शब्दकोश Shabdkosh. The Glossary.
Runway, burn multiple, CAC, LTV, CCPS, iSAFE, DPIIT recognition, liquidation preference, option pool shuffle and a hundred more startup terms defined in two sentences, with the formula and the Indian rule where it differs.
- Acceleration
Faster vesting on a trigger. Single trigger vests on a sale of the company; double trigger vests when the holder is also let go after the sale. Investors prefer double.
- Activation
The moment a new user first gets the value the product promises. Onboarding exists to get people there quickly; retention is measured from it.
- Angel investor
An individual who invests their own money in a company’s earliest stage, usually in small cheques alongside others. In India most angels invest through registered angel networks or syndicates.
In India: The so-called angel tax (section 56(2)(viib)) on share premium above fair value was abolished for all investors from 1 April 2024 by the Finance (No. 2) Act 2024.
- Annual compliance (AOC-4, MGT-7, DIR-3 KYC)
What a private company must file every year regardless of size: audited accounts (AOC-4), the annual return (MGT-7 or MGT-7A), every director’s KYC, the income-tax return, and GST and TDS returns through the year.
- Annual contract value (ACV)
The yearly value of one customer contract, used to size deals and plan sales capacity. A ₹12 lakh three-year contract has an ACV of ₹4 lakh.
- Annual recurring revenue (ARR, MRR, Monthly recurring revenue)
The subscription revenue a company would earn in a year if nothing changed, usually monthly recurring revenue times twelve. One-time fees and services are not in it.
ARR = MRR × 12- Anti-dilution
A term that gives investors extra shares if a later round is priced lower than theirs. Broad-based weighted average is the usual, fair version; full ratchet is punitive.
- Articles of association (AoA, MoA)
The company’s constitution, which investor rights from the shareholders’ agreement must be written into to bind the company. The memorandum states what the company exists to do.
- Average order value (AOV)
Revenue divided by number of orders. The commerce equivalent of ARPU; raising it is usually cheaper than winning more orders.
AOV = revenue ÷ orders- Average revenue per user (ARPU, ARPA)
Revenue in a period divided by customers or accounts in it. Rising ARPU with flat churn is the cheapest growth there is.
ARPU = revenue in the period ÷ active customers- Blitzscaling
Reid Hoffman’s term for prioritising speed over efficiency in a winner-takes-most market, accepting waste to win the market first. Right in a few markets and ruinous in most.
- Board deck
The pack a founder sends before a board meeting: the numbers against plan, cash and runway, the few decisions needed, the asks. Send it three days before and spend the meeting on the decisions.
- Board of directors
The body that governs the company, appoints and can remove the chief executive and approves major decisions. A venture round usually adds an investor director; the founders should keep control of the board as long as they can.
In India: Every private company needs at least two directors, one resident in India for at least 182 days in the year.
- Board seat and control
The share of the board the founders hold and the matters that need investor consent. Control is lost by agreement before it is lost by percentage.
- Bootstrapping
Building a company on revenue and the founders’ own money rather than outside capital. Slower in theory; in practice it keeps every decision and every rupee of the upside with the founders.
- Bottom-up market sizing
Building a market size from counted units: number of buyers times what each pays, rather than taking a percentage of a headline figure. The only sizing a serious investor accepts.
- Break-even
The point at which revenue covers all costs and the company stops losing money. Reached by growing revenue, cutting cost or both; the runway tool shows the month.
- Bridge round
A small financing, usually from existing investors on a convertible, to reach the next milestone or the next round. A bridge to somewhere is fine; a bridge to nowhere is the last money.
- Burn multiple
David Sacks’s measure of how efficiently a company turns cash into recurring revenue: net burn divided by net new ARR in the same period. Under 1 is excellent; above 2 is a warning.
Burn multiple = net burn ÷ net new ARR- Burn rate (Burn, Net burn, Gross burn)
The cash a company loses in a month. Gross burn is everything spent; net burn is spending minus revenue, and is the one that sets runway.
Net burn = monthly cost − monthly revenue- CAC payback (Payback period)
The months of gross profit it takes to earn back what a customer cost to acquire. Under twelve months is the usual target for a software company; longer needs more capital.
