Founder glossary

154 startup and fundraising terms explained in plain language, each with a real example and the part first-time founders get wrong.

• 1:1 — A recurring private conversation between a manager and a person who reports to them.
• 409A valuation — An independent valuation of a company's common stock, used to set option strike prices in the US.
• Accelerator — A fixed-term programme giving a small investment, mentorship and a demo day in exchange for a few percent of equity.
• Accounting — Turning bookkeeping records into financial statements and meeting filing obligations.
• Accounts payable — Money you owe suppliers for things already received.
• Accounts receivable — Money customers owe you for work already delivered.
• Acquihire — An acquisition made mainly to hire the team, where the product is usually shut down.
• Activation — The moment a new user first experiences the product's core value.
• ACV (Annual Contract Value) — The annualised value of one customer contract.
• Angel investor — An individual investing their own money, usually at the earliest stage.
• Anti-dilution — A provision protecting earlier investors if a later round is priced lower, by adjusting their conversion price.
• ARR (Annual Recurring Revenue) — MRR multiplied by 12 — the annualised run rate of your recurring revenue.
• B2B sales — Selling to organisations, where several people are involved and budget is approved rather than spent.
• Balance sheet — A snapshot at one moment of what you own (assets), what you owe (liabilities), and the difference (equity).
• Board of directors — The group legally responsible for overseeing the company on behalf of shareholders.
• Board seat — A place on the company's board of directors, which oversees the company and can hire or fire the CEO.
• Bookkeeping — Recording every transaction accurately and on time.
• Bootstrapping — Funding the company from your own money and from revenue, rather than by selling equity.
• Burn multiple — Net burn divided by net new ARR — how much cash you consume to add a dollar of recurring revenue.
• Burn rate — How much cash the company spends per month. Gross burn is everything going out; net burn is what goes out after revenue comes in.
• Business model — How the company creates value and captures some of it as revenue.
• Buyer vs user — The person who pays is often not the person who uses it, and they care about different things.
• CAC (Customer Acquisition Cost) — The total sales and marketing spend to acquire one paying customer.
• Cap table — The record of who owns what part of the company — founders, employees, option pool and investors.
• Cash flow — The actual movement of money in and out of your bank account, as distinct from revenue you have earned but not been paid.
• Cash flow statement — Where cash actually came from and went, split into operating, investing and financing activities.
• Channel — One specific route to customers — SEO, paid ads, outbound email, partnerships, communities, content.
• Churn — The rate at which customers or revenue leave over a period.
• Cliff — An initial period during which no equity vests at all. Leave before it and you get nothing.
• COGS (Cost of Goods Sold) — The direct costs of delivering your product — the costs that rise with each additional customer.
• Cohort analysis — Grouping users by when they joined and following each group over time.
• Common stock — The ordinary share class held by founders and employees. Last in line if the company is sold or wound up.
• Confirmation bias — The tendency to notice evidence supporting what you already believe and discount evidence against it.
• Contractor vs employee — Two legally distinct ways of engaging someone, with different tax, control and IP implications.
• Contribution margin — Revenue from a unit minus all the variable costs of producing and selling that unit — a step beyond gross margin because it also includes variable selling costs.
• Conversion rate — The percentage completing a step out of those who started it.
• Convertible note — A loan that converts into equity at a future priced round, usually with a discount and a valuation cap. Unlike a SAFE it carries interest and a maturity date.
• Customer interview — A structured conversation about what someone actually does today, designed to produce evidence rather than encouragement.
• Data room — A single organised, access-controlled place holding every document an investor or acquirer needs.
• Dead equity — A meaningful stake held by someone no longer contributing to the company.
• Default alive — The company reaches profitability on the money it already has, assuming current growth and spending. Default dead means it does not.
• Delegation — Handing over an outcome, with the authority to decide how it gets done.
• Dilution — When new shares are issued, existing shareholders own a smaller percentage of the company than before.
• Discount (on a SAFE or note) — A percentage reduction on the priced round's share price, rewarding the investor for coming in earlier.
• Discovery call — A first sales conversation focused on understanding the prospect's situation before proposing anything.
• Distribution — How your product reaches customers — the channels through which people discover and adopt it.
• Down round — Raising at a lower valuation than your previous round.
• Due diligence — The investigation a serious investor or acquirer runs before completing a deal — financial, legal, technical, commercial.
• EBITDA — Earnings before interest, tax, depreciation and amortisation — a rough proxy for operating profitability.
• Employee equity — Ownership granted to employees, usually as stock options from the option pool, vesting over time.
• Equity — Ownership in the company, usually held as shares.
• Feedback — Telling someone specifically what you observed and what effect it had, close to when it happened.
