Startup Glossary: 70 Terms Every Founder Should Know

Startup language is full of jargon that nobody explains. Every entry here gives a one-sentence definition, a worked example, the mistakes to avoid and links to the guides that go deeper.

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Funding and investors

AcceleratorAn accelerator is a fixed-length program, often a few months, that gives startups mentoring, connections and sometimes funding, usually in exchange for equity.
Advisory BoardAn advisory board is a group of outside experts who give a startup guidance and introductions, usually for a small equity grant, without the legal duties of a board of directors.
Angel InvestorAn angel investor is an individual who invests their own money in an early-stage startup, usually in exchange for equity or a convertible instrument.
BootstrappingBootstrapping means building a company with your own savings and the revenue it earns, instead of raising money from outside investors.
Bridge RoundA bridge round is a smaller, short-term financing that carries a company to its next major round, or to a sale, when its current cash is running low.
Convertible NoteA convertible note is short-term debt that investors lend to a startup, which converts into equity at a later round instead of being repaid in cash.
CrowdfundingCrowdfunding raises small amounts of money from many people, usually online, either as pre-orders and rewards or, in equity crowdfunding, as ownership in the company.
Down RoundA down round is a financing in which a company sells shares at a lower valuation than in its previous round, often diluting existing owners more than expected.
Due DiligenceDue diligence is the investigation an investor or buyer does before closing a deal, checking that a company's claims, records, contracts and finances are accurate.
IncubatorAn incubator is an organization that supports early-stage ideas and founders with space, guidance and resources over a flexible period, often at low or no cost.
Lead InvestorA lead investor is the main investor in a funding round, who sets the valuation and key terms, usually invests the largest amount, and draws other investors in.
Liquidation PreferenceA liquidation preference is an investor right to be paid back first, before common shareholders, when a company is sold or wound down.
Pitch DeckA pitch deck is a short slide presentation that explains a startup's problem, solution, market, traction and funding ask to investors.
Pre-Seed FundingPre-seed funding is the earliest outside money a startup raises, commonly from founders' networks, angels or small funds, to test an idea and build a first version.
Pro Rata RightsPro rata rights let an investor buy enough shares in a future round to keep their ownership percentage from shrinking.
SAFEA SAFE, or Simple Agreement for Future Equity, lets an investor give a startup money now in exchange for shares later, usually at the next priced round.
Seed FundingSeed funding is an early round of investment, commonly after a first product exists, used to find a repeatable way to acquire customers and build the team.
Series A FundingSeries A is typically a company's first large venture round, raised once there is real traction, to scale a business model that is already starting to work.
Term SheetA term sheet is a short, usually non-binding document that outlines the main terms of an investment, such as valuation, amount, and investor rights, before full contracts are drafted.
Venture CapitalVenture capital is money pooled from outside investors into a fund, which a firm invests in young companies with high growth potential in exchange for equity.

Finance and metrics

409A ValuationA 409A valuation is an independent appraisal of the fair market value of a private company's common stock, used to set the exercise price of stock options.
AcquisitionAn acquisition is when one company buys another, either by purchasing its shares or its assets, usually giving the owners cash, stock or both.
ARRARR, or annual recurring revenue, is the yearly value of a company's recurring subscription revenue, usually monthly recurring revenue times twelve.
Break-Even PointThe break-even point is the level of sales at which a business's total revenue equals its total costs, so it makes neither a profit nor a loss.
Burn RateBurn rate is the amount of cash a startup spends each month more than it brings in, usually measured monthly.
Cap TableA cap table is a record of who owns what in a company: every shareholder, option holder and convertible holder, with their share counts and percentages.
Churn RateChurn rate is the percentage of customers, or recurring revenue, a business loses over a given period, such as a month.
CliffA cliff is an initial waiting period in a vesting schedule during which no equity vests, after which a lump of it vests all at once.
Customer Acquisition CostCustomer acquisition cost (CAC) is the average amount a business spends on sales and marketing to win one new customer.
DilutionDilution is the drop in an existing owner's percentage of a company when new shares are issued to someone else.
EquityEquity is ownership in a company, usually held as shares of stock, and it entitles the holder to a portion of the company's value.
Exit StrategyAn exit strategy is a plan for how founders and investors will eventually turn their ownership into value, such as through a sale, merger or public offering.
Gross MarginGross margin is the share of revenue left after subtracting the direct costs of delivering a product or service, shown as a percentage.
IPOAn IPO, or initial public offering, is when a private company first sells shares to the public on a stock exchange.
Lifetime ValueLifetime value (LTV) is the total gross profit a business expects to earn from a customer over the whole time they keep buying.
MRRMRR, or monthly recurring revenue, is the predictable revenue a business expects to earn each month from subscriptions or ongoing contracts.
Post-Money ValuationPost-money valuation is a company's value immediately after a round, equal to the pre-money valuation plus the new money invested.
Pre-Money ValuationPre-money valuation is what a company is agreed to be worth before a new round of investment money is added.
RunwayRunway is how many months a startup can keep operating before its cash runs out, at its current rate of spending.
Stock Option PoolA stock option pool is a block of company shares set aside to grant to current and future employees, advisors and contractors.
Unit EconomicsUnit economics measures the revenue and cost of a single customer or sale, to show whether the business makes money on each one.
VestingVesting is the schedule over which someone earns full ownership of their shares or options, typically through continued service over several years.

