Startup Glossary of Terms – Everything You Need to Know
From A/B Testing to VC, our Startup Glossary covers all the critical terms you need to know.
Jessica Pedraza
Legal Consultant
Published: May 21, 2024
The startup world is buzzing with jargon. From "A/B testing" to "Zombie startups," the terminology can feel overwhelming, even for experienced entrepreneurs.
But understanding the language is crucial for every stage of the startup journey, from launching, to navigating challenges, to making a strategic exit. To keep you in the loop and fluent in the lingo, here’s a rundown of the most common terms you'll encounter in the startup world.
Glossary of Startup Terms
A/B Testing: A method where two versions of a page or product feature are compared to determine which one performs better.
Accelerator: A program designed to help startups grow through mentorship, capital, and networking opportunities, typically ending in a demo day where startup founders pitch to investors.
Acquisition: The process of one company purchasing another to expand its operations or to eliminate competition. Also refers to acquiring new customers.
Acquihire: The acquisition of a company primarily for the skills and expertise of its staff rather than for its products or services.
Administrative Dissolution: The state's termination of a corporation, often initiated by the Secretary of State, due to non-compliance with regulatory requirements such as unpaid taxes or failure to file reports.
Advisor: An experienced professional who provides expertise and guidance to a startup, often in exchange for equity.
Agile: A flexible project management method that uses ongoing feedback to improve and deliver products.
Alpha: An early version of a product that is used internally to test and refine its features before beta testing with external users.
Angel Group: A collection of angel investors who pool their financial resources to invest in startup companies, often sharing research and due diligence efforts.
Angel Investor: A person who invests money in startups for a share of ownership or other financial stakes.
Annual Recurring Revenue (ARR): The total expected revenue from customers over a year, assuming the number of subscribers remains constant.
API (Application Programming Interface): A set of protocols and tools for building software applications, specifying how software components should interact.
Articles of Dissolution: Official documents submitted to the Secretary of State to formally dissolve a corporation.
Articles of Incorporation (also called Certificate of Incorporation): Legal documents filed with the government to legally document the creation of a corporation.
Authorized Shares: The maximum number of shares that a corporation is allowed to issue under its articles of incorporation.
B2B (Business-to-Business): Refers to businesses that primarily sell products or services to other companies.
B2C (Business-to-Consumer): Refers to businesses that sell products or services directly to consumers.
B2B2C (Business-to-Business-to-Customer): A business model where a company sells its product or service to another business, which then sells it to the end consumer.
Beta: A pre-release product version made available to a select group of users outside of the company to test under real-world conditions.
BHAG (Big Hairy Audacious Goal): A long-term, ambitious goal set by an organization to inspire and focus its efforts. Although bold and potentially questioned by outsiders, it's seen as achievable within the company.
Board of Directors: A group of individuals elected to represent shareholders and oversee a company’s major decisions and management policies.
Bootstrapping: Starting a business with personal finances or the operating revenues of the new company without external help.
Burn Rate: The rate at which a company consumes its capital pool, especially venture capital, before reaching profitability.
Business Assets: Items of value owned by a business, including inventory, equipment, and real estate.
Business Licenses: Permits issued by state or local government required to operate a business legally.
Business Name: The officially recognized name of a business entity.
C-Corporation: A type of corporation in the U.S. that is taxed separately from its owners. C-corps are subject to corporate income tax, and their profits can be distributed to shareholders as dividends, which are also taxed, resulting in double taxation.
Cap Table (Capitalization Table): A spreadsheet or table that shows the equity capitalization of a company.
Certificate of Assumed Name: A document issued by a state authority that permits business operations under a fictitious name.
Certificate of Authority: A state-issued certificate that authorizes a foreign corporation to conduct business within the state.
Certificate of Dissolution: A document that formally marks the dissolution of a business, serving as official notice that the business no longer exists.
Chapter 7 Bankruptcy: A type of bankruptcy involving liquidating a debtor's assets to repay creditors.
Chapter 11 Bankruptcy: A type of bankruptcy that involves reorganization of a debtor's business affairs and assets, used primarily by corporate entities.
