The average yearly value of one customer contract or subscription. SaaS businesses that focus on annual or multi-year subscription plans use ACV to measure sales metrics.
ACV formula: total contract value divided by total years in contract. For example, if a customer signs a five-year contract for $100,000, the ACV is $20,000.
ARR might seem similar to ACV, but it’s not. ARR accounts for recurring revenue across several contracts. ARR is the metric that SaaS companies expect to repeat and grow year over year.
The price that a certain category of a product is typically sold for. To calculate the ASP, take the total revenue earned by all products in a product class and divide that amount by the total number of units sold.
Learn more in Scale your sales team to win the early majority by Unusual Co-Founder John Vrionis
A small market with specific characteristics that make it an ideal target to sell a new product or service. The choice of the market is based on the compatibility between the resources available, the product, and the market itself.
a group of experts and specialists selected by a company’s CEO and management team to provide advice and support for business development. A board of advisors is an opportunity for startups to fill skill gaps in leadership and, ideally, get unbiased perspectives. Board advisors tend to specialize in a particular area of knowledge, such as finance, law, product development, or accounting.
the rate at which a company spends venture capital to finance overhead before generating positive cash flow. Startups’ valuations are often measured by their burn rate, when they’re unable to generate a positive net income in its early days. Seed-stage investors and venture capitalists tend to provide funding based on a company’s burn rate. How to calculate burn rate: starting balance minus ending balance divided by number of months.
the sum of the costs to acquire customers divided by the number of acquired customers. Acquisition costs include online and offline expenses to obtain a customer. Common CAC include advertising, Cost Per Click (CPC), and marketing, sales, and customer service employee wages.
By comparing ACV to CAC, companies can figure out how long it will take to make a profit on a contract. When you compare ACV to CAC, if the annual contract value doesn't offset the cost of acquiring a customer, there’s likely a problem with the sales process.
a document that defines the people who own portions of a company. Cap table spreadsheets tend to include information about a company's equity ownership capital, such as common stock, preferred stock, and convertible equity.
Learn more about the business of cap tables in How Carta won their first 100 customers: an interview with Carta Founder Henry Ward by Sandhya Hegde
refers to attrition or the percentage rate at which customers stop subscribing to a company's product or service. In order to grow, companies must make sure that their new subscriptions are higher than lost subscriptions during a specified period of time. Different industries tend to vary how often they measure churn — such as monthly, quarterly, or annually. To calculate churn, start with the number of customers you lost during a time period and divide that by the number of customers that you started with during the same period.
refers to strategies and tools that companies use for acquiring, onboarding, and retaining customers. The main goals of CRM systems are to streamline processes and improve communication with customers.
the bedrock intuition that a founder builds their company on. Ideally, a founder has first-hand experience living the pain that drives the belief that now is the time to build a new solution.
the release of a product to the general public. Whereas beta or limited release versions are intended for testing and user feedback purposes,
when a product reaches GA, it is considered officially available.
the process of offering shares of a private company to the public to purchase. An IPO is typically underwritten by an investment bank(s), which also arranges for the shares to be listed on stock exchanges. To hold an IPO, companies must meet requirements by exchanges and the Securities and Exchange Commission (SEC).
A method of measuring a company’s performance compared to a set of targets, objectives, or industry peers and how it’s progressing toward goals. KPIs help to figure out a company's strategic, financial, and operational achievements, especially compared to the competition. Some of the most common KPIs are revenue growth, profit margin, client retention rate, and customer satisfaction.
sales qualification methodology that's popular in enterprise sales. It's essentially a checklist for information you need to know, things you need to do, and people you need to develop relationships with.
One of the most important determinants of a startup’s success is the founder’s ability to successfully execute on the correct go-to-market (GTM) strategy. The optimal GTM for an enterprise startup is vastly different than it was a decade ago.
Founders must now embrace that the correct GTM begins at product strategy and demands that a founder function as an expert conductor of several major functions in the organization. Enterprise startups that executed with the old enterprise GTM model had engineering and product teams that did their work in a more serial, siloed fashion, and sales and marketing were tasked with finding the best way to penetrate an organization and complete a sales process. In the Modern GTM, the teams in the organization are much more interdependent.