Payback (months) = CAC ÷ monthly gross profit per customer- Cap table (Capitalisation table)
The register of who owns what: shares, options, convertibles and the percentage each works out to, now and fully diluted. Keep it in a tool, not a spreadsheet nobody trusts.
- Cash flow forecast (13-week cash flow)
A week-by-week projection of cash in and out for the next quarter. The tool that turns runway from an estimate into a schedule of what has to happen by when.
- CCD (Compulsorily convertible debenture)
A debt instrument that must convert into equity by a set date, used in India where a note-like instrument is wanted without the DPIIT conditions on convertible notes. Treated as equity under FEMA.
- CCPS (Compulsorily convertible preference shares)
The share class Indian venture rounds are usually done in: preference shares that must convert into equity by a set date, carrying the liquidation preference and other investor rights until then.
In India: Foreign investors can hold CCPS under FEMA; optionally convertible instruments are treated as debt.
- Channel
A route to customers: search, content, paid advertising, outbound sales, partners, marketplaces, word of mouth. Most companies find one that works and most of their growth comes through it.
- Churn
The share of customers or revenue lost in a period. Logo churn counts customers; revenue churn counts money, and can be negative when the remaining customers grow.
Monthly churn = customers lost in the month ÷ customers at the start- Cliff
The initial period, usually one year, during which nothing vests; at the cliff the first tranche vests at once. A co-founder who leaves in month eleven leaves with nothing.
- Cohort
A group of customers who started in the same period, tracked together so you can see whether later groups behave better than earlier ones. The chart that shows product-market fit or its absence.
- Compounding
Growth on growth: each period’s increase is added to the base the next period grows from. The reason growth rate matters more than size early.
- Contribution margin
What is left from a sale after all the costs that vary with that sale, including delivery, payment fees and acquisition. The margin that tells you whether one more customer helps.
- Conversion rate
The share of people who take the next step, from visitor to sign-up, sign-up to activation, trial to paid. Small improvements at the top compound through everything below.
Conversion = people who took the step ÷ people who could have- Convertible note
A loan that converts into shares at the next priced round, usually at a discount or under a valuation cap, instead of being repaid. Fast and cheap to paper; the price is decided later.
In India: Indian private companies can issue convertible notes under the Companies rules only if DPIIT-recognised, in amounts of ₹25 lakh or more per investor in a single tranche, converting or repaying within ten years.
- Crossing the chasm
Geoffrey Moore’s account of the gap between early adopters, who buy a new product for its novelty, and the mainstream, who buy only when it is safe. Most products die in the gap.
- Customer acquisition cost (CAC)
What it costs in sales and marketing to win one new customer, fully loaded with salaries and tools, not just advertising.
CAC = sales and marketing spend in a period ÷ new customers won in it- Customer discovery (Customer development)
Steve Blank’s method of testing a business idea by talking to customers before building, in a sequence of hypotheses and interviews. The product comes after the facts.
- Data room
The organised folder of documents an investor or acquirer reviews: incorporation papers, cap table, contracts, financials, metrics, compliance. Build it before you need it.
- Default alive or default dead
Paul Graham’s question: if costs stay as they are and revenue keeps growing at its current rate, does the company reach profitability on the money it has? Yes is default alive. Most founders who do not know are default dead.
- Delta 4
Kunal Shah’s rule that a product wins when it is at least four points better, on a ten-point scale, than what it replaces. Below that, people stay with what they know.
- Dilution
The shrinking of every existing holder’s percentage when new shares are issued. Each round dilutes everyone who was there before by the same factor.
Each existing stake × (1 − amount raised ÷ post-money)- DIN (Director identification number)
The unique number every director of an Indian company must hold, allotted by the MCA and obtainable through SPICe+ for first directors.
- Discount
The reduction on the next round’s price per share that a convertible or SAFE holder receives for having invested earlier, commonly 15–25 per cent.
- Do things that don’t scale
Paul Graham’s advice to recruit the first users by hand, serve them personally and build the product around them, because the scalable version is learned from the unscalable one.
- Down round
A round priced below the previous one. Painful for morale and the cap table, and it triggers anti-dilution; still better than running out of money.
