The Ultimate Finance Dictionary for Startup Founders

Pac O'Shea

15 August 2024

Welcome, founders! To impress investors, you need to master key finance terms. Here’s your no-nonsense guide to the essential lingo that’ll make you sound like a pro.

Published 15 August 2024. Updated 28 July 2026.

This dictionary defines the finance and fundraising terms UK startup founders need most often: cash management terms like burn rate and runway, fundraising terms like cap table and SAFE, and SaaS metrics like MRR and ARR. Each term is defined in one or two sentences, with formulas included where founders need to actually calculate the number, not just recognise it.

TL;DR

Cash terms to know cold: burn rate, runway, idle cash, liquidity.
Fundraising terms: cap table, term sheet, convertible note, SAFE, dilution.
SaaS/B2B metrics: MRR, ARR, ACV, churn rate, net revenue retention (NRR).
Formulas that matter most: Runway = Idle Cash / Monthly Burn Rate, and CAC Payback Period = Customer Acquisition Cost / Monthly Gross Margin per Customer.
A few terms are easy to confuse (gross burn vs. net burn, MRR vs. ARR, SAFE vs. convertible note); see the comparison table below.

What Are the Key Cash Management Terms Startups Should Know?

Cash Burn Rate: the amount of money a company spends each month before it becomes profitable.
Gross Burn: total operating expenses for the period, before subtracting any revenue.
Net Burn: total expenses minus revenue for the period, the number that actually determines how fast cash is depleting.
Idle Cash: money sitting in accounts that isn't allocated to near-term spending and isn't earning a return.
Runway: the number of months current cash will last at the current burn rate. Formula: Runway = Idle Cash / Monthly Burn Rate.
Cash Flow: the movement of money in and out of the business over a period.
Liquidity: how quickly an asset can be converted into cash without losing value.

What Are the Key Financial and Performance Metrics?

Profit and Loss Statement (P&L): a report of revenue, costs, and net income over a specific period.
Revenue: total income generated from sales.
Revenue Growth Rate: the percentage increase in revenue over a specific period.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of operating profitability before financing and accounting decisions.
Gross Profit Margin: revenue minus the direct cost of delivering the product or service.

What Are the Key Fundraising and Capital Structure Terms?

Bootstrapping: self-funding a startup without external investment.
Cap Table: a document outlining a company's ownership structure across founders, employees, and investors.
Clean Cap Table: a cap table that accurately reflects current ownership, free of errors or unresolved grants.
Term Sheet: a non-binding document outlining the proposed terms of an investment.
Convertible Note: short-term debt that converts into equity, typically at a future priced round.
Equity Financing: raising capital by selling shares in the company.

What Are the Key Product Finance Terms?

Customer Lifetime Value (CLV): total revenue expected from an average customer over the life of the relationship. Formula: CLV = Average Purchase Value x Purchase Frequency x Average Customer Lifetime.
CAC Payback Period: the time required to recover the cost of acquiring a customer. Formula: CAC Payback Period = Customer Acquisition Cost / Monthly Gross Margin per Customer.
Time to Value (TTV): how long it takes a customer to realise value from the product.
Return on Ad Spend (ROAS): revenue generated per unit spent on advertising. Formula: ROAS = Revenue Generated by Ads / Cost of Ads.
Net Revenue Retention (NRR): revenue growth from an existing customer base, accounting for churn, expansion, and contraction.

What Are the Key Startup Debt Finance Terms?

Principal: the original amount of a loan, before interest.
Deferred Revenue: money received for goods or services not yet delivered.
Amortization: spreading the cost of an asset or loan over time.
Covenants: conditions and restrictions attached to a loan.
Venture Debt: borrowing that complements venture capital funding without further diluting ownership.

What Are the Key B2B and SaaS Finance Terms?

