Startup glossary
The startup terms founders actually use, in plain English. Every entry has a clear definition, the formula where there is one, a worked example, and the mistakes to avoid. Written through one lens: does this help you decide what to build, or whether it is working?
30 terms
Validation & Discovery
Concierge MVP
A concierge MVP delivers the product's value manually, by hand, to real customers before any of it is automated or built into software.
Customer Discovery
Customer discovery is the process of talking to potential customers to understand their problems, behaviors, and willingness to pay, before committing to a solution.
Ideal Customer Profile (ICP)
An Ideal Customer Profile (ICP) is a precise description of the customer who gets the most value from your product and is easiest for you to reach, win, and keep.
Jobs To Be Done (JTBD)
Jobs To Be Done (JTBD) is a framework that says customers "hire" a product to make progress on a specific job in their life, rather than buying it for its features.
Minimum Viable Product (MVP)
A Minimum Viable Product (MVP) is the smallest version of a product that lets you test your riskiest assumption with real users and learn whether to keep going.
Painkiller vs Vitamin
A painkiller solves an urgent, expensive problem people will pay to make go away. A vitamin is a nice-to-have that improves things but is easy to live without.
Product-Market Fit
Product-market fit (PMF) is the point where a product satisfies strong market demand, shown by customers who keep using it, pay for it, and tell others about it.
Smoke Test
A smoke test is a lightweight demand experiment, usually a landing page with a real call to action, that measures whether people will sign up, pre-order, or pay before the product exists.
The Mom Test
The Mom Test is a set of rules for customer interviews, from Rob Fitzpatrick, designed to get honest answers by talking about the customer's life and past behavior instead of pitching your idea.
Total Addressable Market (TAM)
Total Addressable Market (TAM) is the total annual revenue available if you sold your product to every possible customer. SAM and SOM narrow it to what you can realistically serve and capture.
Unit Economics
Burn Rate
Burn rate is how fast a company spends its cash reserves, usually measured per month. Gross burn is total monthly spend; net burn is spend minus revenue.
Churn Rate
Churn rate is the percentage of customers (or revenue) you lose in a given period. Logo churn counts customers; revenue churn counts dollars.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the total sales and marketing spend required to win one new customer.
Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV, also CLV) is the total gross profit you expect from a customer across their entire relationship with you.
Default Alive vs Default Dead
Default alive describes a startup that will reach profitability on its current trajectory before the money runs out. Default dead is one that will not, unless something changes. The terms come from Paul Graham.
LTV:CAC Ratio
The LTV:CAC ratio compares the lifetime value of a customer to the cost of acquiring one. The widely cited healthy benchmark is 3:1 or higher.
Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is the predictable subscription revenue a business earns every month, normalized to a monthly figure. It counts only recurring charges, not one-off fees.
Runway
Runway is the number of months a company can keep operating before it runs out of cash, assuming current burn and revenue hold.
Unit Economics
Unit economics are the direct revenues and costs tied to a single unit of your business, usually one customer, expressed through metrics like CAC, LTV, and contribution margin.
Fundraising
Cap Table
A capitalization table (cap table) is the record of who owns what in a company: founders, investors, and employees, with their shares, options, and ownership percentages.
Convertible Note
A convertible note is a short-term loan that converts into equity at a later priced round. Unlike a SAFE, it is debt: it carries an interest rate and a maturity date.
Dilution
Dilution is the reduction in existing shareholders' ownership percentage when a company issues new shares, typically during fundraising or when expanding the option pool.
Pre-Money vs Post-Money Valuation
Pre-money valuation is what a company is worth before new investment. Post-money valuation is the pre-money value plus the new money raised.
SAFE (Simple Agreement for Future Equity)
A SAFE (Simple Agreement for Future Equity), created by Y Combinator, gives an investor the right to equity in a future priced round instead of shares today. It is not debt and carries no interest or maturity date.
Term Sheet
A term sheet is a mostly non-binding document that lays out the key terms of an investment, including valuation, amount raised, and investor rights, before the full legal paperwork is drafted.
Valuation Cap
A valuation cap is the maximum company valuation at which a SAFE or convertible note converts into equity, no matter how high the next priced round values the company.
Growth & GTM
Go-To-Market (GTM)
A go-to-market (GTM) strategy is the plan for how a company reaches its target customers and convinces them to buy, covering audience, channels, pricing, messaging, and sales motion.
Product-Led Growth (PLG)
Product-led growth (PLG) is a go-to-market motion where the product itself drives acquisition, conversion, and expansion, usually through a free trial or freemium tier, with little or no sales team.
Operating
Bootstrapping
Bootstrapping is building and growing a company using personal savings and revenue from customers, rather than raising outside investment.
Moat (Competitive Advantage)
A moat is a durable competitive advantage that makes it hard for competitors to copy or displace you, such as network effects, switching costs, brand, or proprietary technology or data.
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