Founder glossary

• ACV

  ACV is the average yearly value of a customer contract, excluding one-time fees.

• ARR

  ARR is the yearly value of a business's recurring subscriptions, usually calculated as current MRR × 12.

• Growth rate

  Growth rate is how fast a metric such as MRR increases over a period; CAGR is the steady yearly rate that would produce the same result over several years.

• MRR

  MRR is the subscription revenue a business can expect every month, with every active plan converted to a monthly amount.

• MRR vs ARR

  MRR measures recurring revenue per month and ARR per year (MRR × 12); they describe the same subscriptions at different scales.

• SaaS metrics

  SaaS metrics are the handful of numbers that describe a subscription business: MRR, growth, churn, retention, ARPU, CAC, LTV and runway.

• Churn rate

  Churn rate is the percentage of customers (or recurring revenue) you lose in a period, usually measured monthly.

• Net revenue retention

  Net revenue retention is the percentage of recurring revenue you keep from existing customers after a year, counting upgrades as well as cancellations and downgrades.

• ARPU

  ARPU is average recurring revenue per paying customer per month: MRR divided by the number of paying customers.

• CAC

  CAC is the average amount you spend on sales and marketing to win one new paying customer.

• LTV

  LTV is the total gross profit you expect to earn from an average customer over the whole time they stay.

• LTV:CAC ratio

  The LTV:CAC ratio compares what a customer is worth over their lifetime with what it cost to acquire them; 3:1 is the classic target.

• Payback period

  Payback period is how many months of gross profit it takes to earn back what you spent acquiring a customer.

• Pricing strategy

  A pricing strategy is how you decide what to charge and how to package it: value-based, tiered, penetration, freemium, usage-based or a mix.

• Proration

  Proration is charging or crediting only for the part of a billing period a customer actually used after they upgrade, downgrade or cancel mid-cycle.

• Burn rate

  Burn rate is how much cash a company loses each month: gross burn is total spending, net burn is spending minus revenue.

• Default alive

  A company is default alive if, at current costs and growth, it reaches profitability before the money runs out.

• Ramen profitable

  Ramen profitable means a startup earns just enough to pay its founders' basic living expenses.

• Runway

  Runway is how many months you can keep going before the money runs out: cash divided by monthly net burn.

• Bootstrapping

  Bootstrapping means building a company with your own savings and customer revenue instead of outside investment.

• Indie hacker

  An indie hacker (or indie maker) is someone who builds and runs their own profitable internet business independently, usually bootstrapped and often solo.

• Lifestyle business

  A lifestyle business is a profitable company built to fund the life its founder wants, rather than to grow as fast as possible or be sold.

• Micro SaaS

  A micro SaaS is a small, focused software-as-a-service business run by one person or a tiny team, serving a niche, with low costs and no outside funding.

• Solopreneur

  A solopreneur is an entrepreneur who runs a business entirely alone, without co-founders or employees.

• Build in public

  Building in public means sharing how you build your product openly as you go: progress, revenue, mistakes and decisions.

• Lifetime deal

  A lifetime deal sells permanent access to a software product for a single upfront payment instead of a subscription.

• MVP

  An MVP is the smallest version of a product that lets you learn whether real customers want it, ideally by getting them to use it or pay for it.

• Product-market fit

  Product-market fit is when a product satisfies a strong market so well that customers keep using it, pay for it and tell others without being pushed.

• Side project

  A side project is something you build outside your main job, in spare time, often as an experiment that may grow into a business.

• TAM

  TAM is the total revenue opportunity if every possible customer bought your product; SAM and SOM narrow it to who you can serve and realistically win.

• Vibe coding

  Vibe coding is building software by describing what you want to an AI model in plain language and accepting the code it writes, often without reading it closely.

• Acqui-hire

  An acqui-hire is an acquisition where the buyer mainly wants the founder or team, who join the acquiring company as employees.

• Exit multiple

  An exit multiple is a business's sale price divided by a financial metric, usually annual revenue, ARR or annual profit (SDE).

• SAFE

  A SAFE is a short contract where an investor gives a startup money now in exchange for the right to shares later, when the company raises a priced round.

• Stripe Atlas

  Stripe Atlas is Stripe's service for incorporating a US company (a Delaware C corporation or LLC) online, from anywhere in the world.

Frequently asked questions