Glossary

a general partner is a manager of a venture fund. GPs analyze potential deals and take the final decision on how a fund's capital will be allocated. General partners get paid through management fees, carried interest, and distributions from the fund.

limited partners, are the investors into a fund. They could include individuals, family offices, fund of funds which are funds specialized in investing in other funds, pension funds, universities, corporates, governments especially through sovereign funds. There are funds with a single LP and they are often called evergreen if the LP commitment is essentially a given. More commonly funds have multiple LPs, of differing size, almost always less than 100 for practical and legal reasons.

the cut that GPs accrue after disbursing profits back to LPs. The standard in the VC industry is 20%. Carry is the moonshot for VCs, the real financial and reputational upside.

what pays the day to day for a fund, salaries and running the office. 2% of the fund size during 10y is a typical amount.

individuals who invest their own money, typically on their own behalf.

an organization that invests money on behalf of others, such as pensions, mutual funds, banks, hedge funds, and insurance companies.

Annual Contract Value (ACV) is the average annual revenue generated from each customer contract, excluding fees. If a customer signs a 5-year contract for $50,000, averaging this value per year will give you an annual contract value of $10,000.

The amount of money a person, syndicate or fund is able to invest in a company.

Dilution is the reduction in the ownership percentage in the startup as an effect of the issuance of shares (next funding rounds).

means being in a good market with a product that can satisfy that market

Annual recurring revenue - is the yearly value of revenue generated from subscriptions, contracts, and other recurring billing cycles refers to revenue, normalized on an annual basis. ARR=MRRx12. Details

Keep It Simple Security - a standard convertible note investment agreement introduced by the early stage investor 500Startups. More details

Software as a Service

If the startup’s valuation in the next equity round is lower than the Valuation Cap, the SAFE/convertible note Investors will be paying for their shares at the actual valuation and applying the discount rate (typically 15-20%). If the next equity round is higher than the Valuation Cap, the discount rate is not applied.

Lead Research Specialist

A Net Promoter Score is a numerical value generated directly from customer feedback. A brand that has all promoters will have a cumulative score of +100. A brand that has all detractors will have a cumulative score of -100. Details

Simple Agreement for Future Equity.

South East Asia

The amount of money a person, syndicate or fund is able to invest in a company.

Y Combinator

Sales minus COGs = gross margin

the process of researching how sound is the potential investment opportunity, including researching the founders, company and market before investing in a company.

A liquidity event which typically can be an acquisition or an IPO (initial public offering)

Enterprise Resource Planning

Full Time Equivalent

Marketing Qualified Leads

Small, Medium Enterprise

Funding round where founders exchange the shares they own in the company for cash from investors.

Total Contract Value

Total addressable market represents the overall revenue potential for a product or service—the total market demand for a product or service. TAM implies that you capture 100% of your addressable market. Details

Lifetime value (of customer) - is the total dollar amount the startup is likely to receive from an individual customer over their subscription with your product. Customer Lifetime Value = ( Annual revenue per customer * Customer relationship in years) minus Customer Acquisition Cost

Serviceable Obtainable Market is the percentage of the market that you can actually reach with your product, sales, and marketing channels. This should be a realistic view of the customer base your company can pursue.

Ideal customer profile - the type of customer that would benefit the most from the product or service. Companies that fit the ICP are most likely to buy and continue to use the product.

Post-money valuation is pre-money valuation + round amount. We will always ask founders for post-money valuation, and post-money valuation SAFEs- makes it easy to understand ownership, because your equity % will be $ amount invested / post-money valuation.

Minimum Viable Product - a product with enough features to attract early-adopter customers and validate a product idea early in the product development cycle

Customer Acquisition Cost (CAC) is the amount of money a business spends to get a customer to purchase its products or services. CAC is an important growth metric for businesses to determine customer profitability and sales efficiency. Details

The serviceable available market - the market opportunity that exists within a firm’s existing core competencies and/or past performance. The biggest consideration when calculating SAM is that a firm most likely can only service markets that are core or directly adjacent to its current customer base.

Compound Annual Growth Rate - measure of an investment's annual growth rate over time, with the effect of compounding taken into account.

Annual Contract Value (ACV) is the average annual revenue generated from each customer contract, excluding fees. If a customer signs a 5-year contract for $50,000, averaging this value per year will give you an annual contract value of $10,000. Details

Capitalization Table (Cap Table) - shows how much equity ownership is held by each entity/individual. Important to pay attention to: how much investors already own; if there is employee stock option pool; how is the equity distributed among founders.

Monthly Recurring Revenue (MRR) is the income that a company expects to receive in payments on a monthly basis. Details

An agreement that is effectively a loan and can later be converted into stock. The note gives investors the opportunity to get their money back plus interest or to receive stock when the company does their next priced round.

Fast-Moving Consumer Goods

Time required to recover the initial investment; typically referring to customer acquisition cost.

Ability to keep supporting the company at the same financial terms that others in the future coming into the company have

Daily Active Users - how many users engage with the product in some meaningful way that’s relevant to the business. Sometimes Monthly Active Users (MAU) is a more suitable metric - depends what is the frequency of the problem that the users use the product to solve.

Memorandum of understanding

SaaS churn measures the number of SaaS customers who cancel their subscriptions for the given period. This metric indicates the long-term viability of a SaaS business, as higher churn means a company is losing out on customers and revenue. To streamline SaaS growth, businesses should strive to maintain an average SaaS churn rate between 3 and 8%. Details

How much money the startup is spending on overhead in excess of income, typically on monthly basis

Go-to-market strategy (GTM) - a company's plan to bring a product to market.

User Experience

Non disclosure agreement

The process in which you “earn” your stock over time. The purpose of vesting is to grant stock to founders, team over a fixed period of time so they have an incentive to stick around. A typical vesting period for an employee or founder is 3 - 4 years, which means they would earn 25% of their stock each year over a 4 year period. If they leave early, the unvested portion returns back to the company.