Chapter 13 Bankruptcy: A type of bankruptcy that allows individuals with a regular income to develop a plan to repay all or part of their debts.
Churn Rate: The percentage of customers or users who stop using a service over a certain time period. It’s crucial for businesses that rely heavily on customer satisfaction.
Cliff Vesting: A term used in equity agreements where an employee earns their full benefit of stock options after working for the company for a certain period.
Competitive Advantage: Attributes that allow a company to outperform its competitors.
Convertible Note: A form of short-term debt that converts into equity, typically in conjunction with a future financing round.
Corporate Spin-off: A type of corporate reorganization involving the separation of a division to form a new independent corporation.
Corporate Venture Capital: Funds invested by established companies in startups to achieve financial returns or strategic goals.
Crowdfunding: Raising small amounts of money from a large number of people, typically via the Internet.
Crowdsourcing: Obtaining information or input into a task or project by enlisting the services of a large number of people, also usually via the Internet.
Customer Acquisition Cost (CAC): The cost associated with convincing a potential customer to buy a product or service.
Customer Lifetime Value (CLV): An estimate of the total profit a business expects from a single customer throughout their relationship.
Customer Relationship Management (CRM): A technology for managing all your company’s relationships and interactions with customers and potential customers.
Daily Active Users (DAU): A measure of how many users interact with a product or website daily.
Debt Capital: Capital that a startup business raises by taking out a loan, which must be repaid over time with interest.
Demo Day: An event at which startups present their business ideas to potential investors, typically at the conclusion of an accelerator or incubator program.
Dilution: A reduction in the ownership percentage of a share of stock caused by the issuance of more shares.
Discovery Phase: The initial stage in the project development process where the project's scope, requirements, and feasibility are assessed.
Disruption: A process whereby a smaller company with fewer resources is able to successfully challenge established businesses.
Dissolution: The process of formally ending the existence of a business entity.
Down Round: A funding round where a company’s valuation is lower than the previous round.
Early Adopter: A person who starts using a product or technology as soon as it becomes available.
EBITDA (Earnings Before Interest, Taxation, Depreciation, and Amortization): A financial metric showing a company's earnings before accounting for interest, taxes, depreciation, and amortization. It helps gauge a company's profitability without these external factors.
Ecosystem: A network of interconnected elements, typically used to describe the range of businesses, products, and users in a specific industry or technology sector.
Elevator Pitch: A short and persuasive sales pitch to explain a business idea to a potential investor or partner in the time it takes to ride an elevator.
Employee Stock Ownership Plan (ESOP): A program that provides a company's workforce with an ownership interest in the company.
Employer Identification Number (EIN): A unique number assigned by the IRS to businesses for identification and tax purposes.
Equity: The ownership value in an asset after all liabilities have been subtracted.
Equity Crowdfunding: A method of raising capital through the sale of shares in a business to the public.
Evangelist: A person who advocates for a particular company or product, often someone who helps spread the adoption of a technology or startup.
Exit Strategy: A planned approach to exiting a company. This can involve selling the company to another firm or going public.
Final Tax Returns: The last tax filings a business submits following its dissolution or sale.
First-Mover Advantage: The competitive advantage gained by being the first company to enter into a market with a new product or service.
Freemium: A pricing strategy where a product or service is provided free of charge, but money is charged for additional features, services, or virtual goods.
Funding Rounds: Series of investments whereby investors provide startups with capital in exchange for equity.
Gamify: Using elements of game design in non-game situations to boost engagement and productivity, such as in business processes, education, or customer interaction.
Go-to-Market Strategy (GTM): An action plan that specifies how a company will reach target customers and achieve competitive advantage.
Goodwill: The value of a business above its tangible assets, often associated with its reputation and customer relationships.
Grant: A sum of money given by a government or other organization for a particular purpose.
Growth Hacking: Strategies and tactics aimed solely at growth, used particularly in startups to gain and retain customers.
Incubator: An organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services.
Initial Public Offering (IPO): The process of offering shares of a private corporation to the public in a new stock issuance.
