the startup glossary.

a model that breaks the user journey into five stages. dave mcclure called them the pirate metrics.

a clean way to find the leaky stage of your business. most early stage products are not failing at acquisition, they are failing at activation or retention.

a fixed-length programme (usually three months) that gives early stage companies money, mentorship, and a demo day, in exchange for equity.

yc, techstars, entrepreneur first. the strongest accelerators are worth the equity for the network and the deadline alone. the weakest ones are a paid retreat. check the alumni list.

a company gets bought primarily for its team, not its product or revenue.

a common soft-landing outcome for side projects that built a great team but never found product-market fit. the acquirer effectively pays you to come work for them, with a bit of cap table cleanup on top.

the moment a new user reaches the first meaningful win inside your product.

signing up is not using. if you can name the one action that turns a curious visitor into a real user (sent first invoice, published first page), you can stop guessing what to fix in onboarding and start measuring it.

the average yearly revenue from a single customer.

tells you whether you have a self-serve business (low acv, lots of customers) or a sales-led one (high acv, few customers). it changes everything: pricing page, support model, hiring plan.

someone with relevant experience who helps you for a small slice of equity (usually 0.1 to 1%) over two years.

the right advisor opens a door you cannot reach yourself. the wrong one takes equity and never replies. always ask for a specific output (intro, monthly call, deck review) before you give shares.

the specific instant a new user actually feels the value of your product. not when they sign up, when they "get it".

identify this moment and optimise the path to it. for facebook it was "10 friends in 7 days". for slack it was "2,000 messages sent". every onboarding decision should pull users toward this moment faster.

an individual who invests their own money into early-stage companies, usually £10k to £250k cheques.

often the first outside money a side project takes. good angels bring intros and operating advice. bad angels bring meetings you do not want.

total revenue divided by total users in a period.

a sanity check on pricing. if your arpu is £4 and your support costs per user are £6, you have a problem no amount of growth will fix.

monthly recurring revenue multiplied by 12. the size of your subscription business if nothing changed for a year.

the headline number people quote when bragging on twitter. useful for benchmarking. less useful if half your revenue is from one customer who might leave next month.

you sell to other companies, not to individuals.

fewer customers, bigger cheques, longer sales cycles, more support burden per account. b2b side projects usually need a clear job-to-be-done and a buyer you can email directly.

you sell to individual people, not businesses.

lots of customers, small cheques, low support tolerance, and growth lives or dies by marketing. b2c side projects need a hook that travels (memes, shareability, a clear before/after).

an early version of your product released to a small group before the public launch.

lets you trade polish for feedback. private beta means hand-picked users. public beta means anyone can sign up but expectations stay low. label it clearly so nobody is angry about rough edges.

a small group of people who oversee the company, set strategy, and can hire or fire the ceo.

most side projects do not need a board. once you raise from vcs, you will have one. founders usually keep control of the board until series a or later. treat composition as one of the most important decisions you make.

you fund the business from your own pocket and from revenue. no outside investors.

most side projects start here and many stay here on purpose. you keep all the equity and all the decisions. the trade-off is slower growth and the constant question of when to quit your job.

the percentage of visitors who land on a page and leave without doing anything.

a high bounce on your landing page is almost always a hook problem, not a product problem. fix the headline and hero image before you touch anything else.

the point where your revenue covers your costs. zero profit, zero loss.

the first real milestone. before break-even you are paying for the business. after it, the business pays for itself. plan a number and a date.

a small extra raise between two main rounds to keep the lights on a few more months.

bridges fund the next milestone, not a vision. if you find yourself needing one before you have hit any of the goals from your last round, that is a real signal, not a paperwork issue.

sharing the day-to-day of building your product openly, including revenue, decisions, and mistakes.

the dominant marketing channel for side projects in the last few years. trades short-term polish for long-term distribution. only works if you have something interesting to say and the discipline to keep showing up.

net burn divided by net new arr added in the same period. how much money you spent to add £1 of recurring revenue.

a single ratio that exposes whether growth is efficient. under 1 is great. over 3 means you are buying growth at a price that will probably catch up to you.