- DPIIT recognition (Startup India recognition)
The Department for Promotion of Industry and Internal Trade’s certificate that an entity is a startup under the Startup India definition, which unlocks tax holidays, self-certification, the seed fund scheme and convertible notes.
In India: An entity qualifies for up to ten years from incorporation while turnover in any financial year has not exceeded ₹200 crore (raised from ₹100 crore by G.S.R. 108(E) of 4 February 2026), if it works on innovation or has a scalable model with high potential for employment or wealth creation, and was not formed by splitting an existing business.
- Drag-along and tag-along
Drag-along lets a majority force the rest to join a sale on the same terms; tag-along lets minority holders join a sale the majority has agreed. Both appear in every Indian shareholders’ agreement.
- Due diligence
The investor’s examination of the company before money moves: financial, legal, technical and commercial. The data room is where it happens; the surprises found there reprice or kill rounds.
- ESOP (Employee stock option plan, Stock options)
Options that give employees the right to buy shares at a fixed exercise price after vesting. The way a startup pays for talent it cannot afford in cash.
In India: Options are taxed as a perquisite at exercise on the difference between fair value and exercise price, and again as capital gains at sale; startups eligible under section 80-IAC can defer the perquisite tax by up to 48 months or until the employee sells or leaves.
- Exercise price (Strike price)
What an option holder pays per share to turn the option into shares. Set at or below fair value at grant; a low strike makes options worth more.
- Exit
The event at which investors turn shares back into money: a sale of the company, a listing or a secondary sale. Every venture investment is underwritten against one.
- Fair market value (FMV, Valuation report)
The price per share a registered valuer or merchant banker certifies. Needed for issuing shares to foreign investors, for ESOP tax and for the income-tax rules on share premium.
- FEMA (Foreign Exchange Management Act, FDI)
The law governing foreign investment into Indian companies. Most sectors allow 100 per cent foreign investment automatically; shares must be issued at or above fair value and reported to the RBI within thirty days on Form FC-GPR.
- Founder-market fit
Whether the founders are unusually suited to the problem: they have lived it, sold into it or built for it before. Investors weigh it most at the earliest stage, when there is little else to weigh.
- Founder’s dilemma
Noam Wasserman’s finding that founders must choose between keeping control and growing value, because the money and the people that grow a company dilute the founder’s say. Rich or king, rarely both.
- Founders’ agreement
The document co-founders sign before money arrives: equity split, vesting, roles, decision rights, what happens if one leaves, and who owns the IP. The agreement most often missing and most often needed.
- Fully diluted
The share count as if every option, warrant and convertible had been exercised. Investors price on the fully diluted count; founders often quote the issued one.
- Funnel
The stages a prospect passes through from first contact to paying customer, with the share that moves between each. Conversion rates between stages tell you where to work.
- Go-to-market (GTM)
How a product reaches and wins its customers: the segment, the channel, the message, the price and who does the selling. A good product with no go-to-market is a hobby.
- Gross margin
Revenue minus the direct cost of delivering it, as a share of revenue. Software runs 70–90 per cent; services and physical goods far lower, which changes every other number.
Gross margin = (revenue − cost of goods sold) ÷ revenue- Gross merchandise value (GMV)
The total value of goods sold through a marketplace, before the marketplace’s own cut. Not revenue; the marketplace’s revenue is its take rate on GMV.
- Growth loop
A system in which the output of one cycle feeds the input of the next: users invite users, content ranks and brings readers who make content. Loops compound; funnels leak.
- Growth rate
The percentage increase in a key number, usually revenue or active users, per week or month. Compounding makes a small weekly rate enormous: five per cent a week is twelve times in a year.
Annual multiple = (1 + weekly rate)^52- GST (Goods and services tax, GSTIN)
India’s unified indirect tax on goods and services, filed monthly or quarterly. Registration is mandatory above the turnover threshold, for inter-state supply of goods and for most online sellers; most startups register at once so they can claim input credit.
- Ideal customer profile (ICP)
The description of the customer your product fits best: size, sector, role, situation and budget. Sales gets faster the narrower it is.
- Intellectual property assignment (IP assignment)
The agreement by which founders, employees and contractors transfer what they create to the company. Without it the company does not own its own product, and diligence will find that.