Intellectual Property: Original ideas and creations protected by law, giving the creator exclusive rights to use, sell, or license them.
Involuntary Dissolution: Termination of a corporation initiated by external parties or authorities rather than the shareholders or directors.
Investment Syndicate: A temporary alliance of companies formed to handle a large transaction that would be difficult or impossible for the entities involved to handle individually.
Iteration: Repeating a series of steps in product development to make gradual improvements until a desired outcome is achieved.
Key Performance Indicators (KPIs): A set of quantifiable measurements used to gauge a company's overall long-term performance.
Lead Investor: The organization or individual who provides the largest portion of capital in a financing round and often plays a significant role in managing and coordinating the investment.
LEAN: A methodology for developing businesses and products that aims to shorten product development cycles and quickly discover if a proposed business model is viable.
Limited Liability Company (LLC): A business structure that provides limited liability to its owners but allows for flexible management arrangements.
Liability Insurance: Insurance that covers legal liabilities to third parties incurred by a business.
Liquidation: The process of converting business assets into cash to pay debts.
Liquidation Preference: A term used in contracts and state law to specify which investors get paid first and how much they get paid in the event of a liquidation event or sale of the company.
Lifetime Value (LTV): The predicted net profit attributed to the entire future relationship with a customer.
Market Penetration: The percentage of a target market that consumes a product or service. Marketing strategies may include aggressive price reductions and widespread distribution.
Management Buyout (MBO): A form of acquisition where a company's managers acquire a large part or all of the company from the private owners or the parent company.
Merger: The combination of two companies to form a new entity, typically involving the mutual consent of both companies.
Micro-VC: A venture capital fund that typically manages smaller amounts of capital and invests in the early stages of startups.
Minimum Viable Product (MVP): A product with just enough features to satisfy early customers and provide feedback for future product development.
Moat: A competitive advantage (e.g., proprietary technology, strong brand identity, regulatory protection, unique manufacturing processes, and significant scale advantages) that allows a business to protect its market share and profitability from competitors.
Monetization: The process of converting something into money, especially by generating revenue from an asset, business, etc.
Monthly Active Users (MAU): The number of unique users who engage with a site within a 30-day period.
Monthly Recurring Revenue (MRR): Revenue that a company can consistently generate each month.
Net Promoter Score (NPS): A management tool that can be used to gauge the loyalty of a firm's customer relationships.
Non-Executive Director (NED): A member of a company's board of directors who is not part of the executive team. A non-executive director typically does not engage in the day-to-day management of the organization but is involved in policy-making and planning exercises.
Notice of Intent to Dissolve: A formal declaration that a corporation plans to dissolve itself.
Operating Agreement: A document outlining the framework for the operation of an LLC, defining the business's financial and functional decisions.
Organic/Inorganic Traffic: Web traffic received naturally and not through paid ads is considered organic, while inorganic traffic is the result of paid advertising.
Outsourcing: Obtaining goods or services from an outside or foreign supplier, especially in place of an internal source.
Partnership: A business structure in which two or more individuals manage and operate a business.
Partnership Agreement: A contract among business partners that details the rules and guidelines of the partnership.
Pitch Deck: A brief presentation used by entrepreneurs to provide investors with a quick overview of their business plans during meetings.
Pivoting: Changing a business strategy significantly to deliver more value to customers and improve returns.
Platform as a Service (PaaS): A category of cloud computing services that provides a platform allowing customers to develop, run, and manage applications without the complexity of building and maintaining the infrastructure.
Portfolio Company: A company or entity in which a venture capital firm or private equity firm invests.
Preferred Stock: A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.
Private Equity: Capital investment made into companies that are not publicly traded on a stock exchange.
Private Equity Acquisition: The process of a private equity firm buying out a company, typically to improve its financial health and resell it at a profit.
Pre-Seed Funding: The earliest stage of funding a new company comes when the company’s founders are first getting their operations off the ground.
Pre-money and Post-money Valuation: Pre-money refers to the company's valuation before receiving funding; post-money includes the funding amount.
Product Market Fit (PMF): The degree to which a product satisfies a strong market demand.
