Startup Terminology: A Practical Glossary for Founders

Predictable subscription revenue earned each month.

Annualized recurring revenue (normalized to a yearly basis).

ARR = MRR × 12

Average revenue per customer (monthly or annual).

ARPU = Total Revenue ÷ Total Customers

Rate at which customers (or revenue) are lost over time.

Customer Churn = Customers Lost ÷ Customers at Start

Total sales + marketing cost to acquire one customer.

CAC = Sales & Marketing Spend ÷ New Customers

Total revenue expected from a customer over their lifetime.

Revenue retained from existing customers after churn + expansion.

Revenue remaining after direct delivery costs (hosting, support, infra).

Gross Margin = (Revenue − Cost of Service) ÷ Revenue

How much cash the business spends per month beyond revenue (negative cash flow).

How long the company can operate at the current burn rate.

Runway = Cash on Hand ÷ Monthly Burn

Money moving in and out of the business.

The estimated worth of the company, often negotiated in funding rounds.

Return received as a percentage of the invested amount.

Built using founder resources and/or operating revenue instead of external investment.

An individual who invests early-stage capital, often before institutional funding.

The first formal outside funding round, typically used for MVP and early traction.

Successive funding rounds aligned to growth stages (early scale, expansion, late scale).

An investment instrument that converts to equity later (often before a priced round).

A loan intended to convert into equity at a later valuation.

Institutional investment for high-growth startups, typically in exchange for equity.

A non-binding document outlining the major terms of an investment.

The investor's investigation into the business (financial, legal, market, and operational).

The event where founders/investors realize returns (acquisition or IPO are common).

The smallest product that delivers value and enables learning from real users.

A demonstration that an idea is feasible (technical and/or commercial).

Evidence the market strongly wants the product and will pay for it (and keep using it).

A significant change in direction based on learning (market, product, pricing, or channel).

Innovation that materially changes an existing market (cost, access, audience, expectations).

A business that sells products or services to other businesses.

A business that sells directly to individual consumers.

A sales strategy where the brand sells directly to customers without retailers.

Software delivered over the internet, typically sold via subscription.

How the company creates, delivers, and captures value.

Market sizing framework: TAM (total), SAM (serviceable), SOM (obtainable).

Ownership interest in the company, represented by shares or a percentage.

The process of earning equity over time (common for employees and founders).

A group providing governance and oversight, often including investors and advisors.

Programs that support startups with mentorship and resources (often for equity).

A short presentation used to explain the business to investors, partners, or customers.

A legal agreement to protect confidential information from being shared.

The dangerous phase after launch when costs are high and revenue is not yet sufficient.

The earliest stage of a venture (high risk, high uncertainty, potential upside).

A startup with a valuation over $1B.

A startup still operating but not meaningfully growing.