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Basic Terms

Updated: May 20

Whether you're a founder building your first startup, an investor scanning pitches, or an aspiring entrepreneur trying to keep up — the business world comes with its own language. Understanding these terms isn’t just helpful — it’s essential.


This article is your go-to guide for all the basic (but powerful) business terms you’ll ever need. We’ve broken them down clearly, category by category — from funding lingo like “valuation” and “burn rate” to strategy terms like “pivot” and “product-market fit.”


  • Use Ctrl + F (or Cmd + F on Mac) to quickly find any term you're looking for.

  • Click on a term in the list to jump straight to a deeper explanation.


Bookmark this article as your go-to guide whenever business jargon pops up—in meetings, pitch decks, or articles. Never feel lost in the conversation again.



Startup & Business Basics


  • Startup – A company in its early stages of operation aiming for high growth.

  • SME (Small and Medium Enterprise) – A small or medium-sized business with limited revenue and number of employees.

  • Entrepreneur – Someone who starts and runs a business, taking on financial risks in hopes of profit.

  • Founder – The person who creates and starts a business (mainly startup).

    Many top founders, like Steve Jobs and Mark Zuckerberg, were college dropouts who proved vision beats formal credentials.

  • Co-founder – A person who partners with the founder to start a business.

  • CEO (Chief Executive Officer) – The highest-ranking executive responsible for the overall operations and performance of the company.

  • CFO (Chief Financial Officer) – Executive responsible for managing financial actions and risks.

  • CMO (Chief Marketing Officer) – Executive responsible for marketing activities, strategies, and communications.

    The first Chief Marketing Officer (CMO) was hired in 1993, inspired by Philip Kotler's modern marketing strategies.

  • COO (Chief Operating Officer) – Executive responsible for day-to-day operations.

  • CTO (Chief Technology Officer) – Executive responsible for technological needs and research & development.

  • Cofounding Team – The group of people who start the business together.

  • Bootstrapping – Building a company without external capital.

    GitHub, Mailchimp, and Shopify started bootstrapped. Mailchimp sold for $12B in 2021 after years of profit.

  • Business Model – The plan for how a company will make money (e.g., subscription, freemium, SaaS).

  • Pivot – A major change in business direction or strategy.

  • MVP (Minimum Viable Product) – The most basic version of a product that solves the core problem, used to test the idea.

    Dropbox’s MVP was a video. A simple explainer video grew their waitlist from 5,000 to 75,000 overnight.

  • USP (Unique Selling Proposition) – What makes your product or business stand out.

  • Accelerator – A fixed-term program that supports startups through mentorship, education, and funding, usually ending with a demo day.


  • Incubator – An organization that helps startups grow by offering resources like office space, mentorship, and connections, usually over a longer period than an accelerator.

  • Pitch Deck – A brief presentation that outlines the business idea, team, market, and plan to attract investors.

    Airbnb faced seven investor rejections and sold custom cereal boxes to raise funds.

  • Pre-Revenue – A stage where a company has not yet generated any sales or income.

  • Post-Revenue – A stage where a company has started generating sales income from its products or services.

  • Offshoring - Moving business operations to another country to reduce costs.

  • Outsourcing - Contracting work to external companies rather than doing it in-house.

  • Stealth Mode - A temporary state where a startup operates in secrecy to avoid competition.

    Apple launched the iPhone in stealth mode, revealing it only during Steve Jobs’s 2007 keynote.

Finance & Investment


  • Angel Investor – A wealthy individual who invests personal money in startups.


  • Revenue – Total income from sales before any costs or expenses.

  • ARR (Annual Recurring Revenue) – Total yearly subscription revenue.

ARR can inflate growth—$10/month becomes $120/year on paper even if customers churn next month.

  • MRR (Monthly Recurring Revenue) – Monthly version of ARR


  • Profit – Revenue minus all expenses.

  • ROI (Return on Investment) – Profit or loss relative to the investment


  • Gross Margin – (Revenue - Cost of Goods Sold) / Revenue. Is expressed as a percentage.

    Amazon operated with negative gross margins for years, selling at a loss to dominate the market long-term.

  • Net Margin – Profit after all expenses are deducted from revenue


  • Cash Flow – The movement of money in and out of a business.


  • Balance Sheet – Financial statement showing assets, liabilities, and equity.

    Ford’s strong balance sheet and reserves helped it survive the 2008 crisis without a bailout.

  • Income Statement – Financial report showing profit/loss over a period.


  • Burn Rate – How fast a startup is spending money.

  • EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization.


  • Runway – How long your startup can survive at the current burn rate.

    The average runway for startups is 18 months. Startups often must raise money again quickly to survive.

  • Valuation – The estimated worth of a business.

  • Equity – Ownership in a company, typically in the form of shares.

  • Dilution – Reduction in ownership percentage due to new shares issued.

  • Cap Table (Capitalization Table) – A spreadsheet showing who owns how much of the company.


  • M&A (Mergers & Acquisitions) – Consolidation of companies through various financial transactions.

  • Acqui-hire – An acquisition where the main goal is to acquire the team rather than the product or company itself.

