Startup glossary: every term, in plain English

By Abha Lohia · Startup Decoded

The words you meet in Indian startup news, from ACV to zero-based budgeting, explained in a line or two.

A B C

A

Accelerator: A programme that takes in early startups for a few months, often giving small funding, mentors and connections in return for a small equity stake. Y Combinator is the global example; India has several corporate and independent ones. Read the guide
Account aggregator: An RBI-regulated service in India that lets a person share their financial data, such as bank statements, with a lender or app, but only with their consent. It helps fintech startups assess loans faster.
Accredited investor: A rich or experienced investor who the law treats as able to take higher risks. SEBI has a formal accredited investor category for AIFs, with eligibility based on income, net worth and experience. Read the guide
Acqui-hire: A purchase of a company mainly to hire its team rather than to get its product or customers. The product is often shut down after the deal. Founders and staff usually get retention packages.
Acquisition: One company buying most or all of another company, in cash, shares or both. For a startup, it is a common exit for founders and investors. The buyer takes over the assets, customers and sometimes the team.
Activation rate: The share of new users who complete a key first step, such as placing a first order or finishing sign-up. A low rate means people arrive but do not see the product value. Read the guide
Adjusted EBITDA: EBITDA after the company removes costs it calls one-off, such as ESOP charges or restructuring. It can show the core business more clearly, but it can also hide real costs, so read the adjustments carefully.
Advisory board: A group of experienced outsiders who give a startup guidance but have no legal power over decisions. Advisors often receive a small ESOP grant instead of a salary. Read the guide
AIF: Alternative Investment Fund: a pooled fund registered with SEBI that invests money from investors in startups, real estate or other assets. Most Indian venture funds are AIFs, split into Category I, II and III. Read the guide
Allotment: The formal issue of shares to an investor or applicant after they have paid. In a funding round, the board passes a resolution and files forms with the Registrar of Companies. In an IPO, it is when applicants get shares.
Anchor investor: A large institution, such as a mutual fund, that buys shares in an IPO a day before it opens to everyone. Their early interest gives other buyers confidence. Their shares have a short lock-in.
Angel investor: A wealthy individual who invests their own money in an early-stage startup, often before any fund will. Cheques in India typically range from a few lakh rupees to a few crore, in return for equity. Read the guide
Angel network: A group of angel investors who pool their research and often co-invest in the same deals. Founders pitch once and can raise from many members. Indian examples include Indian Angel Network and Mumbai Angels. Read the guide
Angel tax: A tax, under Section 56(2)(viib) of the Income Tax Act, on money a private company raised above its fair market value. The July 2024 Budget abolished it for all investors from assessment year 2025-26, which covers money raised from 1 April 2024. Check current rules with a professional.
Annual recurring revenue (ARR): The yearly value of a company's subscriptions and other repeating contracts, usually monthly recurring revenue times twelve. It shows how predictable the income is. One-time fees are not counted.
Anti-dilution: A clause that protects an investor if the company later sells shares at a lower price. It adjusts the investor's conversion price so they keep more of the company. Common types are full ratchet and weighted average. Read the guide
AOV: Average order value: the average amount a customer spends per order. Total sales divided by the number of orders. Retail and e-commerce startups watch it to judge whether delivery and marketing costs are covered.
API: Application programming interface: a set of rules that lets one piece of software talk to another. Many Indian startups sell APIs, such as payments or identity checks, that other businesses plug into their own apps.
ARPU: Average revenue per user: revenue divided by the number of active users in a period. Telecom, gaming and subscription startups use it to see how much each user is worth.
Articles of Association: The rulebook of a company that sets out how it is run, including share rights and board powers. After a funding round it is usually amended to include investor rights agreed in the shareholders' agreement. Read the guide
Asset-light: A business model that grows without owning many costly assets such as factories or vehicles. Marketplaces and software firms are asset-light. It needs less capital, but may earn thinner margins on each sale.
Attrition: The rate at which employees leave a company over a period. High attrition raises hiring costs and can hurt a startup's culture and speed. It is usually shown as a yearly percentage.
AUM: Assets under management: the total value of money a fund or asset manager looks after for investors. A venture fund's size is often described by its AUM or its committed corpus. Read the guide
Authorised share capital: The maximum amount of share capital a company is allowed to issue, as set in its charter documents. To issue more shares in a funding round, the company may first need to raise this limit and pay a stamp fee. Read the guide

