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Accredited Investor
An accredited investor is a high-net-worth individual or entity that meets certain federal requirements and can invest in securities that aren’t registered with the Securities and Exchange Commission (SEC), like private company stock. If you want to angel invest in startups, you generally need to be an accredited investor.
Read more →Amortization
Amortization is the process of expensing the cost of an asset or loan over time.
Read more →Angel Investor
An angel investor or seed investor is an individual who uses their own money to invest in startup companies.
Read more →Annual Contract Value (ACV)
Your annual contract value (ACV) tells you the annual value of each customer or account regardless of the contract’s length. You can use your ACV to estimate how much you’ll earn from each new customer and how many customers you’ll need to reach your revenue goals.
Read more →Annual Recurring Revenue (ARR)
Annual recurring revenue (ARR) tracks the expected revenue from products and services that are sold with contracts that last at least 12 months. Software as a service (SaaS) companies, and other companies that offer subscriptions, commonly track their ARR.
Read more →Average Revenue Per User (ARPU)
The average revenue per user (ARPU), also called average revenue per unit, is often used by tech, media, and telecom companies to track their revenue per customer.
Read more →Billings
Software as a service (SaaS) companies often track their current and future income in three ways: bookings, billings, and revenue. Billings are the money that you’ve invoiced for and will be paid soon.
Read more →Board Director
Your startups’ board members, the board directors, have a fiduciary duty to the company’s shareholders and they make important decisions, such as whether to sell the company. Generally, founders will be the first board directors and lead investors may get board seats during each funding round.
Read more →Bookings
You book a client when they sign a contract with your company, and your bookings are the total value of the signed contracts.
Read more →Burn Multiple
Your burn multiple is your net cash burned divided by your net new ARR in a given period. It’s a measure of capital efficiency, and you’d like to keep it as low as possible.
Read more →Burn Rate
Your company’s burn rate describes how quickly it’s losing (burning) money. Many venture-backed startups need time and money to build their customer base and improve their products or services before becoming profitable.
Read more →C Corporation (C Corp)
A C corporation, or C corp, is a type of legal business entity. C corps are the default corporation type and a popular choice for startup founders. Other options include S corporations and limited liability companies (LLCs).
Read more →Cap Table
A capitalization table (cap table) tells you who owns what percentage of a company. It often starts as a spreadsheet, but there are programs that can help you create and manage your cap table.
Read more →Capital Expenditures (CapEx)
Capital expenditures (CapEx) are when you spend money to buy, maintain, or improve assets that you plan to use for longer than a year. These can include tangible assets, such as equipment and property, and intangible assets, like patents or licenses.
Read more →Churn
Customer churn refers to how many customers you’ve lost during a period, while revenue churn can refer to the annual or monthly recurring revenue change from losing customers. Depending on your business, churn could refer to someone who stops using your service, uninstalls your app, downgrades their plan, or cancels a subscription.
Read more →Cohort Analysis
Cohort analysis involves segmented populations based on a shared characteristic, such as customers who signed up for a service during the same month, to better analyze and understand trends.
Read more →Contribution Margin
Contribution margin is a company’s or product’s line revenue minus variable expenses. Your contribution margins can be a factor in deciding which products or services to invest in and which to discontinue.
Read more →Convertible Note
A convertible note is a loan that can convert into equity during a conversion event, such as a funding round. They are an option for raising money from venture capitalists and angel investors. However, the simple agreement for future equity (SAFE) has become a popular alternative.
Read more →Cost Per Click (CPC)
Cost per click (CPC) advertising is when you pay based on how many people click on your ad. With CPC advertising, you can be certain that you’re not paying for ads that don’t result in someone visiting your website.
Read more →Cost of Goods Sold (COGS)
Cost of goods sold (COGS) — sometimes called cost of revenue (COR) or cost of sales (COS) — is the costs that are directly associated with making a company’s products or services.
Read more →Cross-Selling
Cross-selling is when you sell current customers an additional related product or service. A successful cross-selling strategy can increase the customer lifetime value (CLTV). Often, it costs less to cross-sell a customer than to acquire a new one.
Read more →Customer Acquisition Cost
This is how much it costs for you to secure a new customer. Customer acquisition costs — more commonly known as CACs — cover all of the marketing and sales expenses, including salaries, that are incurred as part of your lead generation activities.
