Startup Glossary

The terms founders and investors throw around, in plain language. What each one means, why it matters, and a resource or two worth your time on it.

Finance

Burn Rate Net Burn · Gross Burn How fast you are spending cash. Gross burn is everything going out each month, net burn is that minus the revenue coming in, th... Runway How many months your company can keep operating at its current spend before the bank account hits zero. Cash in the bank divide...

Metrics

CAC Payback Period Payback Period How long it takes for a customer to pay back what you spent to acquire them. Measured in months of their gross profit against y... Churn Churn Rate · Attrition The rate at which customers stop paying you over a period. Revenue churn measures the money that leaves, customer churn measure... Customer Acquisition Cost CAC What it costs you, all in, to win one new paying customer: the sales and marketing spend over a period divided by the customers... Lifetime Value LTV · CLV · Customer Lifetime Value The total gross profit you expect from a customer across their whole relationship with you. It turns a monthly price into the r... MRR Monthly Recurring Revenue · ARR · Annual Recurring Revenue The predictable subscription revenue you can count on each month (MRR), or the same figure annualised (ARR). It strips out one-... Retention Retention Rate · Cohort Retention How many of your users or customers keep coming back over time. Usually read as a cohort curve: of everyone who started in a gi... Unit Economics The revenue and cost of a single unit of your business, usually one customer, boiled down to whether that unit makes or loses m...

Fundraising

Cap Table Capitalization Table The record of who owns what in your company: founders, investors, and the employee option pool, share by share and percentage b... Convertible Note Note A loan that is meant to convert into equity at your next round instead of being paid back in cash. Like a SAFE, but structured ... Dilution The drop in your ownership percentage when the company issues new shares, usually to raise money or grant employee options. You... ESOP Employee Stock Option Pool · Option Pool A block of shares set aside to grant to employees as stock options, so the people you hire early can own a piece of what they b... SAFE Simple Agreement for Future Equity A short investment contract where someone gives you money now in exchange for shares later, when you next raise a priced round.... Valuation Cap Cap The maximum company valuation at which an early investor's SAFE or note converts into shares. It rewards them for backing you e... Vesting Cliff · Four-Year Vesting Earning your equity over time instead of all at once. The standard is four years with a one-year cliff: nothing vests until you...

Growth

Ideal Customer Profile ICP A sharp description of the exact customer your product is best for: their size, role, situation, and pain. Not everyone who cou... North Star Metric NSM The single metric that best captures the core value your product delivers to customers, the one number a whole team can rally a...

General

Moat Defensibility · Competitive Advantage The durable advantage that makes it hard for competitors to copy you and take your customers: network effects, switching costs,...

Product

Product-Market Fit PMF The point where you have a product a specific market clearly wants, so much that people pull it from you rather than you pushin...
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