how much cash you spend per month beyond what you earn.

pair it with cash in the bank to get your runway. side projects often have a near-zero burn and that is the superpower. the moment you hire, it changes fast.

how much you spend, on average, to land one paying customer.

compare to ltv. if you spend £200 to win a customer who pays you £50 and leaves in 4 months, you do not have a business, you have a charity. for organic-only side projects, cac feels like zero. it is not, your time has a price.

a list of who owns what in the company. founders, investors, employees with options.

starts as a spreadsheet, becomes the most consequential document you will ever own. get it set up properly before you give anyone equity, including a cofounder.

the rate at which customers stop paying you.

logo churn counts customers leaving. revenue churn counts pounds leaving. they tell different stories. for most early stage products under 5% monthly is acceptable, over 10% means something is broken upstream of marketing.

the period at the start of a vesting schedule during which you earn no equity. usually 12 months.

protects everyone if a cofounder quits in month three. with a one-year cliff, they walk away with zero equity. without it, you have an angry stranger on your cap table.

someone who starts the company with you and shares meaningful equity.

easier to add than to remove. a bad cofounder is harder to fire than a bad hire. agree on equity split, vesting, decision rights, and exit terms in writing before you ship anything together.

the direct cost of delivering your product to one customer. hosting, payment fees, api credits, fulfilment.

gross margin is just revenue minus cogs. for ai-powered tools, model costs are a real cogs line that scales with usage. ignore it and your pricing will be wrong.

a group of users who signed up in the same window. usually grouped by week or month.

lets you see if newer users behave better than older ones. if every new cohort retains worse than the last, do not blame growth. fix the product.

revenue lost from existing customers downgrading their plan, dropping seats, or reducing usage. not full churn, just shrinking.

easy to miss. customer count looks stable while revenue quietly leaks. track it separately from churn to know whether your problem is people leaving or people using less.

the percentage of people who complete a step. landing page to signup, signup to paid, trial to renew.

a single number that can be improved a hundred ways. always name the conversion you mean. "we doubled conversion" is meaningless without saying conversion from what to what.

a loan that converts into equity at the next priced funding round. the older cousin of the safe.

used to be the default for early rounds. now mostly replaced by safes in the uk and us. you might still see notes from older angels or in markets where safes are not standard.

the single thing you want a reader, viewer, or visitor to do next. click, sign up, buy, share.

every page should have exactly one primary cta. two primary ctas is the same as none. side project landing pages routinely lose half their potential because the visitor cannot tell what the page wants from them.

the percentage of people who click after seeing something. an ad, an email subject, a tweet.

the cheapest signal in your funnel. a low ctr means the hook is wrong. a high ctr with low conversion means the promise does not match the product.

steve blank's practice of talking to potential customers before and during building, to test whether the problem and the solution actually fit.

most side projects skip this and learn the same lessons six months later through silence and zero signups. an hour of customer conversation usually beats a week of building.

paul graham's test: at your current growth rate and burn, can you reach profitability before the money runs out?

the single most important question for any startup that has raised money. if the answer is yes, you have time. if it is no, every decision should be about getting to yes.

when new shares are issued, your existing percentage of the company goes down.

every round dilutes you. that is fine if your slice is worth more even though it is smaller. founders usually own 40 to 60% after a seed round. plan for it instead of being surprised by it.

using your own product the way customers do, in your real workflow.

forces you to feel the bugs and friction firsthand. side project builders have an unfair advantage here. you usually built it for yourself, so dogfooding should be the default, not a campaign.

a funding round at a lower valuation than the previous one.

painful but sometimes necessary. it dilutes everyone harder and signals to the market that the last valuation was too high. better than the alternative of not raising at all.

the trade-off between cash and ownership when bringing someone on.

early team members trade salary for upside. but equity is not a substitute for paying the rent. be honest about which one you are actually offering.

a pool of equity set aside to grant to current and future employees.

investors will usually require you to create or top up the esop before their money comes in, which dilutes you, not them. negotiate the size carefully.

how investors and founders eventually get cash out. acquisition, ipo, or secondary sale.

