Founder Glossary
Definitions that compound.
17 startup and founder terms — defined, explained in plain English, with formulas and examples.
Finance
Runway
How long you have before you go broke at today's spending. The single most important number for any business burning cash.
Burn rate
How fast you're losing money. There's gross burn (everything you spend) and net burn (gross minus revenue).
Gross burn
Everything you spend in a month. Salaries, software, hosting, ads, rent, contractors.
Net burn
The real damage to your bank account each month after the customers pay you. This is what determines runway.
Gross margin
What percent of every dollar of revenue actually stays in your business after the cost of delivering it.
MRR (Monthly Recurring Revenue)
What you'd bill this month if every paying customer stayed exactly the same. The North Star of any subscription business.
ARR (Annual Recurring Revenue)
What you would make over a year if nothing changed. The number you put on the cover of an investor update.
Fundraising
Pre-seed
The first 'real' fundraising round. Usually angels and small funds. You have a working v0 and maybe 5-15 paying customers.
Seed round
The round where you're proving the business model, not just the idea. Usually $5-50k MRR and a clear acquisition channel.
SAFE note
A way to take investor money now without setting a valuation. The investor's money converts to shares the next time you raise a priced round, usually with a cap and/or discount.
Term sheet
The investor's offer letter. Mostly non-binding, but a signed term sheet sets the price and structure for everything that follows; you rarely walk back from it.
Cap table (Capitalization table)
The truth about who really owns the company. Keep it clean from day one; cleaning it up later costs lawyers and trust.
Option pool (ESOP)
Equity you're giving to people you haven't hired yet. Almost always created or topped-up out of pre-money before an investment closes (the 'option pool shuffle').
Growth
CAC (Customer Acquisition Cost)
How much it costs to land one customer. Most founders under-count this by leaving out their own time and tooling.
LTV (Lifetime Value)
How much money a customer is worth to you across their whole lifetime — not just the first month.
Churn
How fast you're losing customers. Quietly the single most important metric for any subscription business.