Intermediate legal
409A Valuation
A 409A is an independent appraisal of a private company's common stock fair market value, required by U.S. tax law before issuing stock options to employees.
Glossary
98 startup terms defined — from MVP to burn rate, cap table, and venture capital.
4
A
Intermediate product
A/B Testing
A/B testing splits traffic between two variants to measure which performs better. A guide to running valid experiments with statistical significance.
Beginner accounting
Accounts Receivable and Payable
Accounts receivable is money owed to your company by customers. Accounts payable is money your company owes to vendors and suppliers.
Intermediate exits
Acqui-hire
An acqui-hire is an acquisition where the buyer's primary goal is to hire the target company's team, not acquire its product.
Intermediate metrics
Activation Rate
The % of new users who reach your product's core value moment within a defined window. The most predictive early-stage metric for long-term retention.
Intermediate ai
Agentic Workflow
A multi-step AI process where a model autonomously plans, uses tools, and executes tasks without human input at each step.
Beginner ai
AI Agent
An AI agent is a system that uses an LLM to autonomously plan, make decisions, use tools, and take actions to complete a goal.
Intermediate ai
AI Alignment
The challenge of ensuring AI systems behave in ways that match human intentions, values, and goals.
Beginner ai
AI Hallucination
When an AI model generates confident-sounding but factually incorrect or fabricated information.
Beginner ai
AI Wrapper
An AI wrapper is a product built on top of a foundation model API with a custom UI, workflow, or niche focus, rather than novel AI model development.
Beginner fundraising
Angel Investor
An angel investor funds early-stage startups with personal capital for equity, typically before VCs participate. Many are former founders or operators.
Beginner finance
Annual Contract Value (ACV)
ACV is the average annualized revenue per customer contract, excluding one-time fees. A core B2B SaaS metric for measuring deal size and forecasting revenue.
Beginner metrics
ARR - Annual Recurring Revenue
ARR is the annualized value of all active subscriptions. It is the primary top-line metric for SaaS companies and a key signal for fundraising readiness.
B
Beginner strategy
Bootstrapping
Bootstrapping means building a startup using personal savings and revenue, without external investors. Founders retain full ownership and control.
Intermediate fundraising
Bridge Round
A bridge round is a small financing to extend a startup's runway until a larger funding round or key milestone is reached.
Beginner finance
Burn Rate
Burn rate is the monthly rate at which a startup spends cash. It determines how much runway remains before the company must raise more money or turn profitable.
C
Intermediate metrics
CAC - Customer Acquisition Cost
CAC is the total cost to acquire a new customer, including all sales and marketing spend. A core unit economics metric for evaluating business viability.
Intermediate equity
Cap Table
A cap table tracks who owns what in a startup - founders, investors, and employees - and how ownership changes across funding rounds.
Beginner metrics
Churn Rate
Churn rate is the percentage of customers or revenue a business loses over a given period. The most important retention metric for any subscription business.
Beginner ai
Claude Code
Anthropic's agentic CLI tool that gives Claude full access to your codebase, enabling multi-file edits, terminal commands, and autonomous coding tasks.
Intermediate metrics
Cohort Analysis
A method of grouping users by a shared trait—typically signup date—and tracking their behavior over time to reveal retention trends.
Intermediate strategy
Competitive Moat
A competitive moat is a durable advantage that protects a startup's market position from competitors. Network effects and switching costs are the strongest.
Beginner ai
Context Window
The maximum amount of text an LLM can process in a single interaction - inputs plus outputs combined.
Intermediate growth
Conversion Rate Optimization
CRO is the practice of increasing the percentage of visitors who complete a desired action on your site, using testing and data.
Intermediate fundraising
Convertible Note
A convertible note is short-term startup debt with interest and a maturity date that converts into equity when a future priced round closes.
D
Beginner ai
DeepSeek
A Chinese AI lab and open-source model family that trained frontier-level LLMs at a fraction of Western competitors' reported costs.
Intermediate strategy
Default Alive
A startup is default alive if its revenue growth will reach profitability before cash runs out. Coined by Paul Graham in 2015.
Intermediate fundraising
Down Round
A down round occurs when a startup raises capital at a lower valuation than its previous round, triggering dilution and anti-dilution.
Intermediate fundraising
Due Diligence
The structured investigation an investor conducts before closing a deal, covering financials, legal, product, team, and market validity.
E
Intermediate finance
EBITDA
EBITDA measures a company's operating profitability before interest, taxes, depreciation, and amortization - a proxy for core business cash generation.
Intermediate ai
Embedding
A numerical vector that represents the meaning of text, enabling AI to compare and retrieve semantically similar content.
Intermediate equity
Equity Dilution
Equity dilution occurs when a startup issues new shares, reducing existing shareholders' ownership percentage. It happens at every funding round.
Intermediate equity
ESOP - Employee Stock Option Pool
An ESOP is a reserved pool of equity set aside to grant stock options to employees, advisors, and early hires as non-cash compensation.