you do not need to plan the exit on day one, but you should know whether the business could ever be sold or taken public. some kinds of businesses cannot be either, and that is fine, it just changes who should invest.

extra revenue you earn from existing customers. upgrades, seats, usage, add-ons.

cheap revenue. an upsold customer costs almost nothing to acquire. tools with healthy expansion revenue can grow without spending more on marketing.

when an existing investor invests again in your next round.

a strong signal to new investors. if your seed investors are not following on at series a, prospective leads will ask why.

paul graham's 2024 term for the founder-led operating style that breaks the rule of "hire great people and let them do their jobs". founders dive deep into specific areas instead.

side project founders are already in founder mode by default. understanding the concept is mostly about resisting the pressure later to delegate everything when you scale. some of the highest-impact founders never stop being in the weeds.

the alignment between you and the problem you have chosen. your background, network, or obsession gives you an unfair edge.

investors increasingly index on this for pre-seed bets, because everything else is too noisy. for side projects, it is the difference between an idea you will stick with for a decade and one you will abandon after a hard month.

a free tier that aims to convert a small percentage of users into paid plans.

cheap to acquire but support and infrastructure costs scale with the free base. only works if the free product creates a clear moment where paying solves a real pain. otherwise it just costs you money.

the path from "someone saw your product" to "someone paid you", broken into measurable steps.

most stuck side projects have a leak in a specific step, not a vague "marketing problem". drawing the funnel and putting numbers on each step shows you where to push.

the total value of transactions running through a marketplace, before you take your cut.

the headline number for marketplaces and platforms. impressive on a slide. less impressive when you remember you only earn the take rate, not the gmv.

revenue minus the direct cost of delivering it, as a percentage of revenue.

software businesses usually have 70 to 90% gross margins. that is what makes them so attractive. if yours is closer to 30%, you are running an agency or a marketplace and should value it differently.

a system where output from one user creates input for the next. invites, content, referrals, network effects.

a funnel is linear, a loop compounds. the best side project growth stories almost always have one. ask: when a user does the core action, does anything happen that helps the next user find me?

the percentage of revenue you keep from existing customers over a year, before any upsells.

tells you how leaky the bucket is, without expansion revenue papering over the cracks. grr above 90% is healthy for b2b saas.

your interview process. who sees the candidate, in what order, with what brief.

most early hires fail because the process was "we had a chat and they seemed nice". write down the brief, the rubric, and the steps before you post the role.

a specific description of the customer who gets the most value from your product and is easiest to reach.

when everything is for everyone, nothing is for anyone. an icp is not a demographic, it is a situation. "founders six months post-launch with under £5k mrr and no marketing hire" is an icp. "small businesses" is not.

the company sells shares on a public stock exchange for the first time.

one of two main exits. very rare. usually only relevant if you are well above £100m arr. the other exit is acquisition, which is more likely for almost everyone.

ship a small change, observe what happens, decide the next change. repeat.

iteration speed is the single best predictor of which side projects find product-market fit. you cannot think your way to the answer. you have to ship and see.

a framework that says people do not buy products, they hire them to do a job. focus on the situation and the desired outcome, not the demographic.

reframes feature decisions around what the user is trying to accomplish. "men aged 25 to 34" is useless. "i need to send a contract before this client changes their mind" is a job. you can build for jobs.

how many new users one user brings in. above 1 means each user invites more than one, which is exponential growth.

real viral growth (k > 1) is rare and usually short-lived. most products that look viral are actually just well-marketed. measure honestly.

a metric you track because it captures something that actually matters.

kpis only work if there are few of them. if you track 30 numbers you track nothing. pick 3 to 5, write down why each one matters, and review them on a rhythm.

a one-page pitch published before the product exists, used to measure interest from real visitors.

cheapest way to test demand for an idea. signups, emails captured, and conversion from traffic all give a directional read on whether the wedge is sharp before you write code.

the investor who sets the price and terms of a round. other investors usually follow their lead.

finding a lead is most of the work in raising. once you have one, the rest of the round usually closes quickly. without one, you are chasing a circle of "i'm in if you find a lead".

a small free thing (template, calculator, mini-course) given away in exchange for an email address.

