Glossary
Definitions of the startup and product terms founders actually use, with formulas, benchmarks and worked examples.
A
A/B Testing
A/B testing (split testing) means showing two versions of something to different users and measuring which performs better. Version A vs. Version B. Data wins, opinions lose.
Account-Based Selling
Account-based selling is a sales strategy that targets a curated list of specific named companies individually, tailoring outreach and pitch to each one, instead of casting a wide net across anyone who might vaguely fit.
Activation Rate
Activation rate is the percentage of signups who complete a key action that signals they got value. High activation predicts retention.
ACV (Average Contract Value)
Average Contract Value is the average annual revenue per customer contract. Used to segment customers and set sales strategy.
AI Wrapper
An AI wrapper is a product built mainly as a thin interface on top of an existing foundation model's API, adding a prompt, a UI, and light orchestration without materially extending what the underlying model can do on its own.
Angel Investor
An angel investor is an individual who invests their own money in early-stage startups in exchange for equity. Angels typically write $10k-$100k checks and invest before VCs enter.
API (Application Programming Interface)
An API lets one piece of software talk to another. It's a set of rules and endpoints that define how apps can request data or trigger actions from a service.
ARR (Annual Recurring Revenue)
ARR is the yearly value of recurring subscription revenue. It's MRR × 12, normalized to show annual run rate. SaaS investors care about ARR more than MRR at scale.
B
Beachhead Market
A beachhead market is the smallest, most specific customer segment a startup can realistically dominate first, chosen as a way into a larger market rather than as an end in itself.
Beta Tester
A beta tester is someone who uses a product before its public release to surface bugs and give feedback, usually in exchange for free or discounted access rather than payment or a formal working relationship.
Bootstrapping
Bootstrapping means building your company with personal savings, revenue from customers, or small loans—without taking venture capital. You own 100% and answer to customers, not investors.
Build in Public
Build in public is the practice of sharing your startup's progress, decisions, and often its numbers openly as you build, instead of working in private and only announcing at launch.
Burn Rate
Your "burn rate" represents your monthly expenses relative to your available capital. Calculate your company's potential runway by dividing your total funds by your burn rate.
Buyer Persona
A buyer persona is a semi-fictional profile of the individual person who decides to buy your product, built from real interviews and data about their role, goals, and objections rather than assumptions.
C
CAC (Customer Acquisition Cost)
CAC is how much it costs to acquire one paying customer. Calculate it by dividing total sales and marketing spend by the number of new customers acquired in that period.
Churn Rate
Churn rate is the percentage of customers who cancel their subscription in a given period. It's the silent killer of SaaS businesses—you can't grow faster than you're losing customers.
CI/CD (Continuous Integration / Continuous Deployment)
CI/CD automates the process of testing and deploying code. Continuous Integration merges code changes frequently and runs automated tests. Continuous Deployment automatically pushes passing code to production.
COGS (Cost of Goods Sold)
COGS (Cost of Goods Sold) is the direct cost of delivering your product to each customer. For a SaaS business that means hosting, third-party API fees, and payment processing, not sales, marketing, or general overhead.
Cohort Analysis
A method of grouping users by a shared characteristic (usually signup date) and analyzing their behavior over time to identify patterns in retention, engagement, and revenue.
Competitive Moat
A competitive moat is a structural advantage that makes a business hard for competitors to copy or beat, even after they see exactly what you're doing and try to replicate it.
Content Marketing
Content marketing is creating and publishing useful content, articles, guides, comparison pages, tools, to attract an audience organically, rather than paying for each visitor through ads.
Contribution Margin
Contribution margin is revenue per customer minus variable costs (COGS). Shows how much each sale contributes to covering fixed costs and profit.
Conversion Rate
Conversion rate is the percentage of visitors who complete a desired action. Could be signing up, starting a trial, making a purchase—whatever matters for your business.
Customer Discovery
Customer discovery is the process of talking directly to potential customers before or while you build, to find out whether the problem you assume exists actually exists and whether people would pay to solve it.
