A revenue model is a framework that outlines how a business generates income by selling products or services, licensing intellectual property, offering subscriptions, or employing other monetization strategies. It defines the sources of revenue and the pricing mechanisms that drive the business's financial success.
Revenue streams refer to the various sources of income a business generates from selling products or services, licensing, advertising, or other monetization strategies. Each revenue stream represents a specific way in which a business earns money, contributing to its overall financial stability and growth.
Revenue-based financing (RBF) is a funding method where a business secures capital from investors or lenders in exchange for a percentage of its future revenues. Unlike traditional loans, there is no fixed repayment schedule or interest rate. Instead, repayments are tied directly to the company’s revenue, making it a flexible option for startups with fluctuating income.
A revolving loan is a flexible line of credit that allows businesses to borrow, repay, and borrow again up to a specified credit limit. It provides ongoing access to funds, making it ideal for managing cash flow, covering short-term expenses, or addressing unexpected financial needs. Unlike a term loan, which has fixed repayment schedules, a revolving loan offers flexibility in repayment as long as the borrower stays within the credit limit.
A round refers to a specific stage of financing in which a company raises capital from investors. It is a crucial step in the growth and development of a company, allowing it to secure funds to support its operations, expand its business, or invest in new opportunities.
The run rate is a method used to project a company’s future revenue based on its current performance over a short period, typically extrapolated to an annual figure. It helps startups estimate potential earnings by assuming that recent revenue levels will continue consistently.
The runway refers to the length of time a startup can continue operating using its existing cash reserves before it becomes necessary to secure additional funding.
A SAFE, or Simple Agreement for Future Equity, is a financing contract that grants investors rights to future equity in a startup in exchange for an upfront investment. Unlike traditional convertible notes, SAFEs don’t accrue interest or have a maturity date. They’re often used in early-stage fundraising for their simplicity and flexibility.
The SH01 Form is a document filed with Companies House to officially record the issuance of new shares in a startup. Submitting this form is the final step in closing a funding round, providing a public record of the new shares issued and ensuring compliance with regulatory requirements.
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SOM (Serviceable Obtainable Market) is the realistic portion of the Serviceable Addressable Market (SAM) that a company can capture, based on its resources, competition, and market reach. It represents the actual market share a business expects to obtain within a specific timeframe, considering real-world constraints like budget, distribution channels, and operational capacity.
SOM is often used in startup funding and market analysis to set realistic revenue goals and investor expectations.
A sales funnel is a visual representation of the customer journey, illustrating the stages a potential customer goes through from initial awareness of a product or service to making a purchase. It typically includes stages such as awareness, interest, decision, and action.
A sales pipeline is a visual representation of the stages a sales team follows to convert potential leads into paying customers. It tracks the progress of prospects through the sales process, helping businesses forecast revenue, prioritize efforts, and identify areas for improvement.
Sales revenue is the total income a business earns from selling its products or services during a specific period. It is a key component of a company’s financial performance and is often referred to as "top-line" revenue because it appears at the top of the income statement.
Scalability refers to a business model's ability to increase revenue without a corresponding rise in operational costs. A scalable business can handle growth efficiently, often by leveraging technology, streamlined processes, or economies of scale.
Seed funding refers to the initial capital that is provided to a startup in exchange for equity. It is the first round of funding that a startup receives to help get their business off the ground. Seed funding is typically provided by angel investors, venture capitalists, or even friends and family of the founders.
Seed capital is the initial funding that a startup raises to develop its business idea, build a prototype, or launch its first product. It typically comes from founders, friends and family, angel investors, or seed-stage venture capital firms. Seed capital is used to cover early operational expenses before a company generates revenue or raises larger funding rounds.
For startups, securing seed capital is a crucial step in validating their business model and attracting future investors.
A Serial Entrepreneur is an individual who repeatedly starts, scales, and exits multiple businesses rather than focusing on just one company. Unlike traditional entrepreneurs who may run a single venture long-term, serial entrepreneurs thrive on building, innovating, and launching new startups, often moving on after securing funding, achieving growth, or selling the business.
Series A funding refers to the initial round of financing that a startup receives after seed funding. This funding round is crucial for startups as it allows them to scale their operations and further develop their product or service.
