Startup Glossary for Founders

Find concise definitions for customer research, product development, marketing, finance, fundraising, equity and company operations. Linked term names open a related SparkLaunch guide; one guide may cover several terms.

Use your browser’s Find command (Ctrl+F or Command+F) to search a term or acronym. Metric definitions should state the period, population and included costs. Legal and tax entries are US-focused where indicated; applicable rules and signed documents determine the details.

Numbers

• 83(b) election: A US tax election to recognize qualifying restricted-property compensation at transfer rather than vesting; generally due within 30 days.

• 409A valuation: An estimate of private-company common-stock fair market value used when setting US stock-option exercise prices.

A

• A/B test: An experiment that compares two versions using randomly assigned groups and a defined outcome.

• Accelerator: A time-limited startup program offering support, connections and sometimes investment; participation terms vary.

• Accredited investor: An investor who meets applicable securities-law criteria for certain private offerings; eligibility depends on jurisdiction.

• Acquihire: An acquisition made mainly to bring a company’s team into the buyer’s organization.

• Acquisition: A company or asset purchase; in marketing, the process of gaining customers.

• Activation: The point when a new user completes a defined action associated with receiving product value.

• Active user: A user who performs a specified meaningful action within a stated period, such as a day or month.

• ACV (annual contract value): The annualized value of a customer contract; state how you treat one-time fees and variable charges.

• Advisor equity: Ownership compensation for an advisor, typically subject to a written scope and vesting terms.

• Angel investor: An individual investing personal capital in young companies, often through equity or convertible instruments.

• Anti-dilution protection: A contractual adjustment to preferred-stock conversion terms after specified lower-priced share issuances; it does not prevent all dilution.

• API (application programming interface): A defined way for software systems to exchange requests, data or functions.

• ARPA / ARPU: Average revenue per account or user for a stated period; identify which population you divide by.

• ARR (annual recurring revenue): The annualized value of recurring revenue at a point in time; it excludes one-time fees under common definitions.

• Attribution: Assigning credit for a customer action to marketing or sales interactions under a stated model.

• Authorized shares: The maximum shares a corporation may issue under its governing documents.

B

• B2B (business to business): Selling products or services to other businesses.

• B2B2C: Reaching consumers through another business that distributes or incorporates your product.

• B2C (business to consumer): Selling products or services to individual consumers.

• Backlog: A prioritized list of work that a product or engineering team may undertake.

• Balance sheet: A financial statement showing assets, liabilities and equity at a particular date.

• Beachhead market: A narrow initial customer group chosen to establish a repeatable way to win and serve customers.

• Beta: A testing stage in which selected or public users try a product before a broader release.

• Board observer: A person permitted to attend board meetings under agreed terms, generally without a director’s vote.

• Board of directors: The group responsible for corporate oversight and key decisions under the company’s governing documents and law.

• Board pack: The financials, metrics and decision materials circulated ahead of a board meeting.

• Bookings: The value of customer commitments signed during a period; bookings differ from recognized revenue and collected cash.

• Bootstrapping: Funding a business mainly through founder resources and customer receipts rather than external equity investment.

• Bottom-up market sizing: Estimating an opportunity from countable customers or units multiplied by a defensible price or spend.

• Brand identity: The names, visual elements and style that make a business recognizable.

• Break-even: The point at which revenue covers the costs included in the calculation.

• Bridge round: Financing intended to carry a company to a later financing, sale or operating milestone.

• Burn multiple: Net cash burn divided by net new ARR for the same period; unhelpful when net new ARR is zero or negative.

• Burn rate: The rate at which a business spends cash; specify gross spending or net cash outflow.

• Business model: How a company creates customer value, earns revenue and pays the costs of delivering it.

• Buyer: The person or organization that authorizes or pays for a purchase; the buyer may differ from the user.

C

• CAC (customer acquisition cost): Acquisition spending divided by new customers acquired, with the included costs and time window defined.

• CAC payback: The time needed for customer gross profit to recover acquisition cost under stated assumptions.

• Cap table (capitalization table): A record of company ownership and securities, including shares, options and convertible instruments.

• Capital efficiency: The amount of business progress produced for the capital consumed; name the progress measure being compared.

• Carried interest: A fund manager’s agreed share of investment profits under the fund’s distribution rules.

• Cash flow: Cash moving into and out of the business during a period; accounting profit can differ.

• Champion: A person inside a prospective customer who actively supports adopting your product.

• Channel: A route through which customers discover, buy or receive a product.

• Churn: Loss of customers or recurring revenue over a stated period; specify the population and calculation.

• Cliff: The initial vesting period that must pass before the first portion of an equity grant vests.