Legal and IP

C CorporationA C corporation is a separate legal entity owned by shareholders and taxed on its own income, and it is the structure most venture-backed US startups use.
CopyrightCopyright is legal protection for original works of authorship, such as writing, art, music and software code, that arises automatically once the work is fixed in a tangible form.
Founders' AgreementA founders' agreement is a contract among co-founders that sets out ownership, roles, decision-making, vesting and what happens if someone leaves.
IP AssignmentAn IP assignment is a written agreement that transfers ownership of intellectual property, such as inventions, code or designs, from a person to a company.
LLCA limited liability company is a US business structure that separates the owners' personal assets from the business's debts and is usually taxed as a pass-through.
NDAA non-disclosure agreement is a contract in which one or both parties promise to keep specified information confidential and to use it only for a stated purpose.
Operating AgreementAn operating agreement is the governing document of an LLC that sets out ownership, management, profit sharing and what happens when members join, leave or disagree.
Patent PendingPatent pending means a patent application has been filed for an invention but no patent has been granted, so it gives notice but no enforceable patent rights yet.
Prior ArtPrior art is any evidence that an invention was already known, published, used or sold before a patent application's effective filing date, and it can block a patent.
Provisional Patent ApplicationA provisional patent application is a US filing that gives an inventor a filing date and 12 months to file a regular application, but it never becomes a patent on its own.
Trade SecretA trade secret is confidential business information that has value because it is secret and that its owner takes reasonable steps to keep secret.
TrademarkA trademark is a word, name, logo or other mark that identifies the source of goods or services, with rights that arise from use and can be strengthened by registration.
Utility PatentA utility patent protects a new, useful and non-obvious process, machine, manufacture or composition of matter, and generally lasts 20 years from the filing date.

Product, growth and team

B2BB2B, or business-to-business, describes a company whose customers are other businesses rather than individual consumers.
B2CB2C, or business-to-consumer, describes a company that sells its products or services directly to individual consumers.
Co-FounderA co-founder is a person who starts a company alongside others, sharing the risk, the early work and, typically, ownership and major decisions.
FreemiumFreemium is a pricing model that offers a basic version of a product for free and charges for premium features, higher limits or extra services.
Go-to-Market StrategyA go-to-market strategy is the plan for how a company will reach its first customers, convince them to buy, and deliver the product, including who it targets, pricing and channels.
Growth HackingGrowth hacking is the practice of running many quick, low-cost experiments across marketing, product and sales to find repeatable ways of gaining customers.
Lean StartupThe lean startup is an approach to building new businesses through short cycles of building, measuring and learning, so you test assumptions cheaply before committing big resources.
MVP (Minimum Viable Product)An MVP is the simplest version of a product that real users can use, built to test whether the core idea solves a real problem before you invest in the full thing.
North Star MetricA north star metric is the single number that best captures the value customers get from your product, used to keep the whole team aimed at long-term growth.
PivotA pivot is a deliberate, significant change in a startup's strategy, product, customer or business model, made because evidence shows the current path is not working.
Product-Market FitProduct-market fit means a product satisfies a real, sizable demand in a market, so customers keep using it and new ones arrive without constant pushing.
SaaSSaaS, or software as a service, is software that customers use over the internet by subscription instead of buying and installing it themselves.
Startup EcosystemA startup ecosystem is the network of founders, investors, mentors, universities, service providers and programs in a place that helps new companies form and grow.
TAM, SAM and SOMTAM, SAM and SOM are three nested ways to size a market: total demand, the part your product could serve, and the realistic share you can capture soon.
UnicornA unicorn is a privately held startup valued at $1 billion or more. The term describes a rare outcome, not a goal every company should chase.

A to Z

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409A Valuation

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Operating Agreement

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Runway

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