Cash Management and Stability
• Cash Burn Rate: The amount of money you’re spending each month until you become profitable.
• Gross Burn: Your total operating expenses.
• Net Burn: Your total expenses minus your revenue.
• Idle Cash: Money sitting in your accounts that isn’t being used.
• Runway: The number of months your current cash will last at your burn rate.
• Formula: Runway = Idle Cash / Monthly Burn Rate
• Cash Flow: The movement of money in and out of your business.
• Liquidity: How quickly you can convert assets into cash without losing value.
Financial and Performance Metrics
• Profit and Loss Statement (P&L): A report showing your revenue, costs, and net income over a specific period.
• Revenue: The 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. Measures your ability to generate profit in ideal conditions.
• Gross Profit Margin: Revenue minus the cost of delivering your product or service.
Fundraising and Capital Structure Terms
• Bootstrapping: Self-funding your startup without external investments.
• Cap Table: A document outlining the ownership structure of your company.
• Clean Cap Table: A cap table that clearly and accurately reflects the current ownership, free of complexities, errors, or ambiguities.
• Term Sheet: A non-binding agreement outlining the terms of a potential investment.
• Convertible Note: A type of short-term debt that converts into equity.
• Equity Financing: Raising capital by selling shares of your company.
Product Finance Terms
• Customer Lifetime Value (CLV): Total revenue from an average customer over their relationship with your business.
• Formula: CLV = Average Purchase Value x Purchase Frequency x Average Customer Lifetime
• CAC Payback Period: Time it takes to recover the cost of acquiring a customer.
• Formula: CAC Payback Period = Customer Acquisition Cost / Monthly Gross Margin per Customer
• Time to Value (TTV): Time it takes for a customer to get value from your product.
• Return on Ad Spend (ROAS): Revenue generated per dollar spent on advertising.
• Formula: ROAS = Revenue Generated by Ads / Cost of Ads
• Net Revenue Retention (NRR): Revenue growth accounting for churn.
Startup Debt Finance Terms
• Principal: The original amount of a loan.
• Deferred Revenue: Money received for goods or services not yet delivered.
• Amortization: Spreading the cost of an asset or loan over time.
• Covenants: Loan conditions and restrictions.
• Venture Debt: Borrowing that complements VC funding without diluting ownership.
B2B and SaaS Finance Terms
• Monthly Recurring Revenue (MRR): Consistent revenue from subscriptions.
• Annual Contract Value (ACV): Broad view of revenue from annual contracts.
• Annual Run Rate (ARR): Projects short-term results over a year.
• Cost to Service (CTS): Total expenses for delivering your product or service.
• Gross Merchandise Value (GMV): The total value of merchandise sold over a period.
• Churn Rate: The percentage of customers who stop using your product over a period.
• Contribution Margin: Revenue minus variable costs.
• Dilution: The reduction in ownership percentage due to new shares being issued.
• Exit Strategy: A plan for how investors will realize a return on their investment.
• 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.
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Armed with this dictionary, you’re ready to impress investors, make informed decisions, and lead your startup to success. Happy funding!
Disclaimer
This article is for informational purposes only and does not constitute financial guidance.