Share dilution occurs when a company issues additional shares, reducing the ownership percentage of existing shareholders. This often happens during funding rounds, stock option exercises, or convertible securities conversions. While dilution decreases the proportional ownership of existing shares, it can also increase the company’s overall value if the new shares raise significant capital.
A share repurchase, also known as a stock buyback, is a corporate action where a company buys back its own shares from the market. This reduces the number of outstanding shares, increasing the ownership percentage of remaining shareholders and potentially boosting the stock’s value. Share repurchases are often used as a way to return capital to shareholders or signal confidence in the company’s financial health.
Shareholder value refers to the financial worth delivered to a company’s shareholders through increased stock prices, dividends, and overall company performance. It is a measure of a company’s ability to generate returns for its investors, either through capital appreciation or direct payouts.
A Shareholders Agreement (SHA) is a legally binding contract that defines the relationship between a company, its shareholders, and its investors. It outlines the terms and conditions agreed upon in the term sheet, ensuring that all parties are aligned on their rights, obligations, and responsibilities.
A Shareholders Resolution is a formal document signed by a startup’s shareholders to approve significant business decisions, typically requiring a 75% majority. This resolution is commonly used for key actions like issuing new shares, approving mergers, or making changes to the company’s structure, ensuring that shareholders are informed and aligned on these impactful decisions.
Software as a Service (SaaS) is a software delivery model where applications are accessed through the internet. Instead of installing and maintaining software on individual computers or servers, users can access the software through a web browser.
Startup valuation refers to the process of determining the worth or value of a startup. It is typically based on the startup's potential for growth and future success. Understanding the valuation of a startup is crucial for investors, founders, and stakeholders as it helps in making informed decisions regarding investments, partnerships, and overall business strategies.
A startup attorney is a legal professional who specializes in advising early-stage businesses on key legal matters, including company formation, contracts, intellectual property, fundraising, and regulatory compliance. They help startups navigate legal risks, structure agreements, and ensure long-term protection and scalability.
Stock options are a form of compensation that gives employees, founders, or investors the right to purchase a company’s shares at a predetermined price, known as the exercise or strike price, within a specified time frame. These options become valuable if the company’s stock price increases, allowing the holder to buy shares at a lower price and potentially sell them at a profit.
A strategic alliance is a formal agreement between two or more businesses to collaborate and achieve mutually beneficial goals while remaining independent entities. These partnerships can involve sharing resources, expertise, or market access to enhance competitiveness, expand market reach, or drive innovation.
A strategic partnership is a mutually beneficial arrangement between two or more businesses that collaborate to achieve shared objectives while maintaining their independence. These partnerships often focus on leveraging each other’s strengths, resources, or market access to drive growth, innovation, and competitive advantage.
Strategic planning is the process of defining a company’s direction and making decisions on allocating resources to achieve its long-term goals. It involves setting objectives, analyzing internal and external environments, and crafting strategies to guide the organization toward success.
Sweat equity is the ownership stake that founders or employees receive in exchange for their labor and contributions, rather than a financial investment. It represents the value of their hard work and dedication in building the company.
A sweat equity agreement is a legal contract that outlines the terms under which an individual or group receives ownership or equity in a company in exchange for their time, effort, or expertise instead of monetary investment. It is commonly used in startups to reward founders, early employees, or advisors who contribute significantly to building the business.
Sweat equity shares are equity shares issued by a company to individuals in exchange for their labor, expertise, or other non-monetary contributions, rather than a direct financial investment. These shares are typically granted to founders, employees, or advisors who play a significant role in building the business and are rewarded for their efforts with ownership in the company.
A syndicate is a group of investors who pool their capital and resources to invest collectively in a startup or venture. Syndicates allow smaller investors to participate in larger deals and provide startups with access to multiple investors through a single funding structure.
TAM (Total Addressable Market) and SAM (Serviceable Addressable Market) are key market sizing concepts used by startups and investors to estimate business potential.
Tag-along rights are provisions that protect minority shareholders by allowing them to sell their shares under the same terms as a major shareholder if that shareholder decides to sell. This ensures that smaller shareholders can exit on equal terms in a sale event.