turns anonymous traffic into a list you can nurture. only works if the lead magnet solves a real problem on its own. a "free pdf" downloaded once and forgotten is not a lead magnet, it is a guilty inbox.

eric ries's methodology built on the loop of build, measure, learn. minimum products, validated learning, pivots, persevere.

the source of half the vocabulary in this glossary. the practical bit is the loop, not the slogans. ship small, learn fast, change direction based on evidence rather than feeling.

a clause that says investors get paid first if the company is sold, before any money goes to founders or employees.

a 1x non-participating preference is normal. anything more (2x, participating, with multipliers) quietly transfers most of a small exit's value to investors. read this term first, valuation second.

the total revenue you expect from one customer over the time they stay with you.

compare to cac. a healthy ratio is roughly 3:1 ltv to cac. side projects with very low churn can sustain a much lower ratio because the lifetime is genuinely long.

the ratio of lifetime value to customer acquisition cost.

one of the few ratios that actually predicts whether a business compounds or quietly dies. 3:1 is the rule of thumb. under 1:1 means you are paying people to use your product.

a saas efficiency metric. the annualised new arr added in a quarter divided by the sales and marketing spend from the previous quarter.

over 1 means each pound of go-to-market spend produces more than a pound of recurring revenue, fast. under 0.5 means the engine is leaking. less relevant for self-serve businesses, important once you have a real go-to-market spend.

something about your business that is hard for a competitor to copy. brand, network, data, integrations, switching cost.

side projects often launch with no moat at all. that is fine, you can build one. but if you cannot name what stops someone with twice your budget from doing the same thing, you are operating on borrowed time.

the predictable revenue you can count on every month from subscriptions.

the heartbeat metric for subscription businesses. movement in mrr (new, expansion, churn, contraction) explains your health better than any single number.

the smallest version of your product that lets a real user do the thing they came for.

the most misused acronym in the startup world. an mvp is not a bad product. it is a deliberately narrow product. cut features, not quality.

profit as a percentage of revenue, after every cost. people, marketing, hosting, tax.

gross margin is about the product. net margin is about the company. a side project with a tiny team can have an extraordinary net margin and most do not realise it.

each new user makes the product more valuable to existing users. think social platforms, marketplaces, multiplayer tools.

one of the strongest moats. also the hardest to bootstrap, because the product is barely useful with three users. side projects with network effects need a clear "cold start" plan.

making your product more specific. for a smaller, sharper audience.

most early stage products fail because they are too broad, not too narrow. niching down feels scary because the audience shrinks. it is usually the right move. a product everyone could use is a product no-one needs urgently.

the single number you would optimise for if you could only pick one.

forces you to be honest about what success looks like. usually some version of "value delivered to users", not "revenue earned". revenue follows when the north star moves.

a single survey question: "how likely are you to recommend this to a friend?" scored 0 to 10. nps = % promoters (9-10) minus % detractors (0-6).

a fast read on whether your product creates fans, neutrals, or angry users. over 50 is excellent. under 0 means more detractors than promoters and a leaky bucket.

gross revenue retention plus expansion revenue from existing customers.

the magic number for subscription businesses. nrr above 100% means existing customers grew enough to more than cover the ones who left. you can grow your revenue without acquiring anyone new.

a goal-setting format. one objective (the what) with a handful of measurable key results (the how-we-know).

most useful when you have at least three people. before that, a few clear goals on a page does the same job with less ceremony.

the sequence a new user goes through between signing up and using the product seriously.

this is where most signups quietly die. every extra step is friction. every unnecessary explanation buys you a drop-off. design backwards from the aha moment.

the difference between growth you got for free (seo, word of mouth, social) and growth you paid for (ads, sponsorships).

organic growth is slower but compounds. paid growth is faster but stops the moment you stop spending. side projects almost always live on organic for the first year.

how many months until a new customer has paid back what it cost to acquire them.

shorter is better. 12 months is healthy for b2b, 6 months for b2c. long payback periods only work if churn is genuinely low. otherwise you go broke faster than you scale.

the boundary in your product where free usage ends and paid begins.

