Annual Contract Value (ACV)

ACV denotes the average yearly revenue derived from a single customer contract or subscription. SaaS companies often utilize ACV to gauge their sales performance, particularly when focusing on annual or multi-year contracts.

ACV formula: Total contract value divided by the number of years in the contract. For instance, if a client signs a five-year agreement worth $100,000, the ACV would be $20,000.

Annual Recurring Revenue (ARR)

Though ARR might seem akin to ACV, it represents recurring income across multiple contracts. This metric is crucial for SaaS businesses, allowing them to forecast expected income growth annually.

Average Sale Price (ASP)

ASP reflects the typical selling price of a particular product category. To calculate ASP, total revenue from all products in that category is divided by the number of units sold.

For more details, explore Scale your sales team to win the early majority.

Beachhead Market

This refers to a niche market that presents a favorable opportunity for introducing a new product or service. The selection of this market is based on aligning available resources with both the product and the market characteristics.

Advisory Board

An advisory board consists of specialists appointed by a company's CEO and management team to provide guidance and support in business growth. This board helps startups address leadership skill gaps and gain impartial insights, with advisors often focusing on specific areas like finance, law, or product development.

Burn Rate

Burn rate indicates how quickly a company utilizes its venture capital to cover operational expenses before achieving positive cash flow. Startups' valuations frequently hinge on their burn rates, particularly when they are not yet profitable.

To compute the burn rate: Starting balance minus ending balance, divided by the number of months.

Customer Acquisition Costs (CAC)

CAC represents the total expenditure involved in acquiring customers, divided by the number of customers gained. This includes online and offline marketing costs, such as advertising and the salaries of sales and customer service personnel.

Comparing ACV to CAC can help companies determine the time required to break even on a contract. If ACV does not cover CAC, it may indicate issues within the sales pipeline.

Capitalization Table (Cap Table)

A cap table is a document that outlines the ownership structure of a company. It usually includes details about various types of equity ownership, such as common stock and convertible equity.

Learn more about cap tables in How Carta won their first 100 customers: an interview with Carta Founder Henry Ward by Sandhya Hegde.

Churn Rate

Churn rate measures the percentage of customers who discontinue their subscriptions within a specific timeframe. Companies must ensure that new subscriptions exceed those lost to foster growth.

To calculate churn: Divide the number of customers lost during a period by the total customers at the beginning of that period.

Customer Relationship Management (CRM)

CRM encompasses the strategies and tools employed by companies to attract, onboard, and retain customers. The primary goals of CRM systems are to enhance efficiency and improve customer communication.

Design Partner

Design partners serve as trusted product testers who provide vital feedback during the early stages of product development. Finding the right design partners can significantly influence a startup's success trajectory.

For more insights, see Picking the right design partners at the Seed Stage.

Founding Insight

This term refers to the core intuition that drives a founder in establishing their company. Ideally, a founder has firsthand experience with the issue that their solution aims to address, reinforcing their conviction that now is the time to act.

General Availability (GA)

GA marks the point at which a product is made available to the public. This contrasts with beta versions, which are primarily for testing and feedback.

Holistic Hiring

This approach to recruitment prioritizes a collective effort to scale the company effectively. By ensuring everyone is aligned, holistic hiring drives the company's mission forward.

For more on this, read Holistic hiring for hyper-growth.

Initial Public Offering (IPO)

An IPO is when a private company offers shares to the public for purchase, typically facilitated by investment banks that ensure compliance with exchange and SEC requirements.

Key Performance Indicators (KPIs)

KPIs are metrics used to evaluate a company's performance against defined objectives or industry standards. They help assess strategic and operational successes, with common examples including revenue growth and customer satisfaction.

Sales Qualification Methodology

MEDDPIC is a popular sales qualification method in enterprise sales, serving as a checklist for essential information and relationship-building.

Modern Go-To-Market Strategy

Today, a founder's ability to implement a successful go-to-market strategy is vital for startup success. The modern GTM approach requires founders to integrate various functions within their organization, moving away from siloed operations.

For more information, read Understanding the Modern GTM for early-stage founders.

Minimum Viable Product (MVP)

An MVP is a simplified version of a product that is launched to gain user feedback. It typically includes basic features that attract early adopters before the final product is developed.

For deeper insights, refer to Start It Up.

Network Effect

This phenomenon describes how the value of a product or service increases as more people use it. Successful examples include platforms like Facebook, Uber, and Etsy.

Objectives and Key Results (OKRs)

OKRs are a framework for setting and tracking goals and measurable outcomes. They help teams maintain focus on defined objectives, usually accompanied by three to five key results.

The Modern GTM Planner spreadsheet aids founders in achieving user adoption and revenue targets by converting goals into actionable OKRs.

Product-Led Growth (PLG)

In a PLG strategy, a self-service product experience is central to building customer relationships, influencing both acquisition and retention.

For further exploration, see Introduction to Product-Led Growth by Sandhya Hegde.

Post-Money Valuation

This valuation reflects a company's worth after an investment has been made. It is calculated as the pre-money valuation plus the investment total.

Pre-Money Valuation

The pre-money valuation is the agreed-upon worth of a company before an investment is made, determining the share price for investors.

Pre-Seed Funding

This early funding stage involves investors providing capital to startups in exchange for equity, often occurring when founders are just beginning operations.

Learn more in How to raise Seed and Series A capital.

Product-Market Fit (PMF)

PMF signifies a company having a product that meets the needs of a suitable market. The startup lifecycle typically divides into pre-PMF and post-PMF phases.

Discover more in Finding Product-market fit for consumer products by Sarah Leary, co-founder of Nextdoor.

Proof of Concept (POC)

A POC is designed to validate whether an idea can become a viable reality, assessing feasibility from both a technical and financial perspective.

Pro Rata

This term means distributing something in equal shares or proportionally. In investment contexts, it allows an investor to maintain their ownership percentage in future financing rounds.

Sales Enablement

Sales enablement simplifies complex sales processes into actionable strategies that can enhance revenue.

Software Development Toolkit (SDK)

An SDK is a collection of software tools provided to developers for building applications on specific platforms, encompassing essential components like debugging tools and code frameworks.

Sales Development Representatives/Business Development Representatives (SDR/BDR)

These roles focus on initiating contact with potential clients to drive sales.

Serviceable Available Market (SAM)

SAM represents the portion of the market that a company can realistically target.

Serviceable Obtainable Market (SOM)

SOM estimates the number of potential customers within your SAM who are likely to purchase your product soon.

Total Addressable Market (TAM)

TAM indicates the total revenue potential for a company based on market demand for its products or services.

Time to Aha (TTA)

TTA is the duration needed for a software product to reveal its first significant value proposition.

The Startup Glossary was initially published on Unusual.vc.

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