61 essential terms every founder needs to understand. Each definition links to in-depth articles, free tools, and templates from the Raise Ready library.
An individual who invests personal capital in early-stage startups, typically at pre-seed or seed stage, in exchange for equity.
Contractual protection that adjusts an investor's conversion price if the company issues shares at a lower price in a future round.
A short-term financing round designed to extend a startup's runway until the next major fundraise.
A spreadsheet or ledger showing the equity ownership, dilution, and value of equity in each round of investment.
A short-term debt instrument that converts into equity at a future financing round, typically with a discount or valuation cap.
A secure virtual repository where founders share confidential documents with potential investors during due diligence.
The reduction in existing shareholders' ownership percentage when new shares are issued during a funding round.
The investigation process investors conduct before committing capital, reviewing financials, legal, product, and market factors.
A regular communication (usually monthly or quarterly) from founders to investors covering key metrics, milestones, and challenges.
The investor who sets the terms and price for a funding round and typically takes a board seat.
The order and multiple at which investors get paid back before common shareholders in a liquidation or exit event.
A presentation (typically 10-15 slides) used to introduce a startup to potential investors and secure funding.
The value of a company after receiving new investment, calculated as pre-money valuation plus investment amount.
The value of a company before receiving new investment in a funding round.
The earliest stage of venture funding, typically raising under $1M to validate an idea before building a full product.
A class of shares with rights superior to common stock, typically held by investors, including liquidation preferences and anti-dilution protections.
Simple Agreement for Future Equity. An investment contract that converts to equity at a future priced round, popularized by Y Combinator.
The first significant round of venture funding, typically $1-5M, used to achieve product-market fit and initial traction.
The first major institutional funding round, typically $5-20M, raised after demonstrating product-market fit and repeatable growth.
A non-binding document outlining the key terms and conditions of an investment, including valuation, board seats, and protective provisions.
Institutional investment funds that provide capital to high-growth startups in exchange for equity, expecting outsized returns.
A form of debt financing for venture-backed startups, typically used to extend runway between equity rounds without additional dilution.
Annual Recurring Revenue. The annualized value of recurring subscription revenue, a key SaaS metric.
A revenue projection built from individual unit assumptions (customers, pricing, conversion rates) rather than top-down market estimates.
The rate at which a startup spends cash each month, calculated as total monthly operating expenses minus revenue.
The number of months a startup can operate before running out of cash, calculated as cash balance divided by monthly burn rate.
Cost of Goods Sold. The direct costs attributable to producing or delivering your product, including hosting, support, and payment processing.
A spreadsheet-based projection of a company's future financial performance, typically covering 3-5 years of revenue, expenses, and cash flow.
Revenue minus cost of goods sold, divided by revenue. Expressed as a percentage, it shows the profitability of your core product.
Monthly Recurring Revenue. The predictable revenue a subscription business earns each month from active customers.
The degree to which a company can increase operating income by increasing revenue, as fixed costs are spread over a larger base.
Profit and Loss Statement (Income Statement). Shows revenue, expenses, and net profit over a specific period.
The accounting principle determining when revenue is recorded, governed by ASC 606 standards for SaaS and subscription businesses.
The number of months a company can continue operating at its current burn rate before running out of cash.
Modeling multiple financial outcomes (base, optimistic, pessimistic) to stress-test assumptions and prepare for different futures.
Testing how changes in individual assumptions (like churn or CAC) impact key financial outcomes like profitability and runway.
An integrated financial model connecting the income statement, balance sheet, and cash flow statement.
Average Revenue Per User. The average monthly or annual revenue generated per active customer.
Customer Acquisition Cost. The total cost of sales and marketing divided by the number of new customers acquired.
The number of months it takes for a customer to generate enough gross profit to recover their acquisition cost.
The percentage of customers who cancel or stop paying in a given period, typically measured monthly.
Grouping customers by acquisition date and tracking their retention, revenue, and profitability over time.
Additional revenue from existing customers through upsells, cross-sells, or increased usage.
Customer Lifetime Value. The total profit a customer generates over their entire relationship with your company.
The ratio of customer lifetime value to acquisition cost. A ratio of 3:1 or higher is considered healthy for sustainable growth.
The percentage of revenue retained from existing customers after accounting for churn, downgrades, and expansion. Above 100% means expansion outpaces churn.
The time required for a customer's cumulative gross profit to equal the cost of acquiring them.
The direct revenue and costs associated with a single unit (customer, transaction) of your business model, revealing fundamental profitability.
Money a company owes to its suppliers for goods and services received but not yet paid for.
Money owed to a company by its customers for products or services delivered but not yet paid for.
A financial statement showing a company's assets, liabilities, and equity at a specific point in time.
A formal gathering of a company's board of directors to review performance, approve decisions, and provide strategic guidance.
A financial statement showing how cash moves in and out of a business through operating, investing, and financing activities.
A non-cash expense that allocates the cost of a tangible asset over its useful life, reducing taxable income.
Earnings Before Interest, Taxes, Depreciation, and Amortization. A proxy for operating cash flow used in valuation.
Current assets minus current liabilities. Measures a company's ability to meet short-term obligations and fund day-to-day operations.
A portion of acquisition price contingent on the acquired company hitting specific financial targets post-acquisition.
A founder's plan for how they and investors will realize returns, typically through acquisition, IPO, or secondary sale.
Mergers and Acquisitions. The process of combining or purchasing companies, a primary exit path for venture-backed startups.
A valuation method that multiplies annual revenue by a factor (typically 5-15x for SaaS) to estimate company value.
Total Addressable Market. The total revenue opportunity available if a product achieved 100% market share.
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