50 startup terms you need to know

A comprehensive list of startup terms and lingo to ignite the founder within.

Have you ever met with a fellow founder, VC, or prospect while they dropped term after term after term that seemed like pure jibberish? Chances are yes. The startup world has many of them.

Startups are a game. You’re either in or out. If you’re in, you’ll have an easier* time raising capital, hiring talent, and getting exposure.

*Asteriks because it’s still not easy. At all. But you take advantage of what you can.

Here are 50 startup terms you may or may not know, that will make it seem like you know your sh*t when pitching, hiring, selling, or networking.

50 startup terms

1. B2B, B2C, and B2B2C

Referring to the company’s sales-related positioning, these terms refer to whether its business model is business to business, business to consumer, or business to business to consumer.

2. Bootstrapping

The act of self-funding new businesses through either revenue growth, savings, and/or smaller contributions from friends and family. Operating activities that aren’t driven by investment funding.

3. MVP

Short for Minimum Viable Product, it refers to the absolute simplest version of your product vision which is intended to test, validate, and gather feedback in the market before spending big on development and other costs.

4. Vaporware

In the same category as MVP, but a little different, Vaporware refers to a product or service that has not and may never become available. Often used to measure demand on an early-stage concept.

5. Problem-Solution Fit and Product-Market Fit

These two terms go hand in hand, and usually one after the other. Problem-solution fit refers to a business successfully identifying a problem that a significant number of customers face, then developing a solution to it. Whilst product-market fit comes after and refers to the point where a business finds a substantial and profitable market segment that resonates with its solution. It’s the sweet spot where the demand meets your supply, and customers appreciate the value your product provides.

6. PoC and Pilot Program

A proof of concept (PoC) and pilot program generally go hand in hand in the B2B sales space, but a PoC can also refer to a pre-MVP product to showcase a functional concept. In regards to sales, a PoC and pilot program are essential customer facing phases where you can demostrate the product or service’s ability to deliver on it’s selling points, before proceeding to a full-scale launch or paying customer.

7. Lean and Agile

Lean and agile are software development methodologies that focus on both efficiency and improvement. Lean emphasizes value for customers while minimizing waste, focusing on efficient processes and continuous improvement, whilst Agile emphasizes adaptability and iterative development through cross-functional teams, enabling quick responses to changing market demands and customer needs.

8. Value Prop

A value proposition refers the unique benefits a product or service offers to its target customers, setting it apart from competitors and driving customer engagement. Typically, startups have only one strong value proposition, with some having a secondary.

9. Rounds: Pre-Seed, Seed, Series A (B, C, etc.), and Bridging

These refer to the typical funding rounds in a startup lifecycle.

• Pre-seed generally being pre-product and pre-revenue, raising a small amount of capital to turn an idea into reality.

• Seed generally after having developed an MVP, attracting over $1 million (average) in funding to further develop the product and find initial customers.

• Growth rounds (series A, B, C, etc.) are generally larger rounds ($10 million +) attracting VCs, private equity firms and prominent angels for strategic growth capital spent on new customer acquisition and product development after the business has found product-market fit.

• Bridging rounds generally refer to gaining interim funding between major rounds, helping sustain operations and growth while preparing for the next significant funding event. Usually made up of existing investor capital.

10. Investors: Angels, VCs, family offices, PE, and Syndicates

These refer to the typical types of investors that make up a funding round.

• Angels are an individual investor with high net worth who generally provide early-stage funding and guidance to new businesses in exchange for equity or convertible debt.

• Venture capital (VC) is funding provided by investment firms to early and growth-stage companies in exchange for an ownership stake, aiming to support and scale the business for potential high returns.

• A family office refers to a private wealth management firm established by a wealthy family to manage their investments, often in growth-stage startups but very much depend on their risk-tolerance and strategy.

• Private Equity (PE) firms are much like VCs but generally invest larger amounts at later growth rounds.

• A syndicate is a group of investors or investment firms that collectively invest capital into a startup, usually led by a lead investor.

11. Check or Ticket Size

A "check" (derived from cheque) or "ticket" size refers to the amount of money an investor or firm is willing to invest in a funding round to support the startup's growth (e.g. $500k to $2m). It’s important to only reach out to investors with appropriate check sizes for your funding round.

12. Deployed Funds

Deployed funds refer to the amount of capital that has been allocated apart of a fund. VCs and PE firms generally have multiple funds, and it’s good practice to understand what each fund is worth, how far deployed it is and what period is (e.g. “of our total $1B fund, we have 2 smaller $500m funds, one for new startups and the other for follow-up investments. These funds are 80% deployed, with 5 years to go”).