the placement and timing of the paywall is one of the most important decisions in any freemium product. too soon and people leave before they value the product. too late and they never pay.

a 10 to 15 slide presentation summarising your business, market, traction, team, and ask.

the deck is the entry ticket, not the close. it gets you the meeting. the meeting closes the round. most decks are too long. cut yours in half before you send it.

a change in direction based on what you have learned. usually new audience, new problem, or new product.

pivoting is not failure. pivoting away from clear evidence is. pivoting because something is hard usually is.

a model where the product itself drives acquisition, conversion, and expansion. signup is self-serve, value shows up fast, sharing is built in.

almost every successful side project today is plg. you do not have a sales team. the product has to do the selling.

the moment you can feel demand pulling the product forward, instead of you pushing it onto users.

before pmf, almost nothing else matters (not marketing, not pricing, not the brand). after pmf, almost everything matters. the test you cannot fake: are people angry when the product is down?

the earliest priced round of investment. usually pre-revenue or just past launch.

in the uk, typically £100k to £750k on a safe or note. you are selling potential, not numbers. expect to give up 10 to 20% of the company.

the right of an existing investor to put more money into future rounds to keep their ownership percentage steady.

standard for vcs, often missed for angels. who you give pro-rata rights to today shapes who can lead bridge rounds tomorrow. think about it before you sign the term sheet.

the business covers your basic living costs. not glamorous, but you do not need a job.

the most undersold milestone in all of startup land. ramen profitable buys you something most founders never get: time. with time, you can keep iterating until something works.

a deliberate system that rewards existing users for bringing in new ones. credits, cash, free months, status.

works when the product already produces real word of mouth. bolted onto a product nobody loves, it just creates spammy invites. start by understanding why people already share, then amplify it.

the percentage of users who keep using your product over time.

the leading indicator for everything. if retention is bad, ads are wasted, growth flatlines, and revenue churns. fix retention first, then turn the growth dial.

a saas health check: revenue growth rate plus profit margin should equal at least 40%.

one number that captures the trade-off between growth and efficiency. a company growing 60% with negative 20% margin is "rule of 40". so is a company growing 10% with 30% margin. above 40 is good. below it raises questions.

how many months of cash you have left at the current burn rate.

every decision is downstream of this number. with 18 months of runway you can experiment. with 6 you start picking up the phone. always know yours to the nearest month.

software delivered over the internet on a subscription, instead of sold as a one-time licence.

the dominant model for software side projects because the recurring revenue compounds and the unit economics scale. also the most overcrowded category, which is why niching down matters.

a short legal document that lets investors put money in now and convert into shares at a future round.

the default for pre-seed rounds because it is cheap and quick to close. negotiate the cap and the discount, those are the only numbers that matter.

the slice of the total market you could actually serve. by geography, language, segment.

tam is theatre, sam is realistic. tells you whether the business can grow large enough to matter even if you win.

a transaction where existing shareholders (founders, employees, early investors) sell some of their shares to a new buyer, instead of the company issuing new ones.

how founders take some money off the table without waiting for a full exit. usually only available once the company is well past series a and growing fast.

the first priced funding round. usually after the product is in market and there are early signs of pmf.

in the uk, typically £750k to £3m. expect to give up 15 to 25% of the company. seed investors want a story about momentum, not perfect metrics.

paying for placement on search engine results.

fast traffic but rented. when you stop paying, the traffic stops. useful for testing demand and copy before committing to a long seo strategy.

making your site show up in the unpaid search results.

compounding asset for side projects. every page you write keeps earning traffic. trade-off is the long lag (6 to 12 months) before any meaningful return.

the round after seed, usually £3m to £15m in the uk, raised once the company has proven it can grow.

the bar is no longer "can you build something people want", it is "can you turn money into more money". metrics matter. magic numbers matter. founder charisma stops being enough.

the date you commit to launching, ideally written down before the work begins.

a ship date is the cheapest forcing function in product development. without one, scope grows quietly until everyone is tired.

the slice of the sam you can realistically capture in the next few years.

the most honest of the three market sizes. the only one investors actually trust. usually a tiny number compared to tam, and that is fine.