    Google acqui-hired Aardvark for $50 million in 2009 just for its team.

  • Debt Financing – Borrowing money that must be repaid.

  • Equity Financing – Raising money in exchange for ownership.

  • Term Sheet – A non-binding agreement outlining the terms of an investment.

  • Convertible Note – A loan that can be converted to equity later.

  • SAFE (Simple Agreement for Future Equity) – A simple legal document to raise money without a valuation.

    SAFE notes were created by Y Combinator to replace convertible notes in early-stage funding.

  • Venture Capital (VC) – Funding provided by investors to high-growth startups.

  • Seed Round / Series A/B/C – Funding rounds as a company grows.

  • Exit Strategy – How founders and investors plan to cash out (IPO, acquisition, etc.).

  • IPO (Initial Public Offering) – When a company first sells shares to the public.

  • Unicorn – A privately held startup valued at over $1 billion.

    In 2013, there were 39 unicorn companies. Today, there are over 1,200 worth $4 trillion combined.

  • Decacorn - A privately held startup valued at over $10 billion.

  • Dragon – A startup that raises $1 billion in a single round of funding.

  • Pre-money Valuation – The value of a startup before new investment is added.

  • Post-money Valuation – The value of a startup after investment is added.

  • Sweat Equity – Ownership interest or increase in value created by work done rather than capital invested.

  • Crowdfunding – Raising small amounts of money from a large number of people, typically via platforms like Kickstarter or Indiegogo.

    The world’s first crowdfunding campaign raised money in 1885 for the Statue of Liberty’s pedestal through newspaper ads.

  • Bridge Loan – A short-term loan used to cover immediate costs until longer-term financing is secured.

  • Liquidation – The process of converting assets into cash, often in the event of a company winding down.

  • Lead Investor – The main investor who negotiates terms and sets the pace for a funding round.

  • Ramen Profitable - When a startup makes just enough money to cover the founders' basic living expenses.

  • Warrants - Options to purchase stock at a specific price within a certain timeframe.

  • Zombie Company - A company that earns just enough to continue operating and service debt but cannot pay off its debt.

    Over 30 000 U.S. zombie companies earn just enough to pay interest but lack profits or innovation.

Strategy & Planning


  • SWOT Analysis – Strengths, Weaknesses, Opportunities, Threats.

  • OKRs (Objectives and Key Results) – A goal-setting framework.

  • KPI (Key Performance Indicator) – A measurable value showing how well a company is achieving goals.

  • Go-to-Market (GTM) Strategy – Plan to launch and sell your product.

    Duolingo gamified its go-to-market strategy by using streaks and leaderboards to boost daily active users instead of ads.

  • Business Plan – A document that outlines business goals and how to achieve them.

  • Product-Market Fit – When customers love your product and it satisfies a strong need.

    Only about 1 in 10 startups survive. 90% fail, and 42% fail due to lack of market need.

  • North Star Metric – The one key metric that best shows your product's success.


  • TAM/SAM/SOM – Total Addressable Market/Serviceable Addressable Market/Serviceable Obtainable Market.

  • Traction – Evidence of customer demand and business model validation.

  • Moat – A competitive advantage that protects a business from rivals.

    Coca-Cola’s brand is its moat. Loyalty and a secret recipe help it survive price wars and copycats.

  • Marketplace – A platform where buyers and sellers transact, like Airbnb or Etsy.

  • Disruptive Innovation - A product or service that creates a new market and eventually disrupts an existing one.

  • First-mover Advantage - Benefits gained by the first company to enter a market.

  • Vertical Integration - When a company controls multiple stages of its supply chain.

  • Blue Ocean Strategy - Creating uncontested market space rather than competing in existing markets.

    Apple’s iTunes disrupted music distribution with $0.99 legal downloads amid piracy battles.

Marketing & Sales


  • ARPU (Average Revenue Per User) – Total revenue divided by number of users.

    Spotify’s ARPU is $4.81, showing the revenue drag of freemium users.

  • B2B/B2C/D2C – Business-to-Business/Business-to-Consumer/Direct-to-Consumer.

  • Branding – How your business is perceived by the public.

  • Sales Funnel – The journey from stranger to paying customer.

  • Lead – A potential customer.

  • Activation – The moment a user first experiences the value of your product (e.g., signs up and uses a key feature).

    Pinterest prioritized activation—users who pinned 5 items on Day 1 were far more likely to return.

  • Evangelist – A person (often an employee or early adopter) who passionately promotes a product or brand to grow its user base.


  • CPA (Cost Per Acquisition) – Cost to acquire a paying customer.


  • CLTV (Customer Lifetime Value) – Total worth of a customer over time.

  • CTR (Click-Through Rate) – Percentage of people who click on a link/ad.

  • MQL/SQL – Marketing Qualified Lead/Sales Qualified Lead.

79% of marketing qualified leads never convert to sales, highlighting the need for better handoffs.

  • NPS (Net Promoter Score) – Measure of customer experience and loyalty.

    NPS was invented by Bain & Company in 2003. It’s called 'the one number you need to grow.

  • Conversion Rate – Percentage of people who take a desired action.