A target audience is a specific group of people identified as the ideal customers for a business’s product or service. This group is defined by characteristics such as demographics, behavior, interests, needs, and location. Understanding the target audience helps businesses tailor their marketing strategies, messaging, and offerings to resonate with potential customers effectively.
A target market is a specific group of potential customers that a business identifies as the most likely to purchase its products or services. It is defined by shared characteristics such as demographics, behaviors, needs, geographic location, and purchasing power.
Target pricing is a pricing strategy in which a business sets a price for its product or service based on the perceived value to customers and market demand. The target price is established before the product is developed or produced, ensuring that costs are managed to meet the desired profit margin.
A tear sheet is a one-page financial summary that provides key information about an investment opportunity, company, or fund. It is commonly used by investors, venture capitalists, and financial analysts to quickly assess a company’s performance, key metrics, and growth potential. Tear sheets typically include data such as financials, valuation, market opportunity, investment highlights, and risk factors.
Technical Due Diligence is a crucial process for evaluating the technology, software, infrastructure, and intellectual property of a startup. It aims to assess the viability, scalability, and potential risks associated with these aspects. By conducting thorough technical due diligence, investors and stakeholders can make informed decisions regarding their investments and partnerships.
A tender offer is a public proposal made by an individual, company, or investor to purchase some or all of the shares of a company at a specified price, usually at a premium over the current market price. The offer is typically made directly to shareholders rather than through the company’s board of directors.
The term "Term Cap" refers to the maximum valuation at which a convertible note or other security can convert into equity in a future financing round. It is an important concept in investment agreements and plays a significant role in determining the potential returns for investors.
A Cap Table, short for Capitalization Table, is a crucial document that provides an overview of the ownership stakes and capital structure of a startup. It presents a detailed breakdown of the different classes of shares, options, warrants, and other securities held by various stakeholders.
A term loan is a loan with a fixed duration and a set repayment schedule, typically used by businesses to finance specific expenses, such as equipment, expansion, or other significant investments. The loan amount is repaid in regular installments, usually with interest.
A term sheet is a non-binding agreement that outlines the fundamental terms and conditions governing an investment. It serves as a preliminary document that sets the foundation for further negotiation and the creation of a more detailed and binding contract.
Total Addressable Market (TAM) is the total revenue opportunity available for a product or service if it were to capture 100% of its market. It represents the maximum potential market size for a business and serves as a key metric for understanding the scale and growth potential of an industry or niche.
For startups, TAM is critical for evaluating market opportunities, attracting investors, and developing business strategies to capture a significant share of the market.
Total Addressable Market (TAM) refers to the total revenue opportunity available for a product or service if it were to achieve 100% market share within its specific industry or category. TAM provides an estimate of the market size and potential growth opportunities, helping businesses assess the viability and scalability of their offerings.
Total Available Market (TAM), sometimes referred to as Total Addressable Market, is the total revenue opportunity available for a product or service if it were to achieve 100% market penetration in its specific industry or category. It represents the maximum market demand for a product or service, assuming no competition or limitations.
Total revenue is the total amount of money a business earns from selling its products or services during a specific period. It is calculated by multiplying the quantity of goods or services sold by their selling price. Total revenue is a fundamental financial metric that provides insights into a company’s sales performance and market demand.
Traction refers to the evidence of market validation and customer adoption. It encompasses various indicators such as revenue growth, user acquisition, and positive feedback from customers. Traction is a crucial metric for assessing the success and potential of a product or business.
A tranche refers to a portion of an investment or loan that is released in stages or increments, based on the achievement of certain milestones or conditions. This method of dividing an investment or loan into tranches allows for more flexibility and risk management.
Translation is the process of converting text from one language to another while preserving its original meaning. It’s often the first step for startups expanding into new markets—making product interfaces, websites, and communication accessible to global users.
Turnaround Time refers to the duration it takes for an investor or fund to evaluate a startup and make a decision on whether to invest or provide funding. It is an essential metric in the startup ecosystem as it directly impacts the speed at which a startup can secure funding and proceed with its growth plans.
Unit economics refers to the financial metrics and calculations that analyze the profitability of a single unit of a product or service. It evaluates how much revenue and cost are associated with one unit, helping businesses understand their per-unit profit margin and scalability.