Read Understanding the Modern GTM for early-stage founders by John Vrionis
an early version of a product that looks and feels like a simplified version of the eventual vision. In tech, an MVP is oftentimes launched in the market with basic features but enough to gain attention of consumers. The final product is officially released after getting sufficient feedback from the product's initial users.
Read How to design minimum viable self-serve product experiences for enterprise software by Sandhya Hegde
A phenomenon in which the value of a product, service, or platform depends on the number of buyers, sellers, or users who leverage it. Typically, the greater the number of buyers, sellers, or users, the bigger the network effect. Examples of successful network effects include Facebook and YouTube for social media; Uber and Lyft for rideshare; and Etsy for ecommerce.
a goal-setting framework for tracking objectives and outcomes with specific and measurable actions. OKRs help teams focus and align on clearly defined goals, usually with three to five key results, and specific measurements to keep track of progress.
In a product-led growth (PLG) strategy, a self-serve product experience forms the core foundation of a customer relationship, driving both customer acquisition and retention. All other factors — such as whether you offer a credit card–based payment flow or you’ve hired sales representatives — are tactics that you choose to fit your target customer’s needs at the right time in the right way.
See Introduction to PLG (product-led growth) by Sandhya Hegde.
the valuation of a company after investors have made their investment. This tends to be the pre-money valuation plus the total amount of investment in the fundraising round.
the amount that an investor and the company agree to deem the company to be worth just before an investor's investment. The pre-money valuation determines how much the investor will pay per share for the stock they purchase.
A startup’s early-stage funding round in which investors provide capital to a new startup in exchange for equity, typically when the company's founders are just beginning to operate. The Pre-Seed may happen after an angel round of investment or “bootstrapping”. At Unusual Ventures, we write checks ranging from $1–2 million for Pre-Seed, $4–5 million for Seed, and $10–12 million for Series A rounds. Venture capital terminology fluctuates, but in general, Pre-Seed is the funding round before the Seed and Series A stages.
Learn more in How to raise Seed and Series A capital
The concept of a company being in a good market with a product that can satisfy that market. A startup's lifecycle can be grouped into two phases: pre–product-market fit (PMF) and post–product-market fit. When your startup is pre-PMF, your singular focus is getting to PMF.
Read about the five phases of product-market fit for B2B software by John Vrionis, co-founder of Unusual Ventures
Read Finding Product-market fit for consumer products by Sarah Leary, co-founder of Nextdoor
an exercise focused on determining whether an idea can be turned into a reality. A proof of concept is meant to determine the feasibility of the idea or to verify that the idea will function as envisioned. In , a proof of concept shows whether an idea is feasible from a technology standpoint. For startups, a proof of concept would demonstrate financial viability.
means in “equal portions” or “in proportion” in legal and economic contexts. Pro rata typically means that each person or party receives a fair share in proportion to the whole. A pro rata clause in an investment agreement gives an investor a right to participate in at least one future financing round to maintain their percentage stake in the company.
breaking down the complexity of a sales process into practical ideas through scalable and repeatable practices that will lead to increased revenue. In simplest terms, it’s the systematic process of teaching others how to sell effectively.
a set of software tools and programs in one installable package. Also known as a devkit, that software companies provide to developers to build applications for specific platforms. SDKs tend to include building blocks, debuggers, and a code framework specific to an operating system (OS).
sales development representatives and business development representatives, respectively.
the total portion of a market that a company can possibly acquire. SAM — along with TAM and SOM — are acronyms for three metrics to describe a company’s market.
focuses on how many people in your SAM can realistically benefit from buying your product or service in the near future.
the total amount of money that a company can possibly earn by selling their product or service. TAM is an essential metric in gauging a startup’s growth potential. Unless your company is a monopoly or has no competitors, keep in mind that your company will share TAM with other companies.
The period in which a software product demonstrates its first differentiated value proposition. This is not to be confused with small moments of delight and learning in general. For instance, if you are new to Webflow, your first big ‘aha!’ moment could be simply picking a great template for your blog within five minutes of setting up an account.
The nature of the ‘aha!’ experience needn’t necessarily include a full implementation of your product. The aha moment could be anything from a realistic sandbox to a pre-filled template or a partial implementation that mimics your product.
Learn more in Nail your self-serve product by Sandhya Hegde
Startup Glossary Consumer
Acronyms, jargon, and common terms in startups, VC, and business development — defined by entrepreneurs and venture capitalists