Intermediate metrics
Expansion MRR
Expansion MRR is additional monthly recurring revenue from existing customers via upgrades or seat additions - the engine behind net negative churn in SaaS.
F
Intermediate product
Feature Flag
A feature flag is a code switch that enables or disables a feature at runtime without deploying new code, enabling safer releases and gradual rollouts.
Intermediate ai
Fine-Tuning
Fine-tuning adapts a pre-trained LLM to a specific task or domain by continuing training on a curated dataset of examples.
Beginner ai
Foundation Model
A foundation model is a large AI model trained on broad data at scale, designed to be adapted to many downstream tasks rather than one specific use case.
G
Intermediate equity
Good Leaver / Bad Leaver
Good leaver and bad leaver clauses define how a departing employee's unvested and vested equity is treated based on why they left.
Beginner finance
Gross Margin
Revenue minus Cost of Goods Sold, divided by revenue. The foundational profitability metric that drives SaaS valuation multiples and unit economics.
Intermediate growth
Growth Hacking
A discipline of rapid, low-cost experimentation across product and marketing channels to find scalable, repeatable growth levers.
H
Beginner growth
Hockey Stick Growth
The growth curve every investor wants to see - flat for a long time, then a sudden exponential rise that resembles a hockey stick.
I
Intermediate ai
Inference
Inference is the process of running a trained AI model on new inputs to generate predictions or outputs, as opposed to training the model on data.
Intermediate exits
IPO - Initial Public Offering
An IPO is when a private company first sells shares to the public on a stock exchange, providing liquidity and access to large capital pools.
J
Intermediate finance
J-Curve
The pattern of initial losses or decline before growth - common in VC fund returns, startup unit economics, and post-investment metrics.
K
L
Beginner ai
Large Language Model (LLM)
An LLM is a deep learning model trained on massive text datasets to generate, summarize, translate, and reason with human language.
Intermediate fundraising
Letter of Intent (LOI)
A Letter of Intent is a non-binding document expressing intent to enter an agreement, used in B2B sales and M&A transactions.
Intermediate fundraising
Liquidation Preference
The right of preferred investors to be paid back before common shareholders in a liquidation or sale event, protecting downside.
Intermediate metrics
LTV - Lifetime Value
LTV is the total revenue a business expects from a customer over their lifetime. The key metric for justifying acquisition spend and evaluating unit economics.
Intermediate growth
LTV:CAC Ratio
The LTV:CAC ratio measures how much lifetime value you earn per dollar spent acquiring a customer. A 3:1 ratio is the SaaS benchmark.
M
Beginner metrics
MRR - Monthly Recurring Revenue
MRR is the total recurring subscription revenue a SaaS company earns each month. It is the operational heartbeat metric for tracking short-term growth.
Beginner ai
Multimodal AI
AI models that can process and generate multiple types of data - text, images, audio, and video - within a single system.
Beginner product
MVP - Minimum Viable Product
An MVP is the simplest version of a product that allows a startup to test its core value hypothesis with real users and gather validated learning.
N
Beginner product
Net Promoter Score (NPS)
NPS measures customer loyalty on a 0–10 scale, producing a score from -100 to +100. A leading indicator of retention and referral growth for startups.
Intermediate metrics
North Star Metric
The North Star Metric is the single number that best captures the core value a product delivers to customers and predicts long-term sustainable growth.
Intermediate metrics
NRR - Net Revenue Retention
NRR measures how much recurring revenue is retained and grown from existing customers. Above 100% means the company grows revenue without any new customers.
O
Beginner ai
Open Source AI
AI models whose weights, architecture, and training details are publicly released - enabling free use, modification, and self-hosting.
Beginner ai
OpenClaw
An open-source, local-first AI agent platform that integrates with 20+ messaging apps and runs entirely on your own devices.
P
Intermediate finance
Payback Period
Months to recover the cost of acquiring a customer from that customer's gross profit contribution. Best-in-class SaaS is under 12 months.
Intermediate team
Performance Improvement Plan (PIP)
A PIP is a formal document that outlines an employee's performance gaps and sets a time-bound plan to correct them before termination.
Beginner strategy
Pivot
A structured course correction that changes a startup's strategy while preserving validated learning from prior experiments.
Intermediate fundraising
Pre-Money and Post-Money Valuation
Pre-money valuation is a company's value before investment. Post-money adds the investment amount. Both determine investor ownership.
Beginner fundraising
Pre-Seed Round
A pre-seed round is the earliest startup funding stage, covering idea to prototype. Check sizes range from $100K to $1M from angels and micro-VCs.
Intermediate fundraising
Pro-Rata Rights
The right of an investor to participate in future funding rounds to maintain their ownership percentage in the company.
Intermediate growth
Product-Led Growth (PLG)
Product-led growth is a go-to-market strategy where the product itself drives user acquisition, conversion, and retention without a traditional sales team.