B

B2B: Business-to-business: a company that sells to other companies, not to individuals. Examples are software, logistics and payroll tools. Sales cycles are longer but contracts tend to be larger and stickier.
B2C: Business-to-consumer: a company that sells directly to individuals, such as food delivery or online shopping. It needs many customers, so marketing costs and repeat usage matter a great deal.
Bad leaver: A founder or employee who leaves under bad circumstances, such as misconduct or breach of contract. Agreements often let the company buy back their shares at a low price, sometimes the original cost.
Balance sheet: A statement of what a company owns (assets), what it owes (liabilities) and what is left for owners (equity) on one date. Investors read it to judge cash, debt and financial health.
Basis point: One hundredth of a percentage point, written as bps. If a fee rises from 2.00% to 2.50%, it has risen by 50 basis points. Lenders and fintech firms use it for interest rates and fees.
Beachhead market: The small, specific group of customers a startup targets first before expanding. Winning one narrow segment fully is often easier than serving everyone badly. It is a common step in market planning.
Beta launch: A limited release of a product to a small group of users to find bugs and gather feedback before the full launch. Early startups use betas to test demand cheaply. Read the guide
Blitzscaling: A strategy of growing as fast as possible, often by spending heavily, to win a market before rivals. It trades short-term losses for size. It can suit network-effect businesses but is risky and burns cash quickly.
BNPL: Buy now, pay later: a short-term credit product that lets customers pay for a purchase in instalments, often interest-free for a period. In India it falls under the RBI's digital lending rules.
Board seat: A place on a company's board of directors, which votes on major decisions. Investors who put in large cheques often ask for one. Founders usually keep a majority of seats in early rounds. Read the guide
Book building: The process of finding the price for an IPO by collecting bids from investors within a price band. The final price is set at the level where demand is best met. Most Indian IPOs use this method.
Bootstrapping: Building a company with the founders' own savings and the revenue it earns, without outside investors. It keeps full ownership but usually means slower growth and tighter budgets. Read the guide
Break-even: The point where a company's revenue equals its costs, so it makes neither profit nor loss. Startups often track the month or the sales volume at which they expect to break even.
Bridge round: A small funding round that carries a company to its next big round, often from existing investors. It can be taken as a convertible note or as extra shares in the same round. Read the guide
Bulk deal: A trade of a large number of shares, over 0.5% of a listed company's equity, in a single day on a stock exchange. Exchanges publish them. They show when funds or early investors buy or sell.
Burn multiple: Net cash burned divided by net new annual recurring revenue added in the same period. A lower number means the company spends less to grow. Investors use it to judge growth efficiency.
Burn rate: The amount of cash a startup spends each month more than it earns. Gross burn is total spending, net burn is spending minus income. Dividing cash in the bank by net burn gives the runway.
Business model: How a company creates, delivers and earns money from what it offers. Examples include subscriptions, commissions, advertising and selling products directly. Investors ask how the model scales.
Buyback: When a company buys back its own shares from shareholders. In startups, a buyback lets employees or early investors sell some shares for cash, and can help retain talent.