dau divided by mau. how many days out of the month an average user shows up.

a ratio of 0.5 means a typical user is in the product every other day. that level of usage is rare. context matters: 0.2 is great for a tax tool, terrible for a chat app.

the friction a customer would face to leave you for a competitor. data, integrations, training, habits.

one of the most underrated moats. side projects can engineer switching cost early by being the place where users' real data lives, by integrating into their daily workflow, or by giving them artefacts (boards, projects, history) they would lose.

the percentage of each transaction a marketplace or platform keeps for itself.

high take rate brings revenue per transaction, low take rate brings volume and stickiness. most successful marketplaces sit between 5 and 25%. setting it wrong kills supply or demand, quietly.

the entire global revenue opportunity if every possible customer used your product.

mostly used in pitch decks. useful as a sanity check that the market is big enough to be interesting. dangerous when treated as a real-world number.

shortcuts in your codebase that made shipping faster but cost more to maintain later. quick patches, copy-paste, skipped tests.

a normal cost of moving fast, dangerous when ignored. vibe-coded mvps accumulate debt faster than the founder can read it. plan to pay it down when something stops working, not before.

a non-binding summary of the price and conditions of a funding round.

do not sign one without a lawyer. the headline valuation is rarely the most important term. liquidation preferences, anti-dilution, and board control quietly do more damage.

how long it takes a new user to feel the value of your product, measured from signup to aha moment.

shorter is better. side projects that need 20 minutes of setup before anything useful happens almost always lose to ones where the first win arrives in the first 30 seconds.

evidence that something is working. growing users, growing revenue, growing usage, growing retention.

the word every investor uses and no one defines the same way. at pre-seed, it can be a strong waitlist. at seed, real revenue. at series a, repeatable acquisition. always show a slope, not a snapshot.

a time-limited window during which a user can use the full product before paying.

shorter trials usually convert better than longer ones. forces the user to actually engage. the goal of a trial is to get to the aha moment, not to give away the product.

the revenue and cost of a single unit of your business. usually one customer.

if the unit economics are broken, scale makes everything worse, not better. always make sure one customer is profitable before you spend money to find another.

moving an existing customer to a higher plan, more seats, more usage, or an add-on.

the cheapest growth in any subscription business. an upsold customer cost nothing to acquire. design your tiers and triggers so that growing usage naturally pushes customers up a tier.

you charge by what the customer actually uses (api calls, messages sent, minutes processed) instead of a flat subscription.

increasingly common for ai-powered products because the underlying costs scale with usage. aligns price with value but makes revenue harder to forecast and discounts harder to justify.

what your company is worth, on paper, at a moment in time. pre-money is before the new investment, post-money is after.

high valuation is fun in a tweet, painful in a down round. raise at a price you can grow into within 18 months, not the highest number you can win in a negotiation.

firms that raise money from large funds and invest it into startups in exchange for equity.

vcs need outsized exits to make their model work. that pressure shapes their advice. taking vc money is choosing a particular game with particular rules. not the only game.

the schedule on which equity is earned over time. standard is four years with a one-year cliff.

without vesting, anyone who leaves keeps every share. with it, the equity rewards the people who keep showing up. apply it to yourself, your cofounders, and every early hire.

building software by chatting with an ai assistant in plain english, accepting most of what it suggests, and iterating fast.

the dominant building style for side projects today. you can ship in days what used to take weeks. the trade-off is that you might not understand parts of your own codebase. fine for v1, dangerous at scale.

a list of people who signed up to use your product before it was available.

a real waitlist tests demand cheaply. a vanity waitlist (open for everyone, no qualification) tests nothing. ask a question on signup that lets you learn something from each entry.

a narrow, specific use case you start with, deliberately ignoring the wider opportunity.

a wedge is a foothold, not a final shape. airbnb started with conference attendees in san francisco. starting narrow is how you find the truth fast, then expand from there.

growth from one user telling another user about your product.

the cheapest, slowest, most resilient form of growth. impossible to fake. usually starts when one specific group has a "you have to try this" moment about a specific job-to-be-done.