• Follow-on investment — A later investment by an existing investor in a subsequent round.
• Founder equity split — How ownership is divided between the founders at the start.
• Founder-led sales — The founder personally selling to the first customers, before any sales hire.
• Founders agreement — The document setting out equity split, vesting, roles, decision-making and what happens if a founder leaves.
• Freemium — A permanently free tier alongside paid plans, where the free tier drives adoption.
• Fund — A pool of committed capital with a fixed life — typically ten years — that a VC invests and then returns to its LPs.
• Fund returns / power law — Venture returns are dominated by a tiny number of enormous winners rather than by average performance.
• Fundraising — The process of raising money by selling equity — preparing, building an investor list, taking meetings, diligence, term sheet and close.
• Funnel — The sequence of steps from first contact to paying customer, with drop-off measured at each step.
• General partner (GP) — The people who run a venture fund, make the investment decisions and sit on boards.
• Governance — The rules and structures by which decisions get made and the company is held accountable.
• Gross margin — Revenue minus the direct cost of delivering it, as a percentage of revenue.
• Growth loop — A cycle where the output of using the product feeds back into acquiring more users.
• Hiring — The process of defining a role, finding candidates, assessing them fairly and bringing someone into the company.
• ICP (Ideal Customer Profile) — A precise description of the customer who gets the most value from your product and is easiest to reach, sell and keep.
• Income statement (P&L) — A statement of revenue, costs and profit over a period. Revenue − COGS = gross profit; gross profit − OpEx = operating profit.
• Incorporation — Legally creating the company as an entity separate from its founders.
• Incubator — A programme that helps build a company from close to nothing, often providing space, services and sometimes a founding team.
• Investment bank — A firm that advises on and executes large financial transactions — mergers, acquisitions, IPOs and large debt or equity raises.
• Investment committee — The group inside a fund that formally approves an investment, usually the partners.
• Investment thesis — The specific kinds of company a fund has told its LPs it will invest in — sector, stage, geography, cheque size.
• Investor update — A short regular email to investors covering metrics, progress, problems and specific asks.
• IP assignment — A signed agreement transferring ownership of work product to the company.
• IPO (Initial Public Offering) — Selling shares to the public for the first time and becoming a listed company.
• Jobs To Be Done (JTBD) — The framing that people hire a product to make progress on a specific job in a specific situation.
• KPI — A number tracked continuously because it indicates the health of the business.
• Lead — Someone who might become a customer but has not yet been qualified.
• Legal structure — The legal form of the business — sole trader, partnership, limited company, corporation.
• Limited partner (LP) — The investors IN a venture fund — pension funds, endowments, family offices, wealthy individuals.
• Liquidation preference — The right of preferred shareholders to get their money back first when the company is sold, before common shareholders get anything.
• LOI (Letter of Intent) — A mostly non-binding document setting out the proposed terms of an acquisition before full diligence.
• LTV (Lifetime Value) — The total gross profit you expect from one customer over the whole relationship.
• M&A (Mergers & Acquisitions) — One company buying or combining with another.
• Management — Getting work done through other people — setting expectations, removing obstacles, giving feedback and holding accountability.
• Market sizing — Estimating market size, ideally bottom-up from real units and prices rather than top-down from an industry report.
• Messaging — The specific words you use to express your positioning to a specific audience.
• MRR (Monthly Recurring Revenue) — Predictable revenue that repeats every month from subscriptions or contracts.
• MVP (Minimum Viable Product) — The smallest thing you can build that lets real users get real value and teaches you whether the idea works.
• Net burn — Monthly cash out minus monthly cash in. The real rate at which your bank balance falls.
• Net revenue retention (NRR) — Revenue this period from last period's customers, including upgrades and downgrades, as a percentage.
• North star metric — The single measure that best captures the value customers get from your product.
• OKRs — Objectives (what you want) paired with Key Results (the measurable evidence you got it).
• Onboarding — The process of getting a new customer or a new employee productive.
• Operating expenses (OpEx) — The costs of running the business that do not scale directly with each sale — salaries, rent, software, marketing, legal.
• Operations — The systems and processes that let a company run repeatably — documentation, workflows, vendors, support, security and internal communication.
• Option pool — Shares set aside to grant to future employees.
• Participating preferred — Preferred shares that get their money back first AND then also share in what is left as if they were common shares.
• Payback period — How long a customer takes to repay what you spent acquiring them.
• Payroll — The system that pays employees and handles the tax and contributions withheld on their behalf.
• Performance management — The ongoing process of setting expectations, giving feedback and addressing whether someone is meeting the standard of their role.