- iSAFE
An India-adapted SAFE used by some angel networks: legally compulsorily convertible preference shares with a cap and discount, so it fits the Companies Act and FEMA rather than the US template.
- Jobs to be done (JTBD)
The idea that customers hire a product to make progress in a situation, not for its features. The question is what job they are hiring you for and what they fired to hire you.
- Key hire
The first ten or so people who set what the company can do and what it feels like to work in. Hire slowly, from the problem outward; the first sales hire and the first engineering lead decide the next two years.
- Key performance indicator (KPI)
A measured number a team is accountable for. Useful when there are few and they are leading rather than lagging; a dashboard of forty is a way of not deciding.
- Land and expand
Winning a small first contract inside an organisation and growing it from there. The strategy behind net revenue retention above 100 per cent.
- Lifetime value (LTV, CLV, CLTV)
The gross profit a customer brings over the time they stay. Built from monthly margin and churn; a long lifetime assumed from a short history is the commonest error in a deck.
LTV = monthly gross profit per customer ÷ monthly churn- Liquidation preference
The investor’s right to be paid before the ordinary shareholders when the company is sold or wound up, usually 1× what they invested. Non-participating means they take the preference or convert; participating means both.
- LLP (Limited liability partnership)
A partnership with limited liability and lighter compliance, taxed as a partnership. Suits services firms and professional practices; it cannot issue shares or ESOPs, so venture investors avoid it.
- LTV to CAC ratio (LTV:CAC)
Lifetime value divided by acquisition cost. The rule investors repeat is 3 or above; below 1 every sale loses money.
LTV ÷ CAC ≥ 3- Magic number
A sales-efficiency ratio: the new ARR added in a quarter, annualised, divided by the previous quarter’s sales and marketing spend. Above 0.75 is the usual sign to invest more in sales.
Magic number = (ARR this quarter − ARR last quarter) × 4 ÷ last quarter’s S&M spend- MCA (Ministry of Corporate Affairs)
The ministry whose portal registers companies and LLPs and receives their annual filings. SPICe+, DIN, name reservation and the annual returns all live there.
- Minimum viable product (MVP)
The smallest version of a product that lets you learn whether customers want it. Eric Ries’s term; the point is the learning, not the smallness.
- Moat (Defensibility)
What stops a competitor with more money from taking your customers once you have shown the market exists: network effects, switching costs, scale economies, brand, proprietary data or distribution.
- Monthly close
Finalising a month’s books so the numbers are reliable: reconciled bank, booked invoices and bills, accruals, a P&L and balance sheet. Within ten working days is the standard to reach.
- Net promoter score (NPS)
The share of customers who would recommend you (9–10 out of 10) minus the share who would not (0–6). A proxy for word of mouth, best read as a trend.
NPS = % promoters − % detractors- Net revenue retention (NRR, Net dollar retention, NDR)
Revenue from a cohort of customers a year later, including upgrades and downgrades, divided by what they paid at the start. Above 100 per cent means the base grows without new customers.
NRR = (starting revenue + expansion − contraction − churn) ÷ starting revenue- Network effect
A product that becomes more valuable to each user as more people use it. The strongest moat and the hardest to start, because the first users get the least value.
- Non-disclosure agreement (NDA, MNDA)
A contract that keeps shared information confidential. Mutual when both sides share; investors generally will not sign one to hear a pitch, and a founder should not ask.
- North star metric
The one number that best captures the value customers get and that the whole company can move. Chosen so that growing it grows the business rather than vanity.
- OKR (Objectives and key results)
A goal-setting method: a qualitative objective with three to five measurable key results, set quarterly and scored. Works when the company sets few and reviews them in public.
- OPC (One person company)
A private company with a single member, for a solo founder who wants limited liability. It must convert to a private company to take investors or a co-founder.
- Operating cadence
The rhythm of a company’s decisions: daily stand-ups, weekly metrics, monthly close, quarterly plans, annual budget. Set once and kept, it replaces most management.
- Opportunity cost
What you give up by choosing one use of time or money over the next best. The cost of a year on a weak idea is the year, not the money.
- Option pool (ESOP pool)
Shares reserved for employee options. Term sheets usually require the pool to be created or topped up before the round, in the pre-money, so the founders rather than the investor pay for it.