Read more →Data Room
A data room is a secure location that’s set up to store and limit access to confidential and privileged information. They’re often used for mergers and acquisitions (M&A), initial public offerings (IPOs), audits, and venture capital (VC) financing deals.
Read more →Deferred Revenue
Deferred revenue, also called unearned revenue or customer deposits, is money that you received for products or services you haven’t delivered yet. With accrual-based accounting, you don’t recognize the revenue until you’ve fulfilled your side of the transaction.
Read more →Delaware Annual Report
A Delaware annual report is a report that businesses incorporated in Delaware must file by March 1 each year with the Delaware Secretary of State. When completing your annual report, you also have to pay a filing fee and Delaware Franchise Tax.
Read more →Delaware Franchise Tax
The Delaware Franchise Tax is a fee that businesses incorporated in Delaware need to pay. Franchise is not a reference to a business owned by a franchisee. Many startups and large corporations are incorporated as C corporations in Delaware and pay the Delaware Franchise Tax quarterly or annually.
Read more →Depreciation
Depreciation is how a company writes off the value of fixed assets over their useful life. It can apply to tangible assets, such as office equipment, computers, and buildings.
Read more →Doing Business As (DBA)
A doing business as (DBA or d/b/a) name is a pseudonym that you can use for your business. DBAs are also called trade names, fictitious names, or assumed names. You can register a DBA if you don’t want to use your personal name or legal business entity name with customers and clients.
Read more →Dollar-Based Net Expansion Rate (DBNER)
Dollar-based net expansion rate (DBNER) is a measure of how much revenue you earned from existing customers due to add-ons, upselling, and cross-selling.
Read more →Double-Trigger Acceleration
Double-trigger acceleration is when someone's stock or options can be vested ahead of schedule if there are two triggering events. As a founder, your unvested equity might be accelerated if you sell the company and you’re involuntarily fired.
Read more →EBITDA
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a financial metric that can help you understand your company’s cash flow from its core activities.
Read more →Entrepreneur in Residence (EIR)
An entrepreneur-in-residence (EIR) is typically a former startup founder who now works for a VC firm. The EIR helps the firm with due diligence on potential investments and may serve as an advisor or mentor to the VC fund’s portfolio companies.
Read more →Fair Market Value (FMV)
Fair market value (FMV) refers to the present value of a company’s common shares. With public companies, you can look up the FMV by checking the current stock price. But private companies may need to get a third-party appraisal and 409A valuation to determine their FMV.
Read more →Forecasts
A forecast is a data-backed estimate of your company’s future financial performance. It can be important for making educated investment decisions, creating realistic budgets, and avoiding a cash flow crunch.
Read more →Form D
Form D is a form you file with the Securities and Exchange Commission (SEC) if you want to offer and sell securities without registering the offering. The filing is one way to claim an exemption under Regulation D, which allows you to avoid the otherwise lengthy and costly registration process (i.e., going public).
Read more →Form S-1
The Form S-1 is the form that companies must fill out and file with the Securities and Exchange Commission (SEC) before an IPO. It’s also called the registration statement or simply the S-1.
Read more →Fractional CFO
A fractional CFO, also called a virtual or outsourced CFO, is an external professional who you can hire on an hourly or subscription basis. Outsourcing the work can help growing companies save time and money if they’re not ready to bring on a full-time CFO.
Read more →Free Cash Flow (FCF)
Free cash flow (FCF) is your net cash from operations, minus the money you spend on capital expenditures — long-term assets, such as property or equipment. Your FCF can be important for understanding your company’s financial health, because it’s also the money you’ll use to repay creditors, pay shareholders, or reinvest in your business.
Read more →Full-Time Employee (FTE)
The exact definition of a full-time employee (FTE) can vary, but someone who works at least 30 hours per work or 130 hours per month generally qualifies.
Read more →Generally Accepted Accounting Principles (GAAP)
Generally accepted accounting principles (GAAP) are a set of established accounting rules and standards. Private companies aren’t required to use GAAP, but as your company grows, getting closer to GAAP compliance is important.
Read more →Go-to-Market (GTM)
Your go-to-market (GTM) strategy is an in-depth and actionable plan for how you’ll launch a new product or service, or expand your current offering to a new market. Meta Title: What is Go to Market (GTM)?