• Persona — A short profile of a representative user — their role, goals, constraints and what they currently do instead.
• Pitch deck — A short presentation covering problem, solution, product, market, traction, model, competition, go-to-market, team and the ask.
• Positioning — The place your product occupies in a customer's mind relative to the alternatives they are already considering.
• Post-money valuation — Pre-money plus the new money. The value of the company immediately after the round closes.
• Pre-money valuation — What the company is agreed to be worth immediately BEFORE the new investment lands.
• Pre-seed — The earliest institutional money — usually before meaningful revenue, funding the search for product-market fit.
• Preferred stock — The share class investors typically receive, carrying rights common shares do not — liquidation preference, anti-dilution and often a board seat.
• Priced round — A funding round where the share price is actually agreed, shares are issued immediately and a valuation is set.
• Pricing — What you charge, how you charge it, and how the tiers are structured.
• Pro-rata rights — An investor's right to invest again in future rounds to maintain their existing ownership percentage.
• Product-led growth (PLG) — Growth driven by people using the product itself — free tiers, trials, sharing — rather than by a sales team.
• Product-market fit (PMF) — The point at which you have built something a specific group of people genuinely want, evidenced by their behaviour rather than their compliments.
• Profitability — Making more than you spend over a period.
• Proof of concept (PoC) — A narrow build proving that something is technically possible.
• Prospecting — Finding and contacting people who match your ICP.
• Prototype — A non-production mock-up used to test a design or an interaction, usually not built on real infrastructure.
• Qualified lead — A lead confirmed to have the problem, the budget and the authority to act.
• Referral — A new customer arriving because an existing one recommended you.
• Reserves — Money a VC fund holds back from its total to support existing portfolio companies in later rounds.
• Retention — The share of customers still active after a given period. The inverse of churn, and usually the more useful way round.
• Revenue — The total money earned from customers before any costs are taken out.
• Runway — How many months your company can keep operating before it runs out of money, at its current rate of spending.
• SAFE — Simple Agreement for Future Equity — an investor gives money now in exchange for shares later, when a priced round happens. It is not a loan and has no interest or maturity date.
• Sales cycle — The time from first contact to signed contract.
• Sales pipeline — All your live opportunities, organised by stage, with a value and an expected close date.
• SAM (Serviceable Addressable Market) — The portion of TAM you could actually serve given your product, geography and business model.
• Scalability — The ability to serve many more customers without costs rising proportionally.
• Seed round — The round that funds finding product-market fit and the first repeatable go-to-market.
• Segmentation — Dividing a market into groups with meaningfully different needs and buying behaviour.
• Series A — The round that funds scaling a business model that already works.
• Setting expectations — Being explicit at the start about what success in a role looks like: the outcomes, the standard, the timeframe and how it will be judged.
• Shareholders agreement — The contract between shareholders covering transfers, decisions requiring consent, and exit rights.
• Small business — A company built to be profitable and sustainable at a size the owner chooses, rather than to grow as fast as possible.
• SOM (Serviceable Obtainable Market) — What you can realistically win in the next few years with your actual resources.
• SOP (Standard Operating Procedure) — A written, repeatable description of how a recurring task is done.
• Startup — A new company built to grow fast by finding a repeatable, scalable business model. The defining feature is the search for scale, not the age of the company or whether it uses technology.
• Stock options — The right to buy shares later at a price fixed today (the strike price).
• Strike price — The fixed price at which an option holder can buy a share.
• TAM (Total Addressable Market) — The total annual revenue available if you had 100% of a market with no competition.
• Term sheet — A short, mostly non-binding document setting out the main terms of an investment before the full legal documents are drafted.
• Traction — Evidence that people want what you built — revenue, usage, retention, growth rate.
• Unit economics — The profit or loss on a single customer, once you strip out fixed costs.
• Valuation — The agreed price of the whole company, used to work out what percentage an investment buys.
• Valuation cap — The maximum valuation at which a SAFE or note converts, regardless of what the priced round is actually done at.
• Value proposition — The concrete benefit a specific customer gets, and why it is better than their alternative.
• Value-based pricing — Setting price from the economic value the customer receives, rather than from your costs or a competitor's list price.
• Vanity metric — A number that rises reliably and changes no decision.
• Venture capital (VC) — Professional investors who manage a fund of other people's money and invest it in high-growth startups in exchange for equity.
• Venture debt — A loan made to a venture-backed startup, usually alongside or after an equity round.
• Vesting — Earning your shares over time rather than owning them all immediately.
• Viral coefficient (k) — The average number of new users each existing user brings in.
• Willingness to pay — Evidence that someone will part with money, as distinct from saying they like the idea.