARR (Annual Recurring Revenue):
A key metric in SaaS indicating the predictable revenue generated annually from subscriptions.
Angel Investor:
An individual who provides capital to startups in exchange for equity or convertible debt, often at an early stage.
Accelerator:
A program designed to help early-stage startups grow by providing funding, mentorship, and resources over a set period.
B
Burn Rate:
The rate at which a startup spends cash to finance its operations before generating positive cash flow.
B2B (Business-to-Business):
A business model where companies sell products or services to other businesses.
B2C (Business-to-Consumer):
A business model where companies sell directly to individual consumers.
Bootstrapping:
Building a business using personal savings or operating revenues, without external funding.
Break-Even Point:
The point at which a company's revenues equal its costs, resulting in no profit or loss.
Bridge Financing:
A short-term loan or round of funding used to maintain operations or achieve a specific milestone before securing longer-term financing.
C
CAC (Customer Acquisition Cost):
The cost associated with acquiring a new customer, including marketing and sales expenses.
Churn Rate:
The percentage of customers who stop using a product or service over a given time period.
Convertible Note:
A form of short-term debt that converts into equity, typically during a future financing round.
Cap Table (Capitalization Table):
A document that outlines a company's ownership structure, including equity, convertible notes, and options.
Cohort Analysis:
A method of analyzing customer behavior by grouping users with shared characteristics or experiences within a specific timeframe.
Crowdfunding:
Raising small amounts of capital from a large number of individuals, typically via online platforms.
Customer Lifetime Value (CLV or LTV):
The total revenue a business can expect to earn from a customer over their entire relationship.
D
Dilution:
A reduction in the ownership percentage of existing shareholders due to the issuance of new shares.
Due Diligence:
The process of investigating a company before making an investment or acquisition.
Debt Financing:
Raising capital through loans or bonds rather than issuing equity.
Discounted Cash Flow (DCF):
A valuation method used to estimate the value of an investment based on its expected future cash flows.
Drag-Along Rights:
A clause that allows majority shareholders to force minority shareholders to join in selling the company.
Down Round:
A funding round in which a startup is valued at a lower valuation than in previous rounds.
Data Room:
A secure space, often virtual, used during due diligence to store and share confidential information.
E
Equity:
Ownership interest in a company, represented by shares.
Exit Strategy:
A plan for how investors or founders will realize their return, such as through an IPO or acquisition.
EBITDA:
Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's profitability.
Elevator Pitch:
A brief, persuasive speech used to spark interest in a product, service, or company.
Employee Stock Option Plan (ESOP):
A program that provides employees with the opportunity to purchase company shares, often at a discounted rate.
Equity Crowdfunding:
A method of raising capital where individuals invest in exchange for equity in the company.
Early-Stage Startup:
A company that is in its initial phase, focusing on developing its product or service and finding product-market fit.
F
Freemium:
A business model where basic services are provided for free, while premium features require payment.
Fundraising:
The process of seeking capital from investors to finance business operations or growth.
FOMO (Fear of Missing Out):
A common phenomenon in investing where fear of missing an opportunity leads to hasty decisions.
Founder:
An individual or group of individuals who establish a company or startup.
Full-Stack Developer:
A developer skilled in both front-end and back-end technologies.
Funding Round:
A stage of raising capital, such as Seed, Series A, or Series B, to finance business operations or growth.
First-Mover Advantage:
The competitive edge gained by being the first to market with a product or service.
G
Growth Hacking:
Using creative, low-cost strategies to acquire and retain customers quickly.
Gross Margin:
The percentage of revenue remaining after deducting the cost of goods sold.
Go-To-Market Strategy (GTM):
A plan that outlines how a company will reach and serve its target customers.
Growth Stage:
The phase in a startup's lifecycle where it scales operations and expands market reach.
General Partner (GP):
A managing partner in a venture capital fund responsible for investment decisions.
Granularity:
The level of detail or specificity in data or analysis.
H
Hockey Stick Growth:
A sharp increase in a company's growth trajectory, typically after a period of slower, steady growth.
Hard Stop:
A firm deadline or end time for a meeting, project, or task.
Halo Effect:
When the success or reputation of a single product positively impacts the perception of a brand or other products.
I
Incubator:
A program that helps startups by providing resources like office space, mentorship, and funding.
IPO (Initial Public Offering):
The first sale of a company's stock to the public.
Intellectual Property (IP):
Legal rights that protect creations of the mind, such as inventions, designs, and trademarks.
Iterative Development:
A process of developing and improving a product through repeated cycles and feedback.
Investor Deck:
A presentation used by startups to pitch their business to potential investors.
Integration:
The process of combining different systems or software to work together seamlessly.
J
Joint Venture:
A business arrangement where two or more companies collaborate on a specific project, sharing resources, risks, and profits.
J-Curve:
A growth trajectory often seen in startups where performance initially declines before accelerating rapidly upward.
JIT (Just-In-Time):
An inventory strategy that minimizes stock levels by receiving goods only as they are needed.
K
Key Performance Indicator (KPI):
A measurable value that shows how effectively a company or individual is achieving specific business objectives.
Knowledge Transfer:
The process of sharing or disseminating knowledge, skills, and insights within an organization or team.
K-Factor:
A metric that measures viral growth, indicating how many additional users each new user brings to a platform.
L
Lifetime Value (LTV):
The total revenue a business expects to earn from a customer over the entire duration of their relationship.
Lean Startup:
A methodology focused on building a minimum viable product and iterating based on customer feedback to minimize risk.
Liquidity Event:
An event that allows shareholders to convert their equity into cash, such as an IPO or acquisition.