• Closing: Completion of a financing or transaction after the required conditions, documents and funds are in place.

• Co-founder: A person who helps establish and build a business as part of the founding team.

• Co-founder equity split: The agreed allocation of ownership among founders, including any vesting or repurchase conditions.

• COGS (cost of goods sold): The direct costs allocated to delivering recognized revenue under the company’s accounting policy.

• Cohort: A group sharing a starting event or characteristic, such as customers who signed up in the same month.

• Cohort retention: The share of an original customer or user group still paying or active at a later interval.

• Common stock: A share class often held by founders and employees, with rights set by company documents.

• Competitive advantage: A reason customers choose you or you can operate more effectively than alternatives.

• Competitive moat: An advantage that becomes difficult for competitors to reproduce or overcome over time.

• Concierge MVP: A test in which people manually deliver the proposed service to learn what customers need.

• Contribution margin: Revenue minus the variable costs included in a stated definition; it differs from company-wide profit.

• Conversion rate: The percentage of an eligible starting group that completes a specified action within a defined window.

• Convertible note: Debt that can convert into equity under agreed conditions, commonly carrying interest and a maturity date.

• Copyright: Legal protection for qualifying original expression, such as text, artwork and software code.

• CRM (customer relationship management): A system for recording contacts, interactions, opportunities and follow-up work.

• Cross-sell: Selling an additional product or service to an existing customer.

• Customer advisory board: A recurring group of customers that provides feedback on product direction and priorities.

• Customer concentration: The portion of revenue or activity dependent on a small number of customers.

• Customer discovery: Research into potential customers’ actual problems, behavior, buying process and current alternatives.

• Customer lifetime value (CLV / LTV): An estimate of value across a customer relationship; specify revenue or gross-profit basis and retention assumptions.

• Customer persona: A description of a target individual’s role, needs and behavior, ideally grounded in research.

• Customer success: Work that helps customers achieve intended outcomes and continue receiving value from a product.

D

• Data room: An organized collection of company records shared with authorized reviewers for diligence.

• DAU / WAU / MAU: Daily, weekly or monthly active users, counted using a consistent definition of meaningful activity.

• Default alive: A projection in which current growth and spending assumptions lead to self-sustaining operations before cash runs out.

• Default dead: A projection in which cash runs out before self-sustaining operations without financing or changes to the plan.

• Delaware C-corporation: A corporation formed in Delaware and generally taxed separately from its shareholders under US federal rules.

• Design partner: An early customer collaborating on product development through access, real usage and structured feedback.

• Dilution: A reduction in percentage ownership when additional shares or equity rights increase the ownership denominator.

• Discount (financing): A reduction in the conversion share price relative to a future financing price, under a SAFE or note’s terms.

• Distribution: The methods and relationships used to reach customers and deliver an offer.

• Down round: An equity financing with a lower share price than the prior comparable round.

• Drag-along right: A contractual mechanism requiring covered holders to participate in an approved sale when specified conditions are met.

• Due diligence: A structured review of a company’s records, claims, finances, operations and risks before a transaction.

E

• Early adopter: A customer willing to try an early product because the need or expected benefit outweighs its shortcomings.

• EBITDA: Earnings before interest, taxes, depreciation and amortization; it is not a measure of cash in the bank.

• Economic buyer: The person with authority over the budget and financial approval for a purchase.

• Economies of scale: Reductions in average cost as output grows, where the business’s cost structure allows them.

• EIN (employer identification number): A US federal tax identification number for a business or other entity.

• Employee stock option: A contractual right to buy company shares at an agreed exercise price under a plan and grant terms.

• Enterprise value: A measure of total operating-business value, commonly equity value plus debt minus cash, with stated adjustments.

• Equity: Ownership in a business; accounting equity also means assets minus liabilities.

• ESOP: An ambiguous acronym: US employee stock ownership plan; sometimes informally used for an employee option pool. Clarify which.

• Exit: A transaction that may allow investors or holders to realize value, such as an acquisition or public offering.

• Expansion revenue: Additional recurring revenue from existing customers through greater usage, more seats or additional products.

F

• First ten hires: The earliest employees whose skills and working habits strongly shape a young company’s capabilities.

• Founder story: An account of why the founders understand the problem and chose to build this business.

• Founder-market fit: The relevance of a founding team’s experience, access and insight to the market it is pursuing.

• Franchise tax: A jurisdiction’s tax for the privilege of maintaining or doing business through an entity; rules vary.

• Freemium: A pricing model with an ongoing free version and paid features, capacity or service.

