Startup Glossary
Plain-English definitions of the terms you will run into while starting a business. Each one starts with a short answer, then shows an example and what it means for you.
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What Are Early Adopters?
Early adopters are the first customers willing to try a new product before it is proven. Learn how to spot them, where to find them and what to avoid.
What Is a Break-Even Point?
The break-even point is the sales level where revenue equals total costs. See the formula, a worked example and the mistakes first-time founders make.
What Is a Business Model Canvas?
A business model canvas is a one-page chart with nine blocks that shows how a business creates value and earns money. See each block and an example.
What Is a Business Model?
A business model is how a company creates value for customers and gets paid for it. See the parts, common types, a worked example and mistakes.
What Is a Buyer Persona?
A buyer persona is a short, research-based profile of the person who buys from you. Learn what to include, how to build one and see a worked example.
What Is a Cap Table?
A cap table lists who owns what share of a company. See what goes in one, how to work out ownership and a worked example before and after a round.
What Is a Competitive Analysis?
A competitive analysis compares your idea with the other ways customers solve the same problem. See the three types of competitor, steps and an example.
What Is a Convertible Note?
A convertible note is a loan to a startup that turns into shares at a later funding round. Learn the key terms and follow a worked conversion example.
What Is a Customer Interview?
A customer interview is a one-to-one talk with a potential customer about their problem and habits. See what to ask, what to avoid and an example.
What Is a Go-to-Market Strategy?
A go-to-market strategy is your plan for who you sell to first, what you say, where you reach them and at what price. See the parts and an example.
What Is a Key Performance Indicator (KPI)?
A key performance indicator (KPI) is a number that shows whether your business is on track toward a goal. See startup examples and how to choose your own.
What Is a Lean Canvas?
A lean canvas is a one-page business model for an unproven idea, built around the problem you solve. See the nine boxes, the order and an example.
What Is a Minimum Viable Audience?
A minimum viable audience is the smallest group of people you need to reach for a business to work. See how to estimate yours, with an example.
What Is a North Star Metric?
A North Star metric is the one number that best shows the value customers get from your product. See how to choose one, with examples and common mistakes.
What Is a Pitch Deck?
A pitch deck is a short slide presentation that explains your business to investors. See the usual slides, a worked example and common mistakes.
What Is a Pivot in a Startup?
A pivot is a deliberate change to one core part of a business, based on evidence, while keeping what you have learned. See types and an example.
What Is a Pricing Strategy?
A pricing strategy is the method you use to set what you charge. Compare cost-plus, competitor-based and value-based pricing, with a worked example.
What Is a Proof of Concept?
A proof of concept is a small test that shows whether an idea can work in practice. See how it differs from a prototype and an MVP, with a worked example.
What Is a Prototype?
A prototype is an early, rough model of a product that you show to people to learn before you build the real thing. See the types and a worked example.
What Is a Revenue Model?
A revenue model is how a business gets paid: who pays, for what and how often. See the main types, an example and how to choose one for a new idea.
What Is a SAFE Note?
A SAFE is a short contract that lets an investor fund your startup now in exchange for shares later. See how caps and discounts work, with an example.
What Is a Sole Proprietorship?
A sole proprietorship is a business owned by one person with no legal separation from them. Learn how it works, the risks and when to change structure.
What Is a Startup Accelerator?
A startup accelerator is a short, fixed-length program that gives early companies money, mentors and investor access, usually in exchange for equity.
What Is a Startup Incubator?
A startup incubator supports very early founders with space, mentors and training while they shape an idea. See how it works and how to pick one.
What Is a SWOT Analysis?
A SWOT analysis lists the strengths, weaknesses, opportunities and threats of a business or idea. See how to do one, an example and what to do next.
What Is a Term Sheet?
A term sheet is a short document listing the main terms of an investment before the legal contracts are drafted. Learn the key terms and how to read one.
What Is a Unique Selling Proposition (USP)?
A unique selling proposition is the one specific thing that makes customers choose you over rivals. Learn how to find yours, with tests and an example.
What Is a Value Proposition?
A value proposition states who your product is for, what problem it solves and why it beats the alternative. Get a template, an example and a test.
What Is an Angel Investor?
An angel investor is a person who puts their own money into an early-stage startup for a share of it. See how angels work and how to approach one.
What Is an Elevator Pitch?
An elevator pitch is a short spoken summary of your business idea. Get a simple template, a worked example and the mistakes to avoid.
What Is an Ideal Customer Profile (ICP)?