- Option pool shuffle
The effect of putting the option pool in the pre-money: the quoted valuation stays the same while the founders’ effective price per share falls. Negotiate the pool size against a real hiring plan.
- Persona
A named composite of a customer type used to keep a team designing and selling for a real person. Useful only when built from interviews rather than imagined.
- Pipeline coverage
The value of open deals divided by the revenue target for the period. Three times coverage is the usual rule for a team that closes a third of what it works.
Coverage = open pipeline value ÷ target- Pivot
A structured change of strategy without a change of vision: same problem, different product, customer or channel. Named by Eric Ries; it is a decision, not a drift.
- Pre-money and post-money valuation (Pre-money, Post-money)
Pre-money is what the company is worth before new money goes in; post-money is pre-money plus the money raised. The investor’s share is the money divided by the post-money.
Post-money = pre-money + amount raised; investor stake = amount raised ÷ post-money- Priced round
A financing in which the company’s valuation is set and shares are sold at a fixed price, as opposed to a convertible that defers the price to the next round.
- Private limited company (Pvt Ltd)
The standard vehicle for a venture-backed Indian company: separate legal person, limited liability, shares that can be issued in classes, two to two hundred members. Incorporated through MCA’s SPICe+ form.
- Pro rata right
An investor’s right to invest in future rounds enough to keep their percentage. Standard for lead investors; a company should not promise it to everyone.
- Problem vs complaint
A complaint is something people say; a problem is something they have already paid, worked or waited to solve. Only the second kind supports a company.
- Product-led growth (PLG)
A go-to-market in which the product itself does the acquiring, converting and expanding, usually through a free tier or trial. Sales-led growth puts people in front of that process.
- Product-market fit (PMF)
The state in which a market pulls the product out of you: retention holds, word of mouth works, demand outruns what you can serve. Marc Andreessen called it the only thing that matters; Andy Rachleff coined it.
- Quota
The revenue a salesperson is expected to close in a period. Quota times number of ramped reps is the capacity plan; nothing else makes a revenue forecast real.
- Receivables (Accounts receivable, Debtors, DSO)
Money customers owe you for invoices not yet paid. Days sales outstanding is how long on average they take; in India it is often sixty to ninety days for enterprise customers.
DSO = receivables ÷ revenue × days in periodIn India: Section 43B(h) of the Income-tax Act disallows a buyer’s deduction for payments to micro and small enterprises made later than the MSMED Act allows, 45 days with a written agreement and 15 without, which is strengthening collection for registered suppliers.
- Registered office
The address of record for a company, where notices are served and which appears on every filing. It can be a home or a co-working space with a no-objection letter from the owner.
- Retention
The share of customers or users still active after a period. The single most honest measure of whether a product is wanted, because it cannot be bought.
Month-n retention = users active in month n ÷ users who started in month 0- Revenue-based financing (RBF)
Capital repaid as a fixed share of monthly revenue until a set multiple is reached. Suits businesses with steady margins and no wish to sell equity; expensive for fast growers.
- Right of first refusal (ROFR)
The right of existing holders to buy shares a seller wants to transfer, on the same terms, before an outsider can. It keeps the cap table closed.
- Rule of 40
A test for software companies at scale: revenue growth rate plus profit margin should add to 40 or more. Twenty per cent growth with a twenty per cent margin passes; so does sixty with minus twenty.
Growth % + profit margin % ≥ 40- Runway
How many months the cash in the bank lasts at the current rate of loss. The only figure that matters if it is short, and the one most founders estimate without growth in costs.
Runway (months) = cash ÷ net monthly burn- SAFE (Simple agreement for future equity)
Y Combinator’s instrument that gives an investor the right to shares at the next priced round, with a valuation cap and sometimes a discount, without being a loan. The post-money SAFE fixes the investor’s stake at signing.
In India: Indian law has no SAFE; the closest instruments are the CCPS, the convertible note and the iSAFE used by some networks, which is drafted as CCPS.
- Sales cycle
The time from first contact to signed contract. Weeks for small business software, quarters for enterprise; it sets how much runway a sales strategy needs before it pays.