Monthly Recurring Revenue (MRR): predictable revenue from subscriptions, measured monthly.
Annual Contract Value (ACV): the average annualised value of a customer contract.
Annual Run Rate (ARR): a projection of annual revenue based on current short-term results.
Cost to Service (CTS): the total expense of delivering the product or service to a customer.
Gross Merchandise Value (GMV): the total value of merchandise or transactions processed over a period.
Churn Rate: the percentage of customers who stop using the product over a period.
Contribution Margin: revenue minus variable costs.
Dilution: the reduction in existing shareholders' ownership percentage caused by issuing new shares.
Exit Strategy: a plan for how investors realise a return on their investment, typically via acquisition or IPO.
Unicorn: a startup valued at over $1 billion.
Vesting: the process by which employees earn their shares or options over time.
SAFE (Simple Agreement for Future Equity): an agreement that converts into equity at a future date, typically at the next priced round.

Which Finance Terms Do Founders Most Often Confuse?

Which Finance Terms Do Founders Most Often Confuse?
Term	Definition	Commonly confused with	Key difference
Gross Burn	Total operating expenses in the period	Net Burn	Gross burn ignores revenue; net burn subtracts it
MRR	Monthly recurring revenue, measured monthly	ARR	ARR is a 12-month projection of current MRR, not a separate revenue stream
ACV	Average annualised value of a customer contract	ARR	ACV describes a per-contract value; ARR describes total annualised run-rate revenue
SAFE	Converts to equity at a future priced round, no interest or maturity date	Convertible Note	A convertible note is debt (with interest and a maturity date) until it converts; a SAFE is not debt
CAC	Total cost of acquiring one customer	CAC Payback Period	CAC is a cost figure; CAC Payback Period is the time needed to recover that cost from gross margin

What New Finance Terms Should Founders Know in 2026?

Treasury and AI-agent vocabulary has entered everyday founder conversation alongside classic fundraising terms. A few worth adding to the list:

[AER (Annual Equivalent Rate)](https://www.roundtreasury.com/pricing): the standardised annualised rate of return on a savings or money market product, used so founders can compare yield offers on a like-for-like basis regardless of compounding frequency.
Idle Cash Yield: the return earned on cash that isn't needed for near-term operating expenses, typically via savings accounts or money market funds rather than a standard non-interest-bearing current account.
Multi-Entity Cash Visibility: a consolidated, real-time view of balances across every legal entity, bank account, and currency a group operates, replacing manual log-ins to each bank individually.
Agentic Finance / AI Agent: software that takes a bounded action inside a workflow (approving a validated invoice, sweeping idle cash, funding payroll) rather than only displaying information, with a human retaining final approval authority.
FSCS-Protected Deposit: a bank deposit covered by the UK's Financial Services Compensation Scheme up to £120,000 per eligible depositor, per banking institution, as of 1 December 2025 (up from £85,000). See our FSCS coverage guide for the full breakdown.

Frequently Asked Questions

Gross burn is total operating expenses for the period. Net burn subtracts revenue from that figure, so it reflects the actual rate cash is depleting. Net burn is the number that determines runway.

Runway = Idle Cash / Monthly Burn Rate. Use net burn, not gross burn, for an accurate result.

MRR (Monthly Recurring Revenue) measures predictable subscription revenue on a monthly basis. ARR (Annual Run Rate) annualises current revenue to project a 12-month figure; it's a projection based on MRR, not an independently measured number.

A SAFE (Simple Agreement for Future Equity) converts into equity at a future priced round and carries no interest or maturity date. A convertible note is technically debt until conversion, and typically carries interest and a maturity date. Both are common early-stage fundraising instruments in the UK and US.

Earnings Before Interest, Taxes, Depreciation, and Amortization: a measure of operating profitability that strips out financing structure and accounting choices, useful for comparing companies with different capital structures.

A cap table that accurately reflects current ownership with no unresolved grants, errors, or ambiguities. It matters most during fundraising and M&A diligence, when a messy cap table can slow or derail a deal.

Idle cash is money sitting in accounts that isn't needed for near-term spending and isn't earning a return. Left in a standard non-interest current account, it earns nothing; moved into a savings account or money market fund, it can earn yield while remaining accessible.

CAC (Customer Acquisition Cost) is the total cost of acquiring one customer. CAC Payback Period is the time it takes to recover that cost from the customer's monthly gross margin: a cost figure and a time figure answering two different questions.