D
DAU/MAU (Daily Active Users / Monthly Active Users)
DAU is the number of unique users who engage with your product in a day. MAU is monthly. The DAU/MAU ratio (stickiness) shows how often users return—higher is better.
Design Partner
Design partner is an early customer who collaborates on product development. They provide feedback, test features, and help shape the product roadmap.
Design Sprint
A five-day structured process for solving critical business questions through design, prototyping, and testing with real users.
Dogfooding
Using your own product internally before releasing it to customers, named from the phrase eating your own dog food.
Domain Expertise
Domain expertise is firsthand, working knowledge of a specific industry or problem space, built through years of doing the job rather than researching it from outside.
E
Early Adopter
An early adopter is someone who buys or tries a new product well before it is proven, tolerating rough edges and missing features because the problem it solves is painful enough to be worth the risk.
Equity Financing
Equity financing is raising money by selling a percentage ownership stake in your company to investors, in exchange for cash you never have to repay.
Exit Strategy
Your exit strategy is how you plan to cash in on your company. It's like your future game plan. You might sell it, team up with another company, go public, or close shop. Knowing this ahead of time helps you stay prepared.
Expansion Revenue
Expansion revenue is additional recurring revenue generated from customers you already have, through upsells, cross-sells, or growth in seats or usage, as opposed to revenue from acquiring new customers.
F
Feature Flag
A software development technique that allows you to turn features on or off without deploying new code, enabling gradual rollouts, A/B tests, and safe experimentation.
Founder Mode
A hands-on leadership style where founders stay deeply involved in product and execution details, coined by Paul Graham.
Founder-Market Fit
Founder-market fit is when founders have unique insights, experience, or connections that give them an unfair advantage in their target market.
Freemium
Freemium is a pricing model where the core product is free forever, but advanced features, higher limits, or premium support require payment. The free tier drives adoption, paid tiers drive revenue.
Friends and Family Round
A friends and family round is the earliest money a startup raises, typically from people who know the founder personally rather than professional investors, usually before there is a product or any real traction to show.
G
Gross Margin
Gross margin is revenue minus cost of goods sold, expressed as a percentage. Shows how much profit you keep after delivering your product or service.
Growth Hacking
Growth hacking is rapid experimentation across channels to find scalable, low-cost ways to grow. Focus on creativity over budget.
Growth Loops
A growth loop is a self-reinforcing cycle where the output of one round of users becomes the input that brings in the next round, without requiring the company to keep paying for new acquisition each time.
GTM (Go-To-Market)
GTM (Go-To-Market) is the plan for how a company will reach, acquire, and sell to its target customers. It covers who you're selling to, how you'll reach them, how the product is priced and positioned, and the sequence of steps to launch.
I
ICP (Ideal Customer Profile)
ICP describes your perfect customer. The type of company or person most likely to buy, get value, and stay long-term.
Indie Hacker
An indie hacker is a founder who builds and ships software products, usually alone or with one or two collaborators, funded by personal savings or the product's own revenue rather than outside investment.
L
Land and Expand
Land and expand is a sales strategy where you start with a small deal, then grow revenue over time through upsells and cross-sells within the same account.
Landing Page Optimization
Landing page optimization is the process of testing and refining a page's copy, layout, and calls to action to increase the percentage of visitors who complete a target action, such as signing up or requesting a demo.
Lead Scoring
Lead scoring is a system that assigns point values to a lead's actions and attributes so leads can be ranked and prioritized instead of treated as equally likely to buy.
Lean Startup
A methodology for developing products and businesses through rapid experimentation, validated learning, and iterative product releases.
LTV (Lifetime Value)
LTV is the total revenue you expect from a customer over their entire relationship with your business. It's the north star for determining how much you can afford to spend on acquisition.
M
Magic Number
Magic Number measures how much new recurring revenue you get back for every dollar of sales and marketing spend. It is the standard read on whether growth is being bought efficiently.