• Fully diluted ownership: Ownership calculated with specified convertible securities, options and reserved shares included; state the assumptions.

• Fund size: The amount of capital committed to a fund, subject to its governing terms.

• Fundraising process: The organized work of selecting investors, pitching, handling diligence, negotiating and closing financing.

G

• GMV (gross merchandise value): The value of transactions passing through a marketplace under a stated policy; GMV is not the marketplace’s revenue.

• Go-to-market (GTM): A plan for reaching a defined customer, winning purchases and delivering the offer.

• GP (general partner): The managing partner or entity responsible for running an investment partnership.

• Gross burn: Total cash spending during a period before offsetting customer receipts.

• Gross margin: Gross profit divided by revenue, expressed as a percentage using consistent cost definitions.

• Gross profit: Revenue minus cost of goods sold or direct delivery costs under the stated accounting policy.

• Growth loop: A repeatable process in which one round of customer activity helps generate the next round.

• GRR (gross revenue retention): Starting recurring revenue less churn and contraction, divided by starting revenue; excludes expansion and new customers.

H

• Hypothesis: A specific assumption that can be tested against observable evidence.

I

• ICP (ideal customer profile): The characteristics of customers a business can serve well and reach economically.

• Incorporation: The legal creation of a corporation through the applicable jurisdiction’s formation process.

• Incubator: An organization supporting early businesses through resources, mentoring or workspace; duration and funding arrangements vary.

• Independent contractor: A worker or business engaged independently; legal classification depends on the actual relationship and applicable law.

• Investor objections: The concerns an investor needs resolved before proceeding with an investment.

• Investor pipeline: A tracked set of potential investors, relationship stages, next actions and financing fit.

• Investor update: A recurring report covering progress, key metrics, cash position, challenges and specific requests for help.

• IP (intellectual property): Rights relating to creations such as inventions, brand identifiers, original works and protected confidential information.

• IP assignment: An agreement transferring specified intellectual-property ownership from its creator or holder to another party.

• IPO (initial public offering): A company’s first public offering of shares; an offering does not guarantee an immediate sale opportunity for every holder.

• Iteration: A cycle of revising a product or approach based on what was learned.

J

• JTBD (jobs to be done): A way to describe the progress a customer seeks in a particular situation, including existing alternatives.

K

• KPI (key performance indicator): A chosen measure used to assess progress toward a business objective.

L

• Landing page: A focused web page that explains an offer and asks visitors to take a specific next step.

• Lead: A person or organization that may become a customer or investor; qualification criteria should be explicit.

• Lead investor: An investor taking a central role in organizing or negotiating a round, often making a substantial commitment.

• Leading indicator: A measure expected to signal a later outcome; the relationship needs to be tested.

• Leading question: A question whose wording nudges a respondent toward a preferred answer.

• Letter of intent (LOI): A document recording proposed terms or intent; binding obligations depend on its wording and applicable law.

• Liquidation preference: Preferred holders’ contractual priority for specified proceeds before common holders in covered events.

• Liquidity: The ability to turn an asset into cash; private startup shares can be difficult to sell.

• LLC (limited liability company): A legal entity with membership interests and flexible governance; taxation and liability treatment depend on applicable rules.

• Logo churn: Customers lost during a period divided by customers at its start, under the chosen definition.

• LP (limited partner): An investor committing capital to a fund, generally without managing its daily investment decisions.

• LTV:CAC ratio: Estimated customer lifetime value divided by acquisition cost; interpretation depends on margin, retention and timing assumptions.

M

• M&A (mergers and acquisitions): Transactions that combine businesses or transfer ownership of companies or assets.

• Management fee: A fee paid to a fund manager under the fund agreement, separate from carried interest.

• Market segment: A distinct group of potential customers sharing relevant needs or buying characteristics.

• Market timing: The conditions that make customers more ready, or the product more feasible, now than before.

• Marketplace: A business connecting buyers and sellers and supporting their transactions.

• MFN (most-favored-nation clause): A right to adopt specified more favorable terms granted later, subject to the clause’s scope and conditions.

• Milestone: A defined result that reduces uncertainty or demonstrates progress, with a clear completion criterion.

• Moat: See competitive moat: a durable advantage that competitors have difficulty overcoming.

• MQL (marketing-qualified lead): A lead that meets a company’s defined marketing criteria for further sales attention.

• MRR (monthly recurring revenue): The monthly normalized value of recurring customer charges; separate it from one-time fees and cash collections.

• MVP (minimum viable product): A limited product or service sufficient to test a critical assumption with real customers.

N

• NDA (non-disclosure agreement): An agreement governing the handling and permitted disclosure of specified confidential information.