Read more →Gross Margin
Your gross margin is how much you make, as a percentage, after you pay the cost directly associated with making your products or services. Gross margins tend to vary by industry, so a high or low gross margin isn’t necessarily good or bad. But software as a service (SaaS) companies tend to have low direct costs and high gross margins.
Read more →Gross Merchandise Value (GMV)
Gross merchandise value (GMV), or gross merchandise volume, is the total value of the products sold through an eCommerce store or platform during a specific period. It’s broadly used as a key performance indicator (KPI) to measure a business’s growth.
Read more →Gross Retention
Your gross retention, or gross dollar retention, measures the percentage of your revenue that you’re able to maintain from existing customers. It’s an especially important metric for software as a service (SaaS) companies, which rely on recurring revenue.
Read more →Key Performance Indicator (KPI)
Key performance indicators (KPIs) are the core metrics that you and your investors can measure to determine if your business is financially healthy and on track to meet its goals. Tracking KPIs can also give you insight into what’s driving or hindering your business.
Read more →Last Twelve Months (LTM)
The last twelve months (LTM) is also called trailing twelve months (TTM) or rolling twelve months. Investors may look at your LTM revenue, EBITDA, or annual recurring revenue (ARR) as the basis for a backward-looking valuation.
Read more →Limited Liability Company (LLC)
A limited liability company (LLC) is a type of business entity that’s popular for small business owners who want to create a legal separation between their business and personal assets. However, a C corporation is often a better option for startup founders.
Read more →Lock-Up Period
A lock-up period is the time following an initial public offering (IPO) when certain shareholders aren’t allowed to sell their shares. The restriction could apply to founders, employees, investors, the IPO’s underwriter, and other major shareholders, and it typically lasts 180 days.
Read more →Magic Number
The magic number measures software as a service (SaaS) companies’ sales efficiency by comparing the net new annual recurring revenue (ARR) for the quarter to the previous quarter's sales and marketing expenses. You can use the magic number to help decide whether you should be investing more in sales and marketing.
Read more →Minimum Viable Product (MVP)
A minimum viable product (MVP) is an early version of a product that you can release to see if you’ve found a product-market fit and to gather feedback. Rather than spending resources to build a product that customers don’t want or enjoy, you can release an MVP and then use the feedback to create the next version.
Read more →Month Over Month (MoM)
Month-over-month (MoM) measures, such as monthly changes in recurring revenue, are commonly used to analyze software as a service (SaaS) companies.
Read more →Monthly Recurring Revenue (MRR)
Monthly recurring revenue (MRR) is how much your business brings in from subscriptions during a single month.
Read more →Net Dollar Retention (NDR)
Net dollar retention (NDR), also called net revenue retention (NRR), measures the percentage of your revenue that you’re able to maintain from existing customers, inclusive of expansion revenue. Software as a service (SaaS) companies often track and report NDR because it can offer insight into revenue growth and customer satisfaction.
Read more →Net Profit
Net profit is also known as your bottom line since it appears at the very end of your profit and loss statement.
Read more →Net Promoter Score (NPS)
A Net Promoter Score (NPS) can help you track customer loyalty and satisfaction by telling you how likely your customers are to recommend your product or service to a friend.
Read more →Net profit margin
This is the percentage of how much profit is generated from every dollar in sales after all expenses associated with those revenues are paid off. In other words, net profit margin tells you what percentage of your overall revenue is true net income once all expenses are removed.
Read more →Officers
Officers are high-ranking employees of a corporation who are elected by the board of directors. Depending on where you incorporate, you could be required to have certain officers, such as a president or CEO, vice president, treasurer, and secretary.
Read more →Option Pool
An option pool, or employee stock option pool (ESOP), is a block of company stock that you set aside to use for hiring and retaining employees. Startups often rely on equity compensation, especially when making important hires early on.
Read more →Outsourced CFO
An outsourced CFO, also called a virtual or fractional CFO, is an external professional who you can hire on an hourly or subscription basis. Outsourcing the work can help growing companies save time and money before they’re ready to bring on a full-time CFO.
Read more →Outsourced Controller
An outsourced controller can help manage your company’s accounting and finances on an hourly or subscription basis. Outsourcing these services may make sense for early-stage startups that aren’t ready to hire a full-time controller.
Read more →Payback Period
The customer acquisition cost (CAC) payback period, also called time or months to recover CAC, is the amount of time it will take you to break even after signing a new customer.