C

CAC: Customer acquisition cost: the total sales and marketing spend divided by the number of new customers won in that period. It is compared with LTV to see if growth is worth the cost.
CAGR: Compound annual growth rate: the steady yearly rate at which a number would have to grow to go from its start value to its end value over some years. It smooths out ups and downs when comparing growth.
Cap on valuation: A ceiling used in convertible notes and SAFEs. It limits the price at which the note converts, so early investors get more shares if the company's valuation rises sharply by the next round. Read the guide
Cap table: Short for capitalisation table: a list of who owns what share of a company, including founders, investors and the ESOP pool. It shows how each funding round changes ownership. Read the guide
Capex: Capital expenditure: money spent on long-lasting assets such as machines, servers or warehouses. Asset-heavy startups need more capex, which has to be funded through equity or debt.
Capital call: A request by a fund to its investors (LPs) to send part of the money they promised. Funds do not take all the money at once. They draw it down when they find a deal or need to pay fees. Read the guide
Capital efficiency: How much growth or revenue a company gets for each rupee it raises or spends. Investors favour startups that reach milestones with less money, as that leaves founders with more ownership.
Capital gains tax: Tax on the profit made when selling an asset such as shares. Rates in India depend on the type of asset, how long it was held and whether it is listed. Check current rates with a tax professional.
Capitalisation: In a startup context, the way a company funds itself, by equity, debt or a mix. It can also mean turning costs into assets on the balance sheet, which changes reported profit.
Carried interest: The share of a fund's profits, commonly 20%, that the fund managers (GPs) keep after investors have got their money back, often with a minimum return. It is the main way VC managers earn. Read the guide
Cash flow: The money moving in and out of a business over a period. A company can show a profit on paper yet run out of cash if customers pay late. Investors check operating cash flow closely.
Cash runway: The number of months a company can keep running before its cash is gone, based on its current burn. Founders usually try to raise money with at least six to twelve months of runway left.
Category I AIF: A SEBI category for funds that invest in startups, early-stage businesses, social ventures and infrastructure, which the government sees as socially or economically useful. Venture capital funds and angel funds fall here. Read the guide
Category II AIF: A SEBI category of AIFs, such as private equity and debt funds, that do not borrow beyond day-to-day needs. It is the largest AIF category by commitments, and many growth-stage funds are registered here. Read the guide
Category III AIF: A SEBI category of AIFs, such as hedge funds, that use complex trading strategies and may use leverage. They are not typical venture funds and mostly trade in listed securities. Read the guide
CCD: Compulsorily convertible debenture: a loan-like instrument that must convert into shares at a set time or event. Because it is certain to become equity, it counts as equity for foreign investment in India. Read the guide
CCPS: Compulsorily convertible preference shares: shares that carry special rights, such as getting paid first, and must convert into ordinary shares later. They are the most common instrument in Indian venture rounds. Read the guide
Certificate of Incorporation: The document issued by the Registrar of Companies that proves a company legally exists. It carries the company's name, date of incorporation and CIN. Investors ask for it during due diligence. Read the guide
Channel partner: An outside business or person that sells or promotes a company's product for a fee or commission. B2B and fintech startups use them to reach customers without a large sales team.
Cheque size: The amount of money an investor typically puts into one startup in a round. Angels may write small cheques, while later-stage funds write much larger ones. Founders match investors by cheque size. Read the guide
Churn: The share of customers, or revenue, lost over a period because they stop paying or using the product. Low churn means customers stay. It is often tracked monthly.
Churn cohort: A group of customers who left in the same period, studied to learn why. Comparing churn cohorts shows whether product changes or pricing moves helped keep customers.
Churn rate: The percentage of customers lost in a period, found by dividing those who left by those at the start. A 2% monthly churn means roughly one in five customers is lost in a year.
CIN: Corporate Identification Number: a 21-character code given to every company registered in India by the Ministry of Corporate Affairs. It shows listing status, industry, state, year and type, and helps look up filings. Read the guide
Cliff: The initial period, often one year, before any employee stock options or founder shares vest. If the person leaves before the cliff ends, they get nothing. After it, vesting typically continues month by month.
Closing: The point at which a funding round is completed: documents signed and money received. Rounds can close in parts, called first close and final close, as different investors commit. Read the guide
Co-founder: A person who starts a company along with others and shares the risk and ownership. Co-founders usually sign a founders' agreement covering roles, equity, vesting and what happens if one leaves. Read the guide
Co-investment: When an investor or fund invests in a startup alongside a lead investor, often on the same terms. Large funds may invite their own investors to co-invest directly in a deal. Read the guide
