Startup Terminology 101: Key Terms Every Founder Should Know
Y Combinator's Startup School, presented by Dalton Caldwell, Managing Partner at YC.
If you're new to startups, the jargon can be a lot. Dalton Caldwell from Y Combinator put together a quick glossary of the terms you'll hear constantly — here's a rundown.
MVP (Minimum Viable Product)
The key word is viable, not minimal. An MVP has to actually be useful to a customer — not just a bare-bones build that doesn't work.
Venture Capital (VC)
Investors who put small amounts of money into equity of risky startups, betting that a few big wins pay for all the losses. It's the same logic old whaling investors used: fund many ships, hope one comes back loaded.
Angel Investor
An individual investing their own personal money (not a VC fund), usually at the earliest stage, writing smaller checks — often $20K–$50K — and typically not doing it full-time.
Profitability
Making more money than you spend each month. Margins often improve with scale: Google made no revenue for years, but once it turned on ad monetization, its high margins made it hugely profitable.
Burn Rate
How much cash your company loses per month. Worth watching closely — even a company with strong revenue can go under if it's burning cash too fast.
Seed Round
No strict definition — generally, the first meaningful chunk of money a new startup raises. Later rounds (Series A, B, C) usually involve a lead investor taking a significant ownership stake, often with a board seat.
Product Market Fit (PMF)
The point where people are using and loving your product, and your challenge shifts from "finding what people want" to "scaling to meet demand." Pre-PMF and post-PMF call for very different priorities.
Bootstrapping
Building a company using only personal funds or business revenue, with no outside investment. Good for founders who want full control or aren't building a venture-scale business.
Convertible Note
A debt-like instrument: an investor gives you money in exchange for a note that may carry interest or repayment terms. Read the fine print.
SAFE (Simple Agreement for Future Equity)
Created by Y Combinator's Carolyn Levy, a SAFE is an alternative to a convertible note with fewer terms — commonly used to close seed money quickly, ahead of a priced Series A.
Equity
Ownership percentage in the company. Different from stock options, which are a future right to acquire equity.
TAM (Total Addressable Market)
The hypothetical revenue if you captured 100% of potential customers. It's a thought experiment, not a hard number — great products (like Tesla or Uber) can expand their TAM well beyond initial estimates.
Valuation
What the most recent investor's price implies the company is worth (e.g., $2M raised at a $20M post-money valuation = $20M valuation). Since private startups have no liquid market, it's an estimate, not a guaranteed sale price.
IPO (Initial Public Offering)
When a private company sells shares to the public on exchanges like NASDAQ or the NYSE — often seen as a sign of financial maturity.
ARR / MRR (Annual / Monthly Recurring Revenue)
Revenue from renewing or subscription contracts, measured annually (ARR) or monthly (MRR — more common for month-to-month billing, like SaaS subscriptions).
That's the full glossary from the video — a handy reference next time these terms come up in a pitch, a fundraising conversation, or a board meeting.
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