Read more →Pitch Deck
A pitch deck is a set of slides that you’ll generally use to pitch investors. You can customize your pitch deck based on who you’re presenting to and your goals for the meeting, but it should contain an overview of your company, business plan, vision, and financials.
Read more →Post-Money Valuation
Your post-money valuation is the value of your company immediately after a funding round. Generally, it’s equal to your pre-money valuation plus the amount you raised, though the math can sometimes be complicated by the creation of an option pool.
Read more →Pre-Money Valuation
Your pre-money valuation is the value of your company before a funding round.
Read more →Pro Rata
Pro rata is Latin for “in proportion” or “proportionately.” With startup investing, an investor with pro-rata rights will have the option to invest in future funding rounds to maintain their portion of ownership.
Read more →Product Velocity
For software companies, product velocity may refer to how quickly you can release new products or features.
Read more →Qualified Small Business Stock (QSBS)
Qualified small business stock (QSBS), also called Section 1202 stock, gives founders and early startup investors an opportunity to exclude part or all of their profit from capital gains taxes when they sell their stock.
Read more →Quick Ratio
For software as a service (SaaS) companies, the quick ratio measures growth efficiency by comparing how much your monthly recurring revenue (MRR) increases and decreases. It takes expansion, churn, and downgrades into account.
Read more →Ramp Time
Ramp time is how long it will take for a new salesperson to complete onboarding and be fully prepared to reach their quota. Brand new and experienced salespeople alike may take several months to get to know your company and its customers.
Read more →Repeat Customer Rate
This KPI tracks how many customers bought something from you in the past, visited your online store again, and placed new orders.
Read more →Retention
Customer retention measures how many of your active subscribers remain customers over time.
Read more →Revenue Recognition
Revenue recognition refers to when and how your business accounts for the money it collects.
Read more →Right of First Refusal (ROFR)
The right of first refusal (ROFR) can give a company or VC investor priority to purchase shares that a shareholder—such as a founder or employee—wants to sell.
Read more →Roll-Up Vehicle (RUV)
A roll-up vehicle (RUV) is a type of special purpose vehicle (SPV) for founders and angel investors. Rather than having to collect and record each investment individually, the angels invest in the RUV, which then invests in your company.
Read more →Runway
Your runway is how long you’ll have until your business runs out of cash, typically in months. It’s computed by dividing your total cash balance by your current burn rate.
Read more →S Corporation (S Corp)
An S corporation, or S corp, is a corporation that elects to be treated as a pass-through entity. It’s a popular option for small business owners, but might not be a good fit for startups.
Read more →Sales Pipeline
A sales pipeline is a visual representation of how prospects move through your sales process. A detailed sales pipeline can help you identify blocks that are restricting the flow and show you how many prospects are at each stage.
Read more →Sales and Marketing Efficiency
Sales and marketing efficiency measures how much revenue you generate based on your sales and marketing expenses.
Read more →Serviceable Available Market (SAM)
A serviceable available market (SAM), or serviceable addressable market, is the portion of the total addressable market (TAM) that you can reach with your current business model.
Read more →Serviceable Obtainable Market (SOM)
A serviceable obtainable market (SOM) is the portion of the serviceable available market (SAM) that you can realistically capture. Your current offerings, pricing, and competitors could impact your SOM.
Read more →Simple Agreement for Future Equity (SAFE)
A simple agreement for future equity (SAFE) is a simple way to raise money from investors. Similar to a convertible note, a SAFE converts into equity during a future funding round or liquidity event.
Read more →Special Purpose Vehicle (SPV)
A special purpose vehicle (SPV) is a business entity, often a limited liability company (LLC) or limited partnership (LP), that’s created for a specific purpose, such as investing in a startup.
Read more →Venture Capital Associate
Associates at venture capital firms are junior members, one step above analyst, and one step below principal.
Read more →Venture Capital Partner
Partners at venture capital firms are the most senior members of the organization who may be able to propose and approve investments.
Read more →Venture Capital Principal
Principals at venture capital firms are senior employees who are more senior than associates and analysts. They’re more junior than partners but may be on a partner track.
Read more →Vesting Acceleration
Vesting acceleration is when someone's stock or options are vested ahead of the original schedule. Contracts may contain either a single-trigger or double-trigger vesting acceleration, a reference to the number of events that can lead to acceleration.
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