Beginner strategy
Product-Market Fit
Product-market fit is the degree to which a product satisfies strong market demand - when a startup finds an audience that genuinely needs what it has built.
Beginner ai
Prompt Engineering
Prompt engineering is the practice of crafting LLM inputs to reliably produce accurate, useful, and correctly formatted outputs for a given task.
Q
Beginner ai
Qwen
Alibaba's open-source large language model family - multilingual, high-performing, and available in sizes from 0.5B to 72B parameters.
R
Beginner growth
Referral Program
A referral program rewards existing users for bringing in new customers. Learn how double-sided incentives, viral coefficients, and real examples work.
Intermediate ai
Retrieval-Augmented Generation (RAG)
RAG is an AI architecture that combines a retrieval system with an LLM, giving the model access to external knowledge at query time.
Intermediate fundraising
Revenue-Based Financing
Revenue-based financing gives startups capital in exchange for a percentage of future revenue, with no equity dilution and no fixed monthly payments.
Intermediate metrics
Rule of 40
Growth rate % plus EBITDA margin % must equal or exceed 40. The single metric VCs use to balance SaaS growth against profitability efficiency.
Beginner finance
Runway
Runway is how many months a startup can operate before running out of cash. It defines the time to reach the next milestone or close the next funding round.
S
Intermediate fundraising
SAFE - Simple Agreement for Future Equity
A SAFE lets investors fund startups in exchange for future equity, with no interest rate or maturity date. Created by Y Combinator in 2013.
Intermediate strategy
Sales-Led Growth (SLG)
A growth model where the sales team drives acquisition and conversion - the dominant motion for high-ACV B2B products and complex enterprise deals.
Beginner fundraising
Seed Round
A seed round is a startup's first institutional funding, used to validate the product, build the core team, and reach the traction needed for a Series A.
Intermediate fundraising
Series A
A Series A is the first major priced VC round, raised after a startup shows product-market fit and consistent growth. It funds scaling the go-to-market engine.
Intermediate fundraising
Series B Round
Series B is a growth-stage VC round that funds scaling a proven business. Typically requires $8–15M ARR, 80%+ YoY growth, and NRR above 110%.
Intermediate fundraising
Series C
A Series C is a later-stage funding round for startups with proven revenue, used to scale into new markets, acquire competitors, or prepare for an IPO.
Beginner equity
Stock Options
Stock options give employees the right to buy company shares at a fixed strike price. ISOs and NSOs are the two main types used by startups.
Intermediate ai
Synthetic Data
Artificially generated data that mimics real data - used to train, test, and fine-tune AI models when real data is scarce or private.
T
Beginner strategy
TAM, SAM, and SOM
TAM, SAM, and SOM are the three market sizing metrics founders use to quantify opportunity and show investors the realistic scale of their startup.
Intermediate engineering
Technical Debt
The implied cost of future rework created when a team chooses a faster, easier solution today instead of a better long-term approach.
Intermediate fundraising
Term Sheet
A term sheet is a non-binding document outlining the key terms of a VC investment deal before formal legal agreements are drafted.
Beginner ai
Token (AI)
A token is the basic unit of text an LLM processes - roughly 3–4 characters or 0.75 words - used to measure input length, output length, and API cost.
Beginner growth
Traction
Traction is quantifiable evidence that a startup is gaining real customers and momentum - the key signal investors use to gauge product-market fit.
U
Intermediate finance
Unicorn
A unicorn is a privately held startup valued at $1 billion or more. The term was coined by VC Aileen Lee in 2013 to describe this rare class of company.
Intermediate finance
Unit Economics
The direct revenues and costs associated with a single unit of a business, used to determine per-unit profitability and scalability.
V
Intermediate ai
Vector Database
A database optimized for storing and searching vector embeddings - the backbone of AI-powered search and RAG systems.
Beginner ai
Vertical AI
Vertical AI is an AI product built for a specific industry or workflow, combining foundation model capabilities with deep domain expertise and proprietary data.
Beginner equity
Vesting
Equity vesting is how founders and employees earn their shares over time, ensuring long-term alignment between the team and the company's success.
Beginner equity
Vesting Cliff
A vesting cliff is a threshold period - typically one year - before which no equity vests, protecting companies from early team departures.
Intermediate growth
Viral Coefficient
Also called K-factor: the average number of new users each existing user generates. K above 1 means exponential viral growth; below 1 is partial amplification.
W
Beginner finance
Working Capital
Working capital = current assets minus current liabilities. It measures a company's short-term liquidity and ability to fund day-to-day operations.
X
Beginner business-model
XaaS
Everything as a Service - the delivery model where any product or capability is offered via subscription over the internet instead of as a one-time purchase.
Y
Beginner fundraising
Y Combinator
The world's most influential startup accelerator - launched Airbnb, Stripe, Dropbox, and 4,000+ companies since 2005. Known as YC.
Z
Intermediate ai
Zero-Shot Learning
An AI model's ability to perform a task it was never explicitly trained on, guided only by a natural language description.