An ideal customer profile describes the type of customer who gets the most from your product and is easiest to win. See what goes in one and an example.
What Is an LLC?
An LLC is a US business structure that separates your personal assets from the business. See how it works, an example and when to form one.
What Is an MVP (Minimum Viable Product)?
An MVP is the smallest version of a product that lets you test whether people want it. See how it works, an example and the mistakes to avoid.
What Is Annual Recurring Revenue (ARR)?
Annual recurring revenue (ARR) is your repeating subscription income expressed per year. Learn the formula, see an example and avoid the usual errors.
What Is Beta Testing?
Beta testing means giving a nearly finished product to a small group of real users before launch to find bugs and gaps. See the steps and a worked example.
What Is Bootstrapping a Business?
Bootstrapping means funding a business from your own money and its sales instead of investors. See how it works, an example and the trade-offs.
What Is Burn Rate?
Burn rate is how much cash a business spends or loses each month. Learn gross burn vs net burn, the formulas and how to work out your own.
What Is Cash Flow?
Cash flow is the money moving into and out of a business over a period. Learn how it differs from profit, how to calculate it and how to forecast it.
What Is Churn Rate?
Churn rate is the share of customers who stop paying you in a given period. See the formula, a worked example and the mistakes that hide real churn.
What Is Customer Acquisition Cost (CAC)?
Customer acquisition cost is what you spend on sales and marketing to win one new customer. See the formula, a worked example and common errors.
What Is Customer Discovery?
Customer discovery is testing your guesses about who has a problem and how much it matters by talking to real people. See the process and an example.
What Is Customer Lifetime Value (LTV)?
Customer lifetime value is the gross profit one customer brings over the whole time they buy from you. See the formula and a worked example.
What Is Due Diligence?
Due diligence is the checking an investor or buyer does before putting money into a business. See what they look at and how to prepare for it.
What Is Equity Dilution?
Equity dilution is the drop in your ownership percentage when a company issues new shares. See the formula, a worked example and how to plan for it.
What Is Freemium?
Freemium is a pricing model with a free basic version and paid upgrades. Learn how it works, the math behind it and when it suits a new business.
What Is Gross Margin?
Gross margin is the percentage of revenue left after the direct costs of what you sell. See the formula, a worked example and how it differs from markup.
What Is Idea Validation?
Idea validation is testing whether people want and will pay for your business idea before you build it. See the steps, an example and the pitfalls.
What Is Market Research?
Market research is gathering facts about customers, demand and competitors before you commit money. See the types, the steps and a worked example.
What Is Monthly Recurring Revenue (MRR)?
Monthly recurring revenue (MRR) is the predictable subscription income you earn each month. See the formula, a worked example and what not to count.
What Is Pre-Seed Funding?
Pre-seed funding is the first outside money a startup raises, usually before it has a finished product. See who gives it, how it works and an example.
What Is Problem-Solution Fit?
Problem-solution fit means you have evidence that real people have a problem and want your way of solving it. See the signs, an example and the mistakes.
What Is Product-Market Fit?
Product-market fit means a clear group of customers wants your product, keeps using it and tells others. Learn the signs and how to measure it.
What Is Runway in a Startup?
Runway is how many months a startup can operate before it runs out of cash. See the formula, an example and how to make it longer.
What Is SaaS?
SaaS means software as a service: software you use online and pay for by subscription. Learn how the model works, its key metrics and common mistakes.
What Is Seed Funding?
Seed funding is early investment that helps a startup go from a first product to steady growth. See how a seed round works, with a dilution example.
What Is Series A Funding?
Series A is the first large venture capital round, raised once a startup has proven demand and needs money to grow. See how it works, with an example.
What Is TAM, SAM and SOM?
TAM, SAM and SOM are three sizes of the same market: everyone, those you can serve and those you can win. See the formulas and an example.
What Is the Lean Startup Method?
Lean startup is a way to build a business by testing your riskiest guesses with small experiments before you spend big. See the loop and an example.
What Is Traction in a Startup?
Traction is measurable proof that customers want what your startup offers and that demand is growing. See what counts at each stage, with a worked example.
What Is Unit Economics?
Unit economics is the revenue and cost tied to one unit of your business, such as one customer or one order. Learn how to calculate it, with an example.
What Is Venture Capital?
Venture capital is money that funds invest in young, fast-growing companies in return for equity. See how VC works and whether it fits your business.
What Is Vesting?
Vesting means you earn your shares over time instead of owning them all on day one. Learn how schedules and cliffs work, with a worked example.