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Common Terms
Business & Startup Vocabulary
13 min
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Common Terms · Basic

Business & Startup Vocabulary

Cap table · runway · burn · pivot — the language of company-building
13 min read+90 XP on completionCert: Common Terms & Systems
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Business & Startup Vocabulary

The language of company-building is precise because the stakes are precise.

The Cash Equation

Burn rate is what you spend monthly. Runway is how long until the money runs out.

Runway = Cash ÷ Monthly Net Burn

If you have $500k and burn $40k/month, your runway is 12.5 months. Most advisors say raise before you hit 6 months left. Waiting until 3 months is desperation territory.

Cap Tables and Dilution

A cap table answers one question: who owns what?

Early example:

  • Founder A: 50%
  • Founder B: 30%
  • Employee pool: 20%

After a $2M seed at $8M pre-money valuation:

  • Investors own 20% ($2M / $10M post-money)
  • Existing owners each diluted by ~20%

Dilution is not inherently bad — it depends whether the new capital creates more value than the ownership cost.

Valuation Mechanics

Pre-money: what the company is worth before investment.

Post-money: pre-money + new investment.

A $10M pre at $2M invested = $12M post, ~16.7% investor ownership.

MVP vs. Prototype

An MVP is not the smallest possible product — it is the smallest product that creates real value for a real customer. A prototype tests feasibility. An MVP tests the market.

Unit Economics Rule

LTV (Lifetime Value) / CAC (Customer Acquisition Cost) > 3 is a basic health threshold for consumer businesses. Below 1 and you are paying to lose money at scale.

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