Co-sale right: A right letting an investor sell shares alongside a founder if the founder sells to a third party. It stops founders from cashing out while investors are left behind. Read the guide
COGS: Cost of goods sold: the direct costs of making or buying what a company sells, such as materials, manufacturing and shipping to customers. Revenue minus COGS gives the gross profit.
Cohort: A group of customers who share a starting point, such as the month they signed up. Tracking cohorts shows whether newer users stick around better or worse than older ones.
Cold start problem: The difficulty a marketplace or network has in its early days, when it has too few buyers or sellers to be useful. Startups often solve it by focusing on one city or one side first.
Commission model: A way of earning where a company takes a percentage of each sale it facilitates. Marketplaces and travel platforms often use it. The percentage is also called the take rate.
Commitment: The amount an investor in a fund (an LP) promises to put in over the life of the fund. It is paid in parts through capital calls rather than all at once. Read the guide
Comparable companies: Similar businesses, often listed ones, whose valuations are used as a guide to value another company. Analysts compare their revenue or profit multiples. Differences in size and growth still matter.
Competitive moat: A lasting advantage that protects a company from rivals, such as a strong brand, network effects, cost advantages or hard-to-copy technology. Investors look for moats that grow stronger over time.
Compliance: Following the laws and filing the reports a company must, such as company law returns, GST and tax filings. Missing deadlines leads to fines. Investors check compliance records during due diligence.
Consumer internet: A group of companies that serve individual users online, such as e-commerce, food delivery, ride-hailing and entertainment. It has been one of the biggest funded segments in India. Read the guide
Contribution margin: Revenue from a sale minus the variable costs of serving it, such as delivery, packaging and payment fees. It shows if each order adds money towards fixed costs and profit.
Control: The power to direct a company's decisions, through shares, board seats or special rights. A founder can keep control even with less than half the shares if the agreements are set up that way. Read the guide
Conversion price: The price per share at which a convertible instrument, such as a note or CCPS, turns into shares. It may be fixed or linked to a later round's price with a discount. Read the guide
Conversion rate: The share of visitors or leads who take the action you want, such as buying or signing up. A rate of 3% means three out of every hundred visitors convert.
Convertible debenture: A loan-type instrument that can be changed into shares of the company. In India, optionally convertible versions are treated as debt for foreign investment, while compulsorily convertible ones count as equity. Read the guide
Convertible note: A short-term loan from an investor that turns into shares at the next funding round, usually at a discount or with a valuation cap. It lets a company raise money without fixing its valuation now. Read the guide
Cornerstone investor: A large investor who agrees to buy shares in an IPO before it opens and is named in the offer documents. Like anchor investors, cornerstone investors signal confidence to other buyers.
Corporate venture capital: Investing by a large company, such as a bank or a consumer brand, into startups through a separate arm. It seeks financial returns plus useful ties with new technology or partners. Read the guide
Corpus: The total sum of money a fund has raised or committed to invest. A fund with a ₹500 crore corpus has promised that much from its investors. Also called the fund size. Read the guide
Cost of capital: The return investors or lenders expect for giving a company money. Equity is usually costlier than debt because investors take more risk. It affects how companies choose between raising equity and borrowing. Read the guide
Cost per acquisition: The amount spent to get one defined action, such as an app install or purchase. Marketers use it to compare channels. When the action is a paying customer, it equals CAC.
Crore: An Indian unit equal to ten million, written 1,00,00,000. Startup rounds in India are often given in ₹ crore. One hundred crore is one billion rupees.
Cross-border investment: Money that flows from investors in one country into companies in another. In India, foreign investment into startups follows FDI rules, and the company must report it to the RBI.
Crowdfunding: Raising small amounts of money from many people, usually online. It can be donation, reward or equity based. In India, equity crowdfunding for startups is not clearly regulated, so most rely on other routes. Read the guide
Cumulative preference: A feature of preference shares where unpaid dividends pile up and must be paid before ordinary shareholders get anything. It strengthens the investor's claim on a company's profits. Read the guide
Customer acquisition: The work of finding and winning new paying customers through marketing, sales and referrals. Its cost, divided per customer, is called CAC.
Customer concentration: How much of a company's revenue comes from a few customers. If one client provides most of the revenue, losing it could badly hurt the business. Investors see this as a risk.
Customer lifetime value (LTV): The total profit a company expects from one customer over the whole relationship. It is compared with the cost of acquiring that customer. A healthy business earns well above what it spends to win them.
Customer retention: The ability to keep existing customers buying or using the product over time. Better retention lowers acquisition costs and raises lifetime value.

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