Comprehensive definitions of startup and tech terms.
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.
Activation rate is the percentage of signups who complete a key action that signals they got value. High activation predicts retention.
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.
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 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.
Average Contract Value is the average annual revenue per customer contract. Used to segment customers and set sales strategy.
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.
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.
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 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 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.
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.
Contribution margin is revenue per customer minus variable costs (COGS). Shows how much each sale contributes to covering fixed costs and profit.
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.
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 is an early customer who collaborates on product development. They provide feedback, test features, and help shape the product roadmap.
A five-day structured process for solving critical business questions through design, prototyping, and testing with real users.
Using your own product internally before releasing it to customers, named from the phrase eating your own dog food.
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.
A hands-on leadership style where founders stay deeply involved in product and execution details, coined by Paul Graham.
Founder-market fit is when founders have unique insights, experience, or connections that give them an unfair advantage in their target market.
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.
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 is rapid experimentation across channels to find scalable, low-cost ways to grow. Focus on creativity over budget.
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.
A methodology for developing products and businesses through rapid experimentation, validated learning, and iterative product releases.
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.
Magic Number measures sales and marketing efficiency. Shows how much revenue growth you get per dollar spent on sales and marketing.
Minimum Viable Segment is the smallest group of customers you can serve profitably while achieving product-market fit. Narrower focus than TAM.
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 is a software architecture where one instance of the application serves multiple customers. Each customer's data is isolated but shares the same codebase.
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.
Net Revenue Retention measures revenue growth from existing customers. Includes expansions minus churn. Above 100% means you grow without new customers.
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 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.
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.
The AARRR framework for tracking startup growth: Acquisition, Activation, Retention, Revenue, Referral.
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 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.
Product-Market Fit — when your product solves a real problem for a large enough group of people who are willing to pay for it.
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.
Generating just enough revenue to cover founders' basic living expenses (ramen noodles), without external funding.
A graph showing the percentage of users who remain active over time after signup.
Revenue-based financing (RBF) provides capital in exchange for a percentage of future revenue. Repay from revenue, not equity dilution.
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.
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.
Sales Qualified Lead is a lead that sales has vetted and deemed ready for direct outreach. Fits ICP, has budget, shows intent.
The indirect consequences of a decision or action, beyond the immediate first-order result.
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.
The seed stage in bootstrapped startups is the initial phase. Founders use personal resources for activities like market research, product development, and early testing. External funding is not sought at this stage. The goal is to validate the business concept before scaling.
Self-service SaaS lets customers sign up, try, and buy without talking to sales. Product sells itself through trial and onboarding.
TAM is the total revenue opportunity if you captured 100% of your target market. Used to estimate market size for investors.
The implied cost of future rework caused by choosing a quick, easy solution now instead of a better approach that would take longer.
A test definition
How long it takes a new user to experience the core benefit of your product.
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 charges customers based on consumption. Pay for what you use instead of fixed monthly fee.
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.
A pricing structure that offers increasing value at increasing price points, guiding customers from low-commitment to high-value tiers.
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.
A user who has experienced meaningful value in your product and is likely to convert to a paying customer.
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.