Sunday, 16 February 2025

Startup/Business Terms II

MOIC (Multiple on Invested Capital)

Formula: MOIC = (Investment Value + Gains) / Initial Investment
Definition: Ratio of returns to initial investment.

IRR (Internal Rate of Return)
Definition: Annualized return an investor earns on an investment.

COGS (Cost of Goods Sold)
Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
Definition: Direct costs associated with making a product.

NPS (Net Promoter Score)
Formula: NPS = % Promoters - % Detractors
Definition: Measures customer satisfaction and loyalty.

D2C (Direct-to-Consumer)
Definition: Business model where brands sell directly to customers.

B2B (Business-to-Business)
Definition: Companies selling products/services to other businesses.

B2C (Business-to-Consumer)
Definition: Companies selling products/services to individuals.

MRR (Monthly Recurring Revenue)
Formula: MRR = Subscription revenue per month
Definition: Revenue from subscriptions in a given month.

ARR (Annual Recurring Revenue)
Formula: ARR = MRR × 12
Definition: Yearly revenue generated from subscriptions.

Valuation
Definition: The financial worth of a startup based on funding and market position.

Dilution (Equity Dilution)
Definition: Decrease in ownership percentage when new shares are issued.

Convertible Note
Definition: A loan that turns into equity during a funding round.

Pre-Money Valuation
Definition: A startup’s valuation before a new investment.

Post-Money Valuation
Formula: Post-Money Valuation = Pre-Money Valuation + New Investment
Definition: A startup’s valuation after receiving an investment.

SAFE (Simple Agreement for Future Equity)
Definition: An investment contract that converts into equity in the future.

Term Sheet
Definition: A document outlining key deal terms between a startup and an investor.

Cap Table (Capitalization Table)
Definition: A record of company ownership, including shares and investors.

Vesting
Definition: Process where employees earn their shares over time.

Cliff
Definition: A period before equity starts vesting.

Pro Rata Rights
Definition: The right of an investor to maintain their percentage ownership.

Down Round
Definition: A funding round where a startup’s valuation decreases.

Bridge Round
Definition: Temporary funding to sustain operations before a major funding round.

Gross Profit
Formula: Gross Profit = Revenue - Cost of Goods Sold
Definition: Revenue left after deducting direct costs of production.

Operating Profit (EBIT - Earnings Before Interest & Taxes)
Formula: Operating Profit = Revenue - Operating Expenses
Definition: Profit after accounting for all operating expenses.

Net Profit Margin
Formula: Net Profit Margin = (Net Profit / Revenue) × 100
Definition: Measures how much profit a company makes after all expenses.

Break-even Point
Formula: Break-even = Fixed Costs / (Price - Variable Cost)
Definition: Sales volume needed to avoid losses.

ROI (Return on Investment)
Formula: ROI = (Net Profit / Investment Cost) × 100
Definition: Measures profitability of an investment.

Bootstrapping
Definition: A startup funding itself without outside capital.

Freemium Model
Definition: A business model where basic services are free but premium features cost money.

Viral Coefficient
Formula: Viral Coefficient = Referrals Per User × Conversion Rate
Definition: The rate at which new users join due to existing users.

Unit Economics
Definition: Revenue and cost per customer or unit.

Pivot
Definition: A major shift in a startup’s business model.

Unicorn
Definition: A privately held startup worth over $1 billion.

Decacorn
Definition: A privately held startup valued at over $10 billion.

Cockroach Startup
Definition: A startup that focuses on long-term survival rather than fast growth.

Blue Ocean Strategy
Definition: A strategy to create uncontested market space.

Red Ocean Strategy
Definition: A strategy to compete in an established industry.


StartUp Business Terms I

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