13. Burn and Churn Rate

Burn rate refers to the rate at which a company is spending its capital, while churn rate is the rate at which a company is losing its customers or subscribers, both typically expressed as a percentage. Churn rate can also sometimes apply to employee turnover.

14. CAC, LTV, MRR/ARR, and TTM

These acronyms all refer to growth and sales-related metrics, and will often be asked by VCs or brokers when it comes to raising capital or selling your business. CAC and LTV are often presented as a ratio.

• Customer Acquisition Cost (CAC) is the average cost to acquire a new customer including marketing, sales and operational expenses.

• Lifetime Value (LTV) is the estimated net profit (or revenue) that a customer will generate for your business over the course of their relationship. Calculated by (Revenue per customer – Customer acquisition costs – Customer service costs) / (Churn rate + Discount rate) = LTV.

• Monthly and Annual Recurring Revenue (MRR/ARR) refers to the predictable and regular income generated from subscription-based services or products on a monthly or annual basis, respectively.

• Trailing Twelve Month (TTM) is the financial performance metrics or data accumulated over the past twelve consecutive months up to the current date, offering a snapshot of the company's recent performance.

15. Acquihire

An acquihire refers to a situation where a company, often small and failing, is acquired primarily for the talent and expertise of its employees rather than its products, services, or customer base.

16. Runway or Runrate

Your runway (or runrate) is a way of measuring how many months you have left in your business, dependent on your current capital and your monthly burn rate. To do this, divide your monthly spending (burn rate) with your current total capital available.

17. Cap Table

Short for capitalization table, your cap table is an overview of who owns your business and how the ownership is divided. Including stock and convertible notes.

18. Unicorn and Decacorn

A unicorn is a business valued at a billion dollars and over, whilst a decacorn is a business valued at over ten billion dollars. Often determined by funding round valuations.

19. Cottage Business

A cottage business refers to a business that works best if they remain at a small scale, with low overheads and local elements. Often operating out of a home.

20. Stealth Mode

This refers to the process wheras a startup builds in private, keeping it’s operations, product and plans confidential. Often used in cutting-edge technology to avoid disclosing IP. However, this method can make it more difficult to test, validate and gain early traction.

21. Dogfooding

Dogfooding refers to the practice of a company using its own products or services internally to test and validate their product quality, functionality, and experience.

22. Beta and Alpha

These terms refer to the two primary phases of product releases prior to launch. Alpha typically refers to an initial, internal testing phase of a product or service, while beta refers to a subsequent phase where a limited group of external users tests the product before a full-scale launch.

23. Pivot

A pivot refers to a strategic change in a company's business model, product, or target market in response to feedback or market conditions, often to improve viability and better meet customer needs. Often driven from customer feedback or larger market signals.

24. Term sheet

The term sheet is a non-binding agreement with the basic terms and conditions of a funding agreement, and is used for a point of negotiation with investors. Usually, a term sheet will provide information about the startup’s valuation, liquidation terms, voting rights, and investor commitment.

25. Vesting and Cliff

Vesting in startups refers to the gradual accumulation of equity over a specified period, while a cliff represents an initial period during which no equity or ownership rights are accrued, after which a predefined portion becomes available for vesting. These can be applied to investors, employees and founding members.

26. Sweat Equity

Sweat equity refers to theequity earned by individuals based on their contributions of time, effort, and expertise rather than monetary investment. Commonly provided to co-founders or founding members of the team.

27. Convertible Note and SAFE

A convertible note and SAFE (Simple Agreement for Future Equity) note are financial instruments that allow investors to provide funding in the form of a loan (convertible note) or a simple agreement (SAFE) that can convert into equity at a later funding round, providing flexibility and avoiding the need for an immediate valuation of the company. A great option for first funding rounds.

28. Common and Preferred Stock

Common stock represents ownership in a company and usually carries voting rights, while preferred stock typically holds priority over common stock in terms of dividends and assets during liquidation, but doesn't usually include voting rights.

29. Pre-Money and Post-Money Valuation

Pre and post money valuations refer respectively to the valuation of the startup before and after taking on venture or investor capital. For example, let's say a startup is seeking a funding round and investors agree to invest $1 million for a 20% ownership stake in the company.

• Pre-money valuation: The company's estimated value before the investment is $1 million / 20% = $4 million.

• Post-money valuation: After the investment, the company's value is the sum of the investment and the pre-money valuation, which is $1 million + $4 million = $5 million.

30. Tranche

Used by VCs, a tranche refers to a slice of a larger investment or funding round that is released based on the startup meeting specific predetermined milestones or conditions. Often split up into multiple tranches.

31. Down Round

A down round refers to raising additional capital at a lesser valuation of your prior funding round, and is often a result of changing market conditions or unmet forecasted performance.