- Sean Ellis test (40% test, Very disappointed)
Ask users how they would feel if they could no longer use the product. If at least 40 per cent say very disappointed you have a product people need.
- Secondary sale
Existing shares sold by a holder, often a founder or early investor, to a new one; the company receives nothing. Increasingly part of later Indian rounds.
- Section 80-IAC (Startup tax holiday)
The income-tax deduction of 100 per cent of profits for any three consecutive years out of the first ten, for DPIIT-recognised startups with turnover under ₹100 crore that are approved by the inter-ministerial board.
- Seed round
The first priced or convertible round that funds a company to product-market fit, typically ₹2–15 crore in India, from angels, micro-funds and seed funds.
- Series A, B, C
The successive priced rounds after seed, each named by the class of preference shares issued. A funds a repeatable sales motion; B funds scaling it; C and later fund expansion or the road to an exit.
- Shareholders’ agreement (SHA, SSA, Share subscription agreement)
The two long documents of an Indian round: the share subscription agreement sells the shares; the shareholders’ agreement sets the rights and obligations of everyone who holds them. Both are then written into the articles.
- SPICe+
The MCA’s single incorporation form: name reservation, incorporation, DIN, PAN, TAN, EPFO, ESIC, professional tax where applicable, a bank account and optionally GST, in one application.
- Startup India Seed Fund Scheme (SISFS)
The government scheme that funds DPIIT-recognised startups through approved incubators: up to ₹20 lakh as a grant for proof of concept and up to ₹50 lakh as debt or convertible for commercialisation.
In India: Applies to startups incorporated not more than two years before application and not having received more than ₹10 lakh of monetary support under another central or state scheme.
- Sunk cost
Money or time already spent that cannot be recovered and should therefore not influence what you do next. The reason founders keep bad hires and dead products.
- Switching cost
What a customer must spend in money, time or risk to move to a competitor. High switching costs keep revenue; they also slow your own sales when you are the new entrant.
- Take rate
The share of each transaction a marketplace or platform keeps. Revenue is GMV times take rate, which is why GMV alone says little.
Revenue = GMV × take rate- TAM, SAM, SOM (Total addressable market, Serviceable addressable market, Serviceable obtainable market)
Three nested sizes of a market: everyone who could buy, the part you can reach with your product and channels, and the part you can realistically win in a few years. Investors read the method more than the number.
SOM = buyers you can reach × share you can win × price- TDS (Tax deducted at source)
Tax a payer must withhold from certain payments, such as salaries, professional fees, rent and contractor bills, and deposit with the government by the seventh of the next month, with quarterly returns.
- Term sheet
The short, mostly non-binding summary of a proposed investment: valuation, amount, instrument, preferences, board, rights. The negotiation happens here; the long documents follow it.
- Type 1 and type 2 decisions
Jeff Bezos’s distinction between decisions that cannot be undone, which deserve slowness, and decisions that can, which deserve speed. Most are type 2 and most companies treat them as type 1.
- Unit economics
The revenue and cost of one unit of the business, usually one customer. If a customer does not pay back what it cost to acquire and serve, growth makes the losses bigger.
- Valuation cap
The maximum valuation at which a convertible or SAFE converts, whatever the next round’s price. It protects the early investor; the lower the cap the more of the company they get.
- Venture debt
A loan to a venture-backed company, usually alongside or after an equity round, repaid over two to four years with warrants attached. Extends runway without dilution; it must be repaid whatever happens.
- Vesting
Earning shares or options over time rather than owning them at once, so that someone who leaves early does not keep the whole stake. The standard is four years with a one-year cliff.
- Viral coefficient (K-factor)
The number of new users each existing user brings. Above 1 the product grows by itself; most products are well below and virality is a channel, not a strategy.
K = invitations per user × conversion rate of invitations- Why now
The change in technology, regulation, cost or behaviour that makes a company possible today when it was not five years ago. A pitch without one is a pitch for a company that could have existed already.
- Working capital
The money tied up in running the business: receivables and stock minus payables. Growth consumes it, which is why a profitable company can run out of cash.
Working capital = current assets − current liabilities- Zero to one
Peter Thiel’s phrase for creating something new rather than copying what exists. Going from one to many is scaling; going from zero to one is invention.