  • Growth Rate – How fast the business is growing over time.

  • CAC (Customer Acquisition Cost) – Cost to get a new customer.

  • LTV (Lifetime Value) – Revenue a customer generates during their relationship with your business.

  • Churn Rate – Percentage of customers who stop using your product.

    Churn rate can kill a startup — Slack prioritized retention over acquisition early on.

  • Retention – How well you keep customers coming back.

  • SEO (Search Engine Optimization) – Techniques to rank higher in search engines.

  • Bounce – When a visitor lands on a webpage and leaves without taking any further action.

  • Call to Action (CTA) – A prompt encouraging users to take a specific action, like “Sign up” or “Buy now.”

    Dropbox boosted signups by 60% after testing a CTA that said 'Get started with 2GB free,' showing the power of small tweaks.

  • Stickiness – How often users return to use a product or how “habit-forming” it is.



Team & Culture


  • Advisory Board – Group providing strategic advice (not governance).

  • Board of Directors – A group of people elected to represent shareholders and guide the company.

    Steve Jobs was fired by Apple’s board in 1985 when they sided with CEO John Sculley.

  • C-Suite – Top senior executives (CEO, CFO, COO, etc.).

  • Cofounder Agreement – A formal document outlining roles and responsibilities.

  • Culture Fit – How well a candidate aligns with company values.

  • ESOP (Employee Stock Ownership Plan) – Giving employees a chance to own company shares, to align employee interests with company success.

    Google used ESOPs to attract top engineers, turning early employees into millionaires even if they weren’t founders.

  • Equity Compensation – Non-cash pay representing ownership.

  • Hiring Funnel – The stages of recruiting new team members.

  • Option Pool – Shares reserved for employee stock options.

  • Org Chart – Visual representation of company structure.

    Org charts were invented for railroads. The first was drawn in 1854 for the New York and Erie Railroad.

  • Severance – Compensation paid to an employee after they are let go, often based on tenure or employment terms.



Product & Tech


  • API (Application Programming Interface) – Connection between computers/software.

  • SaaS (Software as a Service) – Subscription-based software delivery model.

    99% of new SaaS startups offer monthly pricing. SaaS grew from $5.5B in 2008 to over $200B in 2025.

  • PaaS (Platform as a Service) – A cloud computing model where hardware and software tools are delivered over the internet.


  • Freemium – A business model offering basic services for free while charging for advanced features or add-ons.

    Evernote popularized the freemium model, finding users who stayed two years were 7 times more likely to pay.

  • DevOps – Development and IT operations integration.

  • Front-end/Back-end – Client-side/server-side of software.

  • No-code / Low-code – Platforms that allow building products without coding.

  • Proof of Concept (POC) – Exercise to verify a concept/theory is feasible.


  • Scalability – System's ability to handle increased load.

  • Scrum – A popular Agile framework using sprints.

    Scrum was inspired by a 1986 rugby analogy comparing product teams to rugby scrums.

  • Sprint – A short, fixed period to complete specific work.

  • Technical Debt – The cost of quick-and-dirty code that must be fixed later.

  • UI/UX – User Interface / User Experience.


  • Alpha Release – An early version of a product released to a limited internal audience for testing and feedback.

  • Beta Release – A product version shared with external users to identify bugs and gather real-world feedback before full release.

    Gmail stayed in beta for five years (2004–2009) despite millions of users and near-perfect uptime.

  • Open-source – Software whose source code is freely available for modification and redistribution.

  • Accessibility – The design of products, services, or environments to be usable by people with disabilities.

  • White-label – A product or service made by one company but rebranded and sold by another.

    Supermarkets use white-label strategies: Walmart’s Great Value and Costco’s Kirkland come from the same makers as premium brands.

  • Sandbox – A safe testing environment for new software or features.


Legal & Compliance


  • Bylaws – Rules governing a corporation's internal management.

  • C-Corp/S-Corp – Corporate structures with different tax implications.

  • Cliff – Period before vesting begins.

    Vesting cliffs protect startups by ensuring co-founders earn equity over time, preventing early exits with ownership.

  • Fiduciary Duty – Legal obligation to act in another party's best interests.

  • Incorporation – Formally creating a legal company.

  • Intellectual Property (IP) – Legal rights for inventions, trademarks, etc.

  • LLC (Limited Liability Company) – Business structure protecting owners from personal liability.

  • NDA (Non-Disclosure Agreement) – Legal contract to keep information confidential.

    NDA violations can cost millions. In 2021, Tesla won $400,000 after suing a former employee for leaks.

  • Operating Agreement – Document outlining ownership and member duties in an LLC.

  • Patent – A right granted for an invention.

  • Privacy Policy – How user data is collected and used.

  • Terms & Conditions – Rules for using a product or service.

  • Trademark – Protects brand names, logos, slogans.

    Apple paid $60 million for the iPad name in China after a local company had already trademarked it.

  • Vesting – Process by which employees earn full rights to assets over time.

  • Escrow – A third party temporarily holds money or assets until a deal is completed.

Escrow services helped fuel the online real estate boom by protecting buyers and sellers on platforms like Zillow and Redfin.

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