• Negative churn: A situation where expansion from existing customers exceeds recurring revenue lost to churn and contraction.

• Net burn: Cash outflow after operating cash inflows during a period; define exclusions such as financing proceeds.

• Network effect: A change in a product’s value to participants as more people or organizations use it.

• North Star metric: A chosen measure representing customer value that helps coordinate product and business decisions.

• NPS (Net Promoter Score): The percentage of 9–10 recommendation ratings minus 0–6 ratings on a 0–10 scale; a survey measure.

• NRR (net revenue retention): Starting recurring revenue plus expansion minus contraction and churn, divided by starting revenue; excludes new customers.

O

• OKRs (objectives and key results): A goal-setting method pairing an intended outcome with measurable results used to assess progress.

• Onboarding: The steps that help a new customer or user become ready to receive product value.

• Operating expenses (OpEx): Costs of running the business, such as sales, administration and development, under the company’s accounting policy.

• Option exercise: Using an option to purchase shares at the exercise price, subject to the grant’s conditions.

• Option pool: Shares reserved for future equity awards under a company plan; its size affects fully diluted ownership.

• Organic growth: Growth from unpaid discovery, referrals or product use, though producing it can still require spending.

• Outbound sales: Sales activity initiated by the seller, such as contacting qualified prospective buyers.

P

• Painkiller / vitamin: Informal labels for an urgent customer need versus a less pressing improvement; verify urgency through behavior.

• Participating preferred: Preferred stock that may receive a liquidation preference and share in remaining proceeds, subject to its terms.

• Partner meeting: A venture firm meeting in which partners discuss an opportunity; attending one does not guarantee investment approval.

• Patent: A time-limited legal right to exclude certain uses of a qualifying invention within the granting jurisdiction.

• Pay-to-play: A financing provision linking specified investor rights to participation in a later financing.

• Pilot: A bounded test with a prospective customer to evaluate an offer under agreed conditions.

• Pitch deck: A short presentation explaining the business, customer evidence, team, economics and financing request.

• Pivot: A meaningful change to a business assumption, such as the target customer, offer or revenue model.

• Positioning: How a product is framed for a target customer relative to alternatives and a specific need.

• Post-money valuation: A company’s negotiated value after a financing; the capitalization assumptions and transaction structure matter.

• Pre-money valuation: A company’s negotiated value before the new investment in a financing.

• Pre-seed: An early financing label often used for work on the problem, team or first product; stages have no fixed size.

• Preferred stock: Shares with negotiated economic or governance rights that differ from common shares.

• Pricing and packaging: The features, limits and services included in each offer and the price charged for it.

• Pricing model: The charging structure, such as per seat, per transaction, subscription or usage.

• Privacy policy: A disclosure describing how an organization handles personal data; it should match its actual practices.

• Pro-rata rights: Contractual rights to participate in later financings, often to maintain ownership, subject to eligibility and limits.

• Problem validation: Evidence that a target customer has a meaningful problem, including current behavior and attempts to solve it.

• Product roadmap: A plan describing intended product outcomes or work over time, with priorities and assumptions.

• Product-led growth (PLG): A growth approach in which experiencing the product drives adoption, purchase or expansion.

• Product-market fit (PMF): Evidence that a defined market repeatedly chooses, uses and values the product enough to sustain demand.

• Proof of concept (PoC): A limited demonstration that a proposed technical approach is feasible; it does not establish customer demand.

• Protective provisions: Consent rights allowing specified holders to approve or block defined company actions.

Q

• Qualified lead: A prospect meeting stated criteria for fit, need, authority or readiness to purchase.

R

• Retention: The share of an original group that remains active, paying or generating revenue after a specified interval.

• Revenue: Income recognized from delivering goods or services under the applicable accounting policy; it differs from bookings and cash.

• Revenue recognition: The accounting rules and policies that determine when and how much customer revenue is recorded.

• ROFR (right of first refusal): A right to buy offered shares or assets on specified terms before a proposed third-party transfer proceeds.

• Round sizing: Determining the financing needed to reach defined milestones with realistic spending and timing assumptions.

• Run rate: Annualizing a current period’s results; it is a snapshot calculation rather than a guaranteed forecast.

• Runway: Estimated time until available cash runs out under a spending and receipts forecast.

S

• SaaS (software as a service): Software delivered as an ongoing hosted service, often charged by subscription or usage.

• SAFE (simple agreement for future equity): A contract providing rights to future equity or other proceeds under specified events; standard YC SAFEs are not debt.

• Sales cycle: The elapsed time between a defined sales starting point and a purchase or signed contract.

