Startup Glossary: SAFE, Cap Table, Runway, Credits & More Explained
Plain-English definitions of startup terms: MVP, SAFE, valuation cap, vesting, 83(b), Delaware C-corp, runway, burn, MRR, partner codes and startup credits.
MVP (minimum viable product)Product-market fitStartup creditsPartner code (org ID)AcceleratorIncubatorSAFEValuation capPre-seedSeed roundDilutionVesting and cliff83(b) electionDelaware C-corpLLCCap tableOption poolRunwayBurn rateMRR / ARRChurnCAC and LTVNon-dilutive fundingMerchant of recordDemo dayGo-to-market (GTM)
- MVP (minimum viable product)
- The smallest version of a product that lets you learn whether people want it. It is a learning tool, not a small finished product.
- Product-market fit
- The point where a product satisfies a market strongly enough that users stay, pay and tell others. Usually visible as retention that flattens instead of falling to zero.
- Startup credits
- Free usage that cloud, AI and software companies give new startups (for example API or hosting credits). They expire, often after 12 months, and convert to normal pricing afterwards.
- Partner code (org ID)
- A code an accelerator, VC fund or startup network gives its companies to unlock the higher tiers of credit programmes such as AWS Activate or Google for Startups Cloud.
- Accelerator
- A fixed-length programme (often three months) that gives a batch of startups money, mentoring and a demo day in exchange for equity.
- Incubator
- A longer, usually earlier-stage programme that offers space, mentoring and services, often run by a university or a city, and often without taking equity.
- SAFE
- Simple Agreement for Future Equity: an investment that converts into shares at the next priced round, with a valuation cap and/or discount. Created by Y Combinator.
- Valuation cap
- The maximum company valuation at which a SAFE or convertible note converts into equity, protecting early investors if the next round is priced high.
- Pre-seed
- The earliest money a startup raises, typically from founders, friends, angels or accelerators, to build a first product.
- Seed round
- The first institutional round, used to find product-market fit and early growth.
- Dilution
- The drop in each existing shareholder's percentage when new shares are issued to investors, an option pool or an accelerator.
- Vesting and cliff
- Founder and employee shares are earned over time (commonly four years) with a cliff (commonly one year) before any vest, so a co-founder who leaves early does not keep a full share.
- 83(b) election
- A US tax filing founders send within 30 days of receiving restricted stock, so they are taxed on its value now (near zero) rather than as it vests.
- Delaware C-corp
- The company type most US investors expect: a corporation registered in Delaware, which has well-tested corporate law and specialist courts.
- LLC
- A US limited liability company: simple and tax-flexible, good for bootstrapped businesses, but most venture investors will ask you to convert to a C-corp.
- Cap table
- The table of who owns what in the company: founders, investors, the option pool and convertible instruments.
- Option pool
- Shares reserved for future employees, usually 10-20%, often created just before a round so it dilutes founders rather than the new investors.
- Runway
- How many months the company can operate before the money runs out: cash in the bank divided by monthly burn.
- Burn rate
- Net cash the company spends each month. Gross burn is all spending; net burn subtracts revenue.
- MRR / ARR
- Monthly and annual recurring revenue: subscription revenue normalised to a month or a year, the headline metric of SaaS companies.
- Churn
- The share of customers or revenue lost in a period. Low churn is the clearest sign that a product is working.
- CAC and LTV
- Customer acquisition cost (what it costs to win a customer) and lifetime value (what a customer pays over their life). A healthy business keeps LTV well above CAC.
- Non-dilutive funding
- Money that does not cost equity: grants, credits, competitions, revenue and some loans.
- Merchant of record
- The legal seller in a transaction, responsible for sales tax and VAT. Services like Paddle or Lemon Squeezy act as merchant of record so a small startup does not have to register for tax in every country.
- Demo day
- The final event of an accelerator batch where each startup pitches to investors.
- Go-to-market (GTM)
- The plan for reaching and selling to the first customers: who they are, which channels reach them and how they buy.