32. Hockey Stick Growth

“Hockey stick growth" refers to a growth pattern on a graph where there is a significant and sudden increase in growth or revenue, resembling the shape of a hockey stick. Often occuring when a business finds product market fit.

33. FAANG

FAANG is an acronym representing a group of five major technology companies: Facebook, Amazon, Apple, Netflix, and Google.

34. Bad Actors

A bad actor is an individual or entity, including employees, investors or customers, that engages in unethical, fraudulent, or harmful activities that negatively impact the company, its stakeholders, or its operations.

35. Deprecated

Deprecated is a term used in product developement and sales operations to indicate that a particular feature, product, or approach is no longer recommended or supported. Often the result of poor adoption, high CAC to LTV ratio or a pivot.

36. First Principle Thinking

First principle thinking is a problem-solving approach that breaks down complex issues into fundamental, undeniable truths, which often involves questioning fundamental assumptions to come up with innovative and original solutions, like reimagining vehicle power sources to create electric cars.

37. Nontrivial

This refers to a significant or meaningful feature, problem, task, or solution that requires thoughtful consideration and effort. Often used in situations where more time and effort is required to make decisions.

38. Low Hanging Fruit

A low hanging fruit refers to an easily attainable and immediate opportunity, task, or goal that can be quickly achieved with minimal effort or resources. Often used in product, engineering and sales.

39. Monopoly

A monopoly in startups refers to a market situation where a single company or product holds a dominant position, significantly controlling the market and limiting competitive alternatives.

40. First and Second Mover Advantage

The First Mover Advantage refers to being the initial entrant in a market, gaining a head start and establishing a strong market presence. While the Second Mover Advantage involves learning from the first mover's actions to improve upon their offering and potentially surpass them.

41. Survivor Bias

Survivor bias is the tendency to focus only on successful cases or individuals who have survived or succeeded, ignoring the failures and leading to a skewed perception of the factors contributing to success.

42. Network Effect

A Network effect is where the value of a product or service increases as more people use it, creating a positive feedback loop that attracts and retains users. For example, Uber provides greater convenience and reliability to riders when more drivers join their platforms, creating a network effect.

43. Heuristic

Heurisitic refers to a type of process or method for making decisions in uncertain situations by guesswork based on experience. Often used in situations where quick decisions or short-term solutions are required.

44. GTM

Your go to market (GTM) is the key activity or strategic plan entailing how your startup reaches its target customer effectively and efficiently through different areas of the business including product, branding, marketing and sales.

45. ICP

In B2B sales and marketing, your ideal customer profile (ICP) is a detailed description of the valuable customer(s) that your startup targets at the company level. With details including type, size, turnover, location and industry.

46. Buyer Persona

Your buyer persona goes hand in hand with your ICP, but goes deeper into the individual qualities and attributes of the buyer(s) or key decision maker(s) within the company. These include roles, departments, objectives, challenges and value propositions.

47. TAM, SAM, and SOM

Terms often used by and requested from investors, they refer to quantifying your market and the relvent portions of it.

• Total Addressable Market (TAM) refers to the total market demand for a product or service and is often used to objectively estimate potential growth.

• Serviceable Addressable Market (SAM) refers to the portion of your market that you can service with your unique product or geographic limitations.

• Serviceable Obtainable Market (SOM) refers to the portion of your serviceable market that you can capture and often is dictated by competitors.

48. BD, BDM, SDR and AE

Business Development (BD) refers to the activity of generating new opportunities through sales and partnerships, whereas positions such as Business Development Manager (BDM), Sales Development Representative (SDR) and Account Executive (AE) are the individual roles responsible for executing on BD work. A BDM is typically “full-stack” where they both generate and close leads, whereas the SDR to AE dynamic split off lead generation to deal closing into seperate activities handled individually.

49. CS and CSM

Customer Success (CS) refers to the unit or responsibility of ensuring that customers needs are effectively met, and they’re deriving value from the product or service. Whilst the Customer Success Manager (CSM) is the inividual role responsible for managing those outcomes with the customer.

50. LOI and MOU

A letter of intent (LOI) and memorandum of understanding (MOU) are non-binding agreements used respectively, often in sales as a way to collect commitments in early stages of product developement. An LOI is also often used in early stages of funding rounds between potential investors and the company raising capital.

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That concludes the list of 50 startup terms every founder should know. While there are hundreds more, and I could’ve kept going and going, these are some of the more essential and widely used terms in the industry.

Comment below with any others I missed, or if you’d like to know more.

If you learned something from this, and are interested in diving deeper into some of the above terms and topics, then subscribe. If you know someone that might get value from this newsletter, please share 🙏

P.S. These newsletters will now be going out on Mondays.

For the love of startups.

Tim