M
Market Fit:
When a product satisfies strong market demand, often a key milestone for startups.
MVP (Minimum Viable Product):
The simplest version of a product that allows a team to collect maximum customer feedback with the least effort.
MRR (Monthly Recurring Revenue):
A metric for subscription-based businesses that tracks predictable revenue generated every month.
Moat:
A competitive advantage that protects a business from competitors, such as a strong brand, patents, or network effects.
N
Net Promoter Score (NPS):
A customer loyalty metric that measures how likely customers are to recommend a product or service to others.
Network Effect:
A phenomenon where a product or service becomes more valuable as more people use it.
Non-Dilutive Funding:
Capital raised without giving up equity in the company, such as grants or revenue-based financing.
O
Onboarding:
The process of integrating and familiarizing new users or employees with a product, system, or company culture.
Operational Efficiency:
A measure of how effectively a company converts resources into revenue or outputs.
Option Pool:
Shares set aside by a company for future issuance to employees, advisors, or investors as part of an equity compensation plan.
P
Pivot:
A significant shift in a company's business model, strategy, or product focus to better align with market needs or opportunities.
Pre-Money Valuation:
The valuation of a company prior to receiving a new round of investment.
Post-Money Valuation:
The valuation of a company immediately after a new round of investment, including the investment amount.
Product-Market Fit:
The point where a product satisfies strong market demand, often seen as a critical milestone for startups.
Pitch Deck:
A visual presentation used by startups to communicate their business plan, product, and goals to investors.
Profit Margin:
The percentage of revenue remaining after all expenses are deducted, indicating overall profitability.
Pipeline:
A list or system of potential customers or sales prospects in various stages of the sales process.
Q
Qualified Lead:
A prospective customer who meets specific criteria that indicate they are likely to become a paying customer.
Quarterly Business Review (QBR):
A periodic meeting between a company and its customers to review performance, align goals, and discuss opportunities.
Quality Assurance (QA):
The process of ensuring that a product or service meets predefined quality standards before it reaches the customer.
Quota:
A target or goal, often used in sales to define the minimum expected revenue or number of deals for a team or individual.
R
Retention Rate:
The percentage of customers who continue to use a product or service over a given period.
Run Rate:
A projection of future financial performance based on current data, typically annualized.
Runway:
The amount of time a company can operate before it exhausts its cash reserves.
Revenue Multiple:
A valuation metric that compares a company's valuation to its revenue, often used in startup funding.
Rule of 40:
A guideline for SaaS companies stating that the sum of a company’s growth rate and profit margin should exceed 40% to indicate financial health.
S
Seed Funding:
The initial capital raised by a startup to develop its product or service.
Series A/B/C:
Rounds of funding raised by startups as they scale, typically increasing in size and valuation with each round.
Sweat Equity:
Ownership earned by contributing work rather than investing capital.
Scale:
The ability of a company to grow revenue significantly without a proportional increase in costs.
SaaS (Software as a Service):
A software distribution model where applications are hosted online and accessed via subscription.
SPAC (Special Purpose Acquisition Company):
A company created to raise capital through an IPO for the purpose of acquiring an existing company.
T
Term Sheet:
A non-binding document that outlines the key terms and conditions of a proposed investment.
Total Addressable Market (TAM):
The total market demand for a product or service, assuming full market share.
Traction:
Evidence that a startup's product or service is gaining market acceptance, often measured by metrics like revenue or user growth.
Term Loan:
A loan that is repaid in regular installments over a set period of time.
Turnover Rate:
The rate at which employees leave and are replaced in an organization, often indicative of company culture or job satisfaction.
U
Unicorn:
A privately held startup company valued at over $1 billion.
Unit Economics:
The direct revenues and costs associated with a single unit of a product or service.
User Acquisition:
The process of gaining new users or customers for a product or service.
Upsell:
Encouraging customers to purchase a more expensive or upgraded version of a product or service.
User Retention:
The ability to keep customers or users engaged and continuing to use a product over time.
V
Valuation:
The process of determining the current worth of a company or asset.
Venture Capital:
Funding provided to startups and small businesses with high growth potential in exchange for equity.
Vesting:
A process by which an employee earns the right to full ownership of stock options or other benefits over time.
Vertical Integration:
When a company expands its operations into different stages of production within the same industry.
Value Proposition:
A clear statement of the benefits and value a product or service provides to customers.
W
Wireframe:
A basic visual guide used in interface design to suggest the structure of a website or app.
Working Capital:
The capital available for day-to-day operations, calculated as current assets minus current liabilities.
Web 3.0:
The next evolution of the internet, focusing on decentralization, blockchain, and user-owned data.
White Label:
A product or service produced by one company but rebranded and sold by another.
Warm Lead:
A potential customer who has shown interest in your product or service, typically through engagement or inquiries.
X
XaaS (Anything-as-a-Service):
A collective term for cloud-based services including SaaS, PaaS, and IaaS, highlighting flexibility and scalability.
Exit Multiple:
A valuation metric used to estimate the selling price of a business based on its financial performance, such as EBITDA or revenue.
Y
Yield:
The income return on an investment, expressed as a percentage of the investment's cost or current market value.
Yield Management:
A strategy to maximize revenue by controlling product availability and pricing based on demand.
Year-over-Year (YoY):
A method of comparing a company's performance metrics, such as revenue or growth, against the same period in the previous year.
Z
Zero to One:
A term popularized by Peter Thiel referring to creating something entirely new and innovative, rather than incremental improvements.
Zombie Startup:
A company that continues to operate without significant growth or progress, often surviving on limited funding.