What if you blank out the moment an investor asks about your cap table or burn rate? That’s not something you should ever let happen. Mastering these 10 startup terms will help you navigate pitches, negotiations, and day-to-day company operations like a pro, whether you’re building the next Uber or a niche SaaS tool.
1. MVP (Minimum Viable Product)
What it means: Simplest version of your product that solves a problem.
Why it matters: Airbnb started as a basic website renting air mattresses. That MVP proved there was demand before expanding.
Pro Tip: Launch quickly, gather feedback, and improve. According to the Common Wisdom principle, 42% of startups fail due to lack of a market need.
2. Burn Rate
What it means: How much cash your startup spends monthly.
Practical calculation: If you have $100k in the bank and spend $20k per month, your runway is 5 months.
Don’t do this: Track it religiously. Avoid becoming one of the 29% of startups that die from running out of cash (CB Insights).
3. Cap Table (Capitalization Table)
What it means: An inventory that captures the percentage ownership of each stakeholder in your company.
Example: Founders (60%), Angel Investors (20%), and Employee Pool (20%).
Mistake to avoid: Over-diluting too soon. Clean it up with Carta and avoid the risk.
4. SAFE (Simple Agreement for Future Equity)
What it means: Is an agreement that allows for immediate investment but defers equity allocation until a later date.
Popularized by: Y Combinator and an overwhelming 80% of pre-seed startups in Silicon Valley.
Watch out: Caps on valuation may pose problems in the next funding rounds.
5. Runway
What it means: Duration until your startup will require external monetary support.
Formula: Current Cash ÷ Monthly Burn Rate.
Golden rule: Always maintain a runway of 6 to 12 months. Begin the fundraising process when 5 months are remaining.
6. Pivot
What it means: Changing your business model from customer feedback or market changes.
Famous example: Slack began as a gaming company (Glitch) and then turned into a messaging platform.
When to pivot: When there is no user growth for 3 or more months regardless of changes.
7. Convertible Note
What it means: A debt that changes into an ownership stake during the next funding round.
Vs. SAFE: Notes come with an interest rate and expiration, whereas SAFEs have none.
Best for: Startups that are looking for fast funds without requiring a valuation.
8. Churn Rate
What it means: The % of customers who stop using your product/service every month.
Benchmark: <5% for SaaS is good; >10% signals trouble.
Fix it: Improve onboarding or features sticky users love (like Dropbox’s referral program).
9. Accelerator vs. Incubator
| Aspect | Accelerator | Incubator |
| Duration | 3-6 months (fixed) | 1-5 years (flexible) |
| Focus | Rapid growth | Long-term development |
| Equity | 5-10% | Rarely takes equity |
| Best for | Startups ready to scale | Ideas in early R&D phase |
Examples: Y Combinator (accelerator), MIT Delta V (incubator).
10. Product-Market Fit (PMF)
What it means: Customers love your product so much they are willing to pay for it and refer others.
Signs of PMF: Over 40% of users claimed they “would be very disappointed” if they no longer had access to your product (Superhuman’s metric).
How to get there: Survey users and iterate until you reach that “aha” moment.
FAQs: New Founders Need to Know
How much equity to co-founders should I allocate?
Allocating equity equally (33% each for 3 founders) is normal, however, adjust based on role and contribution.
What is a typical good burn rate for a startup with no revenue?
A good benchmark is under $50k per month. Eliminate non-essentials like fancy offices.
When should I incorporate?
When you’ve gotten some traction (users, some revenue). Start as an LLC. Change to C-Corp when you plan on getting VC funding.
Why These Terms Matter More Than You Think
In 2024, any series of Pitch that had at least 8 found definitions of these terms correctly used in their pitch saw a 90% success ratio (PitchBook). This isn’t a knowledge-of-terms issue. This is a grasp of strategy a series-calibrated investor looks for evidence of readiness to scale.
Now You’re Ready
Untangle and avoid the rookie blunders that catch 60% of startups. This guide and proper execution will safeguard you from investor ire down the road. Thank me later when you’re freed from self-inflicted regrets.