Micro-SaaS
A micro-SaaS is a small, narrowly scoped software-as-a-service product that solves one specific problem for a specific audience, typically run by one person or a very small team on minimal overhead.
MQL (Marketing Qualified Lead)
An MQL is a lead that marketing has judged more likely to become a customer than an average visitor, based on actions they've taken, like downloading a guide, attending a webinar, or revisiting the pricing page, rather than a conversation with sales.
MRR (Monthly Recurring Revenue)
MRR is the predictable revenue your business generates every month from subscriptions. It's the north star metric for SaaS businesses because it shows growth trajectory independent of one-time sales.
Multitenancy
Multitenancy is a software architecture where one instance of the application serves multiple customers. Each customer's data is isolated but shares the same codebase.
MVP (Minimum Viable Product)
An MVP is the simplest version of your product that solves the core problem for early users. It has just enough features to validate your idea and gather feedback—nothing more.
MVS (Minimum Viable Segment)
Minimum Viable Segment is the smallest group of customers you can serve profitably while achieving product-market fit. Narrower focus than TAM.
N
Network Effects
Network effects are a dynamic in which a product becomes more valuable to each user as more people use it. A product with strong network effects gets harder to compete with over time, because a challenger has to convince users to switch to a less valuable, less populated network.
No-Code
No-code is building working software using visual, configuration-based tools instead of writing code by hand.
North Star Metric
Your North Star Metric is the single metric that best captures the core value your product delivers to customers. It's the one number that predicts long-term success better than any other.
NPS (Net Promoter Score)
NPS measures customer satisfaction by asking one question: 'How likely are you to recommend this product to a friend?' (0-10 scale). Promoters (9-10) minus Detractors (0-6) = your NPS.
NRR (Net Revenue Retention)
Net Revenue Retention measures revenue growth from existing customers. Includes expansions minus churn. Above 100% means you grow without new customers.
P
Payback Period
Payback period is how long it takes to recover the cost of acquiring a customer (CAC). Calculated as CAC divided by monthly profit per customer.
Pirate Metrics
The AARRR framework for tracking startup growth: Acquisition, Activation, Retention, Revenue, Referral.
Pivot
A startup pivot is like a strategic shift or change of course. It's usually prompted by insights gained from user testing and analysis. Startups make pivots to adapt their product or strategy to better suit the needs and preferences of the market and their customers.
PLG (Product-Led Growth)
PLG is a go-to-market strategy where the product itself is the primary driver of customer acquisition, conversion, and expansion—not sales or marketing teams.
PMF (Product-Market Fit)
Product-market fit happens when your product solves a real problem for a specific market so well that people actively seek it out, use it regularly, and tell others about it.
PQL (Product Qualified Lead)
A user who has experienced meaningful value in your product and is likely to convert to a paying customer.
Pre-Seed
Pre-seed is the earliest funding round before seed, typically $50k-$500k. Founders raise from angels, friends, family, or micro VCs to build an MVP and validate the idea before raising institutional seed.
Pricing Model
A pricing model is the overall structure a company uses to charge customers, the framework that decides what gets metered, whether price scales with usage, seats, or value delivered, and how customers move between tiers.
R
Ramen Profitable
Generating just enough revenue to cover founders' basic living expenses (ramen noodles), without external funding.
Referral Program
A referral program is a structured system for rewarding existing customers who bring in new customers, typically tracked through a unique referral link or code and paid out in credit, cash, or product perks.
Retention Curve
A graph showing the percentage of users who remain active over time after signup.
Revenue-Based Financing
Revenue-based financing (RBF) provides capital in exchange for a percentage of future revenue. Repay from revenue, not equity dilution.
Runway
Runway is how many months your startup can survive before running out of cash. It's calculated by dividing your current cash balance by your monthly burn rate.
S
SaaS (Software as a Service)
SaaS is software delivered over the internet on a subscription basis. Instead of buying and installing software, users access it through a browser. No servers to manage, no updates to install.
