Glossary
Business terms glossary for founders
40 terms, defined in one sentence and then explained properly — what each one means, why it matters when you are the one running the business, and a realistic example. No jargon defended with more jargon.
Fundraising & Finance
The language of money in and money out — what investors say, and what your bank balance says.
- Break-even pointThe break-even point is the level of sales at which your revenue exactly covers your costs — no profit, no loss.
- Burn rateBurn rate is how much cash your business spends beyond what it brings in, usually measured per month.
- Cap tableA cap table is the running record of who owns what in your company — every share, option and convertible instrument, and the percentage each one represents.
- Convertible noteA convertible note is a short-term loan that converts into equity at your next priced funding round instead of being repaid in cash.
- Equity dilutionDilution is the reduction in your ownership percentage that happens when a company issues new shares to investors or employees.
- Pre-money vs post-money valuationPre-money valuation is what your company is judged to be worth before an investment lands; post-money valuation is that number plus the money invested.
- RunwayRunway is the number of months your business can keep operating at its current net burn before the cash runs out.
- SAFE noteA SAFE — Simple Agreement for Future Equity — lets an investor give you money now in exchange for shares later, when a priced funding round happens.
- Term sheetA term sheet is a short, mostly non-binding document that outlines the price and conditions of a proposed investment before the full legal paperwork is drafted.
- Valuation capA valuation cap is the maximum company valuation at which an early investor's SAFE or convertible note will convert into shares, regardless of how high the actual round price ends up.
- Vesting scheduleA vesting schedule is the timeline over which someone actually earns their equity, so that shares granted on day one only become truly theirs over months or years of continued involvement.
- Working capitalWorking capital is what you would have left if you turned everything the business owns in the short term into cash and paid everything it owes in the short term.
Growth & Marketing Metrics
The numbers that tell you whether attention is turning into customers, and at what cost.
- ARR (annual recurring revenue)ARR is your recurring revenue expressed on an annual basis — normally MRR multiplied by twelve.
- CAC (customer acquisition cost)CAC is the average amount you spend to acquire one new customer, across all your sales and marketing effort.
- Churn rateChurn rate is the percentage of customers — or of recurring revenue — that you lose over a given period.
- Conversion rateConversion rate is the percentage of people who take a specific action you wanted, out of everyone who had the chance to take it.
- FunnelA funnel is the sequence of steps someone passes through on the way from first hearing about you to becoming a paying customer.
- LTV (lifetime value)LTV is the total gross profit you expect one customer to generate over the whole time they stay with you.
- MRR (monthly recurring revenue)MRR is the total predictable revenue your business expects to collect every month from active subscriptions or retainers.
- Organic vs paid trafficOrganic traffic is visitors who find you without you paying per visit — search, word of mouth, referrals — while paid traffic is visitors you buy through advertising.
Product & Strategy
How you decide what to build, who it is for, and why it keeps working once it does.
- BootstrappingBootstrapping is building a business using its own revenue and your own resources rather than outside investment.
- MoatA moat is a structural advantage that makes your business hard to copy, so competitors cannot simply replicate what you do and undercut you.
- MVP (minimum viable product)An MVP is the smallest version of your product that can honestly test whether people want what you think they want.
- North star metricA north star metric is the single number that best captures the value customers actually get from your product, chosen to guide day-to-day decisions.
- PivotA pivot is a deliberate change to a core part of your strategy — the customer, the problem, the product or the business model — while keeping what you have learned.
- Product-market fitProduct-market fit is the point at which a definable group of people clearly want what you have built and keep using and paying for it without persuasion.
- TAM / SAM / SOMTAM, SAM and SOM are three nested estimates of market size: everyone who could ever buy, the slice you can actually reach, and the portion you could realistically win.
Operations & Legal
The structures and paperwork that keep a business a business rather than a hobby with invoices.
- EIN (employer identification number)An EIN is a nine-digit federal tax identification number issued by the IRS that identifies your business the way a Social Security number identifies a person.
- Fiduciary dutyA fiduciary duty is a legal obligation to act in someone else's best interests rather than your own when you hold power over their money or affairs.
- Gross marginGross margin is the percentage of your revenue left after paying the direct costs of delivering what you sold.
- IP assignmentAn IP assignment is a written agreement transferring ownership of intellectual property — code, designs, copy, inventions — from the person who created it to the company.
- LLC vs S-corp vs C-corpThese are three ways to structure a US business that differ mainly in how profits are taxed and who is allowed to own shares.
- NDA (non-disclosure agreement)An NDA is a contract in which one or both parties agree to keep specified information confidential and not use it for their own benefit.
- Net marginNet margin is the percentage of revenue left as profit after every cost — direct costs, overheads, interest and tax — has been paid.
- Operating agreementAn operating agreement is the internal contract that sets out how an LLC is owned, governed and unwound.
Sales & Customers
How deals move, who is actually worth chasing, and whether customers stay once they arrive.
- Churn (customer)Customer churn is the loss of a customer — the moment someone who was buying from you stops.
- PipelineA pipeline is the organised view of every live sales opportunity, sorted by what stage it has reached on the way to a decision.
- Qualified leadA qualified lead is a potential customer who has been checked against clear criteria and genuinely could and might buy from you.
- Retention rateRetention rate is the percentage of customers who are still with you at the end of a period, out of those you had at the start.
- UpsellAn upsell is persuading an existing customer to move to a higher-value version of what they already buy from you.