• Sales-led growth (SLG): A growth approach in which salespeople guide customers through evaluation, negotiation and purchase.

• SAM (serviceable available market): The portion of total market demand that fits your offer, geography and delivery capabilities.

• Scalability: The ability to handle more customers or work without a proportional increase in required resources.

• Secondary sale: A sale of existing holders’ shares, with proceeds going to sellers rather than the company.

• Seed round: Early financing often used to establish product demand and a repeatable business approach; definitions vary.

• Series A: A named equity financing stage often associated with building on early product and commercial evidence.

• Series B and later: Subsequent financing rounds often used to expand a business; labels do not impose a fixed revenue or funding threshold.

• Service-level agreement (SLA): A commitment defining service performance, measurement and remedies when agreed standards are missed.

• Single / double-trigger acceleration: Faster vesting after one specified event, or after two required events, as defined in the equity agreement.

• Solocorn: An informal term for a one-person startup valued at $1 billion or more, typically built and operated with AI and automation.

• Solopreneur: A person who owns and runs a business alone, without co-founders or employees.

• Solution validation: Evidence that customers can use and will choose a particular solution to their problem.

• SOM (serviceable obtainable market): The share of the serviceable market you can plausibly win over a stated period with available resources.

• SQL (sales-qualified lead): A prospect meeting the sales team’s criteria for active pursuit; in software, SQL also means structured query language.

• Startup: A young business seeking a viable model, often with substantial uncertainty about demand, delivery or growth.

• Stock option strike price: The price per share paid to exercise an option, also called the exercise price.

• Switching costs: The time, expense, risk and effort involved in changing from one solution to another.

T

• Tag-along right: A contractual right allowing covered minority holders to join a qualifying sale by other holders.

• Take rate: A platform’s retained revenue as a percentage of the transaction value defined for the calculation.

• TAM (total addressable market): Estimated total demand for a defined category of offer under stated customer, price and scope assumptions.

• Technical debt: Future maintenance or change costs created by earlier technical choices, including expedient compromises.

• Term sheet: A summary of proposed transaction terms; some clauses can bind even when investment terms are nonbinding.

• Terms of service: Contract terms governing use of a product or service, including responsibilities, restrictions and dispute provisions.

• Time to value: The elapsed time from a defined customer starting point to a meaningful product outcome.

• Top-down market sizing: Estimating an opportunity from a broad market total and narrowing it with explicit segment assumptions.

• Traction: Observed evidence of demand or progress, such as repeated usage, paying customers or renewals; label each type accurately.

• Trademark: A sign, name or other identifier that distinguishes the source of goods or services.

U

• Unit economics: The revenue, acquisition costs and service costs associated with a defined unit, such as a customer or order.

• Upsell: Moving an existing customer to a larger or higher-priced version of an offer.

• Usage-based pricing: Charging according to a defined amount of product consumption, such as requests, minutes or transactions.

• User: The person who uses a product, who may differ from the buyer or budget approver.

V

• Valuation cap: A ceiling used in a SAFE or note’s conversion-price calculation; it is not a guarantee of the company’s current value.

• Value proposition: A clear statement of the benefit an offer provides to a specified customer.

• Value-based pricing: Setting a price with reference to the customer’s perceived economic or practical benefit.

• Vanity metric: A number that looks impressive but provides weak evidence of customer value or business progress.

• Venture capital (VC): Investment in companies pursuing outcomes large enough to fit an investor’s strategy and risk profile.

• Venture debt: Debt financing for venture-backed companies, with repayment obligations and lender-specific conditions.

• Venture fund math: How ownership, dilution, fund size and portfolio outcomes affect the returns a venture investor needs.

• Vesting: The schedule or conditions under which equity rights become earned or cease being subject to specified forfeiture or repurchase.

• Vibe coding: Building software with substantial AI-generated code; a working prototype still needs validation, review and operating discipline.

• Viral coefficient: An estimate of how many additional users an existing user brings in through a defined invitation or referral process.

W

• Waitlist: A list of people requesting future access; joining alone does not establish purchase intent.

• Warm introduction: A connection made through a shared contact, ideally with permission and a reason the match is relevant.

• Willingness to pay: What a customer is prepared to spend for a specific offer, best tested with realistic buying decisions.

• Win rate: The share of defined sales opportunities won during a stated period or cohort.

• Working capital: Current assets minus current liabilities; it indicates resources tied to near-term operating obligations.

Z

• Zero-to-one: Informal shorthand for creating and validating an initial product or business rather than expanding an established model.

• Zombie startup: Informal shorthand for a company still operating but with weak growth, financing prospects or a path to sustainable operations.