Product Roadmap: A high-level visual summary that maps out the vision and direction of your product offering over time.
Proof of Concept (POC): Evidence that demonstrates that a concept or theory has the potential to be developed into a viable product.
Pro-Rata Rights: The right of investors to participate in future funding rounds so they can maintain their percentage of ownership in a company.
Prototype: An early sample, model, or version of a product built to test a concept or process.
Research and Development (R&D): The investigative and research work a company does to develop new products or improve existing ones.
Retention: The ability of a company to retain its customers over some specified period.
Revenue-Based Financing: A type of funding in which investors inject capital into a business in return for a percentage of ongoing gross revenues.
Return on Investment (ROI): A calculation used to determine the profitability of an investment. It compares the gain from an investment to its cost.
Runway: The amount of time until a startup goes out of business, assuming current income and expenses continue without securing additional financing.
S-Corporation: A special type of corporation in the U.S. designed to avoid double taxation. S-corps pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders report the flow-through of income and losses on their personal tax returns.
SaaS (Software as a Service): A software distribution model in which applications are hosted by a third-party provider and made available to customers over the Internet.
Scaling: Growing a business in a way that increases revenue without a significant increase in costs.
Secondary Market Sale: The trading of securities or financial instruments among investors after they have been initially issued to the public.
Seed Funding: The first official equity funding stage. It typically represents the first official money that a startup raises.
Series A, B, C Funding: Refers to the various stages of a startup financing. Series A is generally the first significant round of venture capital financing.
Settlement: An agreement reached during the dissolution or reorganization of a business detailing the terms and conditions.
Shareholders Agreement: An arrangement among a company's shareholders describing how the company should be operated and the shareholders' rights and obligations.
Social Proof: A concept where people copy the actions of others in an attempt to undertake behavior in a given situation. In startups, it's often used in marketing to show that others have endorsed a product or service, encouraging new customers to do the same.
Software Development Kit (SDK): A set of software tools and programs used by developers to create applications for specific platforms.
Sole Proprietorship: A business owned and run by one individual, where there is no legal distinction between the owner and the business entity.
Solopreneur: An entrepreneur who operates a business alone, without the help of co-founders or employees.
Stack (or Tech Stack): A set of software subsystems or components needed to create a complete platform such that no additional software is needed to support applications.
Startup Costs: Initial costs incurred during the process of setting up a company.
Stockholder: An individual or entity that owns shares in a corporation.
Strategic Acquisition: An acquisition made by a company for strategic purposes such as accessing a new market or enhancing technological capabilities.
Subscription Model: A business model where a customer must pay a recurring price at regular intervals for access to a product.
Sweat Equity: Equity granted to a company's founders and employees as compensation for their labor.
Technical Founder: A member of the founding team of a company who has technical expertise and is primarily responsible for the technical direction of the product.
Term Sheet: A non-binding agreement that details the basic terms and conditions under which an investment will be made.
Total Addressable Market (TAM): The total market demand for a product or service.
Unicorn: A startup whose valuation has exceeded $1 billion.
User Experience (UX): A person's emotions and attitudes about using a particular product, system, or service.
User Interface (UI): The means by which the user and a computer system interact, particularly the use of input devices and software.
Valuation: The process of determining the current worth of an asset or company.
Venture Capitalist (VC): An individual or firm that invests in startups and small businesses with high growth potential, typically in exchange for equity. Venture capitalists not only provide capital but often offer guidance and resources to help these companies scale effectively.
Vesting: The process through which an employee earns the right to keep stock incentives or retirement plan contributions from their employer, usually over a period of time. Once vested, these benefits cannot be taken away.
Voluntary Dissolution: The deliberate decision by a business’s shareholders, partners, or LLC members to dissolve the entity.
Wireframe: A visual guide that represents the skeletal framework of a website.
Winding Up: The process of settling the accounts and liquidating the assets of a business as part of its closure.
Y-Combinator: An American seed money startup accelerator launched in March 2005.
Zombie Startup: A company or project perceived as neither succeeding nor failing, just existing.