Unit pricing is the pricing strategy that determines the cost of a single unit of a product or service. It provides clarity to customers about the price they are paying per unit, allowing for better comparisons across similar products or services. For businesses, unit pricing helps align pricing strategies with production costs, perceived value, and market competition.
Unit sales refer to the total number of individual products or services sold by a business during a specific period. It is a key performance metric that provides insights into the company’s market demand, operational success, and revenue generation.
Upside refers to the potential for a venture capital investment to generate significant returns or profits. It represents the positive outcome or the favorable result that investors anticipate when investing in a particular venture.
User acquisition refers to the process of attracting and converting individuals into users or customers of a product or service. It involves strategies, campaigns, and techniques designed to reach target audiences, engage them, and encourage them to take desired actions, such as signing up or making a purchase.
User engagement refers to the level of interaction, involvement, and emotional connection that users have with a product, service, or brand. It is often measured through metrics such as clicks, shares, time spent, and repeat usage, indicating how actively users interact with a company’s offerings.
User Experience (UX) refers to the overall interaction and satisfaction that a user has with a product, service, or system. It encompasses elements such as usability, design, accessibility, and the emotional response elicited during use. A positive UX ensures that a product is intuitive, engaging, and meets user needs effectively.
User retention refers to a company’s ability to keep users actively engaged with its product or service over time. It measures how successfully a business prevents churn and maintains a loyal customer base. High user retention indicates that users find consistent value in the offering, while low retention suggests potential issues with user satisfaction, engagement, or product-market fit.
A valuation cap is a maximum valuation set on convertible instruments like a SAFE (Simple Agreement for Future Equity) or a convertible note. It establishes the highest company value at which early investors can convert their investment to equity, allowing them to secure a fair share of the company.
A valuation method is a systematic approach used to determine the economic value of a business, asset, or investment. These methods consider various factors such as financial performance, market conditions, assets, and growth potential to calculate a fair valuation.
Value-Based Pricing is a pricing strategy where a company sets the price of a product or service based on the perceived value to the customer, rather than production costs or competitor prices. This approach focuses on customer willingness to pay by aligning pricing with the benefits and outcomes the product delivers. It is commonly used in SaaS, luxury goods, and service-based industries where differentiation and perceived value play a key role.
Venture debt is a type of financing provided to early-stage, high-growth companies that have already raised equity funding. Unlike traditional loans, venture debt is often used to extend the runway, fund growth initiatives, or bridge the gap between equity rounds. It is typically offered by specialized lenders or venture capital firms alongside equity investors.
A venture partner is a professional affiliated with a venture capital (VC) firm who works on a part-time or project-specific basis. Their role typically involves sourcing deals, providing strategic advice, or supporting portfolio companies, without being a full-time member of the firm. Venture partners leverage their expertise, networks, and industry knowledge to contribute to the firm’s success and investment strategies.
A Venture Studio is a company that creates and develops multiple startups from the ground up, providing resources, expertise, and guidance to accelerate their growth. Venture studios typically support startups with funding, strategic direction, product development, and operational resources, helping founders overcome early-stage challenges more efficiently.
Vertical integration is a growth strategy in which a company gains control over its supply chain by acquiring or merging with its suppliers or distributors. This approach allows the company to streamline operations, reduce costs, and improve control over the production and distribution process.
Vesting is the process by which an employee or founder earns ownership rights over a certain period of time. This is typically achieved through the use of stock options or restricted stock units.
A vesting schedule outlines the timeline over which employees or founders gain ownership rights to their shares or stock options. Typically, this schedule spans several years and often includes an initial “cliff” period, during which no shares are vested.
A warrant is a financial instrument that grants the holder the right to buy a company's stock at a predetermined price during a specific time frame.
A waterfall is the order of priority in which proceeds are distributed among shareholders and creditors during an exit, such as a sale or liquidation. It ensures that each group of stakeholders receives payment based on their specific claim.
Working capital is a financial metric that measures a company’s short-term liquidity and operational efficiency. It is calculated as the difference between current assets (such as cash, accounts receivable, and inventory) and current liabilities (such as accounts payable and short-term debt). Positive working capital indicates that a company can meet its short-term obligations, while negative working capital may signal financial challenges.