SAFE (Simple Agreement for Future Equity)
A SAFE (Simple Agreement for Future Equity) is a financing instrument, introduced by Y Combinator in 2013, that lets an investor give a startup cash now in exchange for the right to receive equity later, when the company raises a priced round. It isn't debt: there's no interest rate and no maturity date.
SAM (Serviceable Addressable Market)
SAM (Serviceable Addressable Market) is the portion of the Total Addressable Market (TAM) that your specific product and business model can realistically serve, narrowed by factors such as geography, product capability, pricing, or which customer segments you actually sell to.
Second-Order Effects
The indirect consequences of a decision or action, beyond the immediate first-order result.
Seed Funding
The first significant round of venture capital funding for a startup, typically used to validate product-market fit and build the initial team. Seed rounds usually range from $500k to $3M.
Seed Stage
Seed stage describes a company that has raised, or is raising, its first institutional round. The product usually exists and has early users, and the money is there to find repeatable go-to-market rather than to discover the idea.
Self-Service SaaS
Self-service SaaS lets customers sign up, try, and buy without talking to sales. Product sells itself through trial and onboarding.
SEO (Search Engine Optimization)
SEO is the practice of optimizing your website so it ranks higher in Google search results. Higher ranking = more organic traffic = more customers without paying for ads.
Series A
Series A is typically the first institutional VC round after seed funding. Startups raise $2M-$15M to scale a proven business model. You need strong traction—revenue, users, growth—to raise a Series A.
Series B
Series B is the funding round that follows Series A, typically raised once a startup has clear product-market fit and a repeatable go-to-market motion, and needs capital to scale that motion rather than find it.
Solopreneur
A solopreneur runs an entire business alone, handling product, marketing, sales, and support without co-founders or employees, whether or not that business involves building software at all.
SQL (Sales Qualified Lead)
Sales Qualified Lead is a lead that sales has vetted and deemed ready for direct outreach. Fits ICP, has budget, shows intent.
Startup Incubator
Startup incubators are programs that offer early-stage companies and entrepreneurs mentorship, funding, and resources to help them grow. In exchange, incubators receive a share of the company's equity.
T
TAM (Total Addressable Market)
TAM is the total revenue opportunity if you captured 100% of your target market. Used to estimate market size for investors.
Technical Debt
The implied cost of future rework caused by choosing a quick, easy solution now instead of a better approach that would take longer.
Time to Value
How long it takes a new user to experience the core benefit of your product.
U
Unit Economics
Unit economics measures profitability per customer. It's the revenue one customer generates (LTV) minus the cost to acquire and serve them (CAC + COGS). Positive unit economics = you make money on each customer.
Usage-Based Pricing
Usage-based pricing charges customers based on consumption. Pay for what you use instead of fixed monthly fee.
User Onboarding
User onboarding is how you guide new users from signup to their first moment of value. Great onboarding feels effortless. Bad onboarding means users churn before they understand what you do.
V
Value Ladder
A pricing structure that offers increasing value at increasing price points, guiding customers from low-commitment to high-value tiers.
VC (Venture Capital)
Venture capital (VC) is money that professional investment firms put into high-growth, high-risk startups in exchange for equity. Firms raise capital from limited partners such as pension funds and endowments, then invest it across a portfolio of startups, expecting most to fail and a handful to generate the fund's returns.
Vibe Coding
Vibe coding is building software by describing what you want in plain language to an AI coding assistant and iterating on what it produces, rather than writing the code by hand.
Viral Coefficient
Viral coefficient measures how many new users each existing user brings in. A coefficient above 1.0 means exponential growth without paid acquisition—each user recruits more than one other user.
W
Waitlist
A waitlist is a signup list for a product that isn't available yet, used to measure demand and build an audience of interested users before launch.
Webhook
A webhook is a way for one app to send real-time data to another when something happens. Instead of constantly checking for updates (polling), the app pushes data automatically when an event occurs.