This glossary is designed for venture capitalists, investors and startup founders who need clear, practical definitions of commonly used startup and investment terms. It forms part two (M–Z) of our startup glossary series and focuses on concepts most often encountered in fundraising, product development, growth and governance.
M - Startup and Product Development Terms
Market Pull – Product development driven primarily by customer demand rather than internal assumptions.
Maturity – The stage at which a company has stable revenue, predictable operations and clear market positioning.
Merger – The combination of two companies into a single new entity.
Moonshot – An ambitious, high-risk innovation effort aimed at achieving a major breakthrough rather than incremental improvement.
Minimum Viable Product (MVP) – The simplest functional version of a product released to gather user feedback and validate market demand.
N - Revenue and Sales Metrics
Net Promoter – A customer who is likely to recommend a product or service to others.
Net Sales – Total sales generated after deducting returns, damaged goods and missing products.
O - Operations and Performance Metrics
Open Rate – The percentage of successfully delivered emails or advertisements that are opened by recipients.
Operating Margin – A profitability ratio that measures operational efficiency and pricing strategy.
Overhang – A situation where an investor’s liquidation preferences exceed the company’s current value.
P - Product, Pricing and Funding Terms
Paper Prototype – A usability testing method in which users interact with a manual, low-fidelity version of an interface to simulate functionality.
Pay Per Click (PPC) – An online advertising model where advertisers pay only when users click on their advert.
Piecemeal Minimum Viable Product (PMVP) – A functional product model that uses existing tools and services to replicate the intended user experience.
Pilot Operation – A small-scale test designed to evaluate the viability of a full product or service.
Pipeline Value – The total potential value of all sales opportunities within a sales funnel.
Pivot – A strategic change in direction based on learning, data or market feedback.
Post-Money Valuation – The value of a company after an investment has been made.
Pre-Accelerator – A programme offering mentorship and support to startups before they enter a formal accelerator.
Pre-Emptive Right – A clause allowing investors to maintain their ownership percentage during future share issuances.
Pre-Money Valuation – The value of a company before new investment capital is added.
Preferred Stock – Shares that carry preferential rights, often including dividends and liquidation priority.
Present Value – The current worth of a future sum of money, discounted to reflect time and risk.
Private Equity – Investments made in private companies whose shares are not publicly traded.
Prototype – An early version of a product used to test feasibility, usability or scalability.
Purchase Pretzel – A model of customer decision-making that reflects its non-linear and complex nature, unlike a traditional funnel.
Q - Governance and Quality Concepts
Quality Assurance (QA) – The process of ensuring that a product meets defined quality standards and customer expectations.
Quorum – The minimum number of shareholders or directors required to legally conduct a meeting or vote.
R - Revenue, Risk and Growth Metrics
Ramen Profitable – A company that generates enough profit to cover the basic living expenses of its founders or team.
Recurring Revenue – Predictable income generated on a regular basis, excluding one-off or professional service fees.
Repositioning – A marketing strategy aimed at changing how a product is perceived by customers.
Retargeting – A marketing technique that serves ads to users who have previously interacted with a product or brand.
Retention Rate – A metric measuring how many customers remain over a given period.
Return on Investment (ROI) – A performance metric calculated by dividing net profit by the cost of an investment, usually expressed as a percentage.
Revenue – The total income generated from sales before expenses.
Risk Tolerance – The level of risk an investor is willing to accept.
Run Rate – Projected annual revenue based on current performance, excluding churn.
S - Scaling, Funding Stages and Strategy
Sandbox – A controlled environment where experimentation can occur without risk to core systems or operations.
Scalability – The ability of a product or business to grow without a proportional increase in costs.
Scalable – Describes a business that can maintain or improve profit margins as sales increase.
Scheduled Vesting – A predefined timeline determining when employees gain access to equity.
Scope – The defined boundaries and deliverables of a project.
Scrum – An agile development framework characterised by short iterations, self-organising teams and frequent communication.
Secondary Public Offering – The sale of additional shares to the public after an initial public offering (IPO).
Secondary Purchase – The purchase of shares from an existing shareholder rather than directly from the company.
Securities – Financial instruments representing equity or debt.
Seed Round – The first formal round of funding, typically used to build a prototype or validate a concept.
Seed Stage – An early startup phase where profitability is unlikely and capital is focused on learning and validation.
Series A – The first major venture capital funding round, usually involving preferred shares.
Series B/C/D/E – Later funding rounds focused on scaling and expansion.
Serviceable Available Market (SAM) – The portion of the total market that a company can realistically target.
Share Consent – A legal provision requiring investor approval before issuing or selling shares.
Sitcom Startup Idea – A contrived startup concept driven by the desire to build something rather than solve a real problem.
Software-as-a-Service (SaaS) – Software delivered via the internet on a subscription basis.
Stakeholder – Any individual or group with an interest in a company’s performance or outcomes.
Startup – A company in the early stages of development, typically focused on growth and innovation.
Statutory Voting – A board voting system where each share carries one vote.
Steps to Revenue – A defined roadmap outlining how a company plans to generate income.
Stickiness – A measure of user engagement and retention.
Stock Options – The right to buy or sell shares at a predetermined price within a set timeframe.
Stockholder – An individual or entity that owns shares in a company.
Story Point – A unit used in scrum to estimate the effort required to complete a task.
Strategic Investors – Investors who provide industry expertise, networks or operational support in addition to capital.
Sweat Equity – Ownership granted in exchange for labour or services rather than cash.
Syndication – A venture capital practice where multiple investors jointly fund a company.
T - Traction, Markets and Investment Terms
Tag-Along Rights – Rights allowing investors to sell their shares on the same terms as founders in a sale.
Term Sheet – A non-binding document outlining the key terms of an investment.
The One Metric That Matters (OMTM) – A single, focused metric used to guide decision-making and measure success.
Total Available Market (TAM) – The total demand for a product or service if market share were unlimited.
Tractability – An assessment of how difficult it is to launch a functional first version of a product.
Traction – Evidence that users are actively adopting and using a product.
U - Valuation and User Growth Concepts
Uncapped Notes – Convertible instruments without a valuation cap, often favouring founders.
Unicorn – A privately held technology company valued at over US$1 billion.
Unique Value Proposition (UVP) – A clear statement explaining why a product is valuable and differentiated.
Unit Economics – Revenue and costs analysed on a per-unit basis.
User Acquisition – The process of converting individuals into active users.
V - Venture Capital and Equity Terms
Valuation – The process of determining a company’s financial worth.
Venture – A business endeavour involving risk and potential reward.
Venture Capitalist – An investor who deploys capital from a venture capital fund into high-growth companies.
Vesting – The process by which employees earn equity over time.
Viral Coefficient – A measure of how effectively users bring in additional users.
Voting Right – A shareholder’s right to vote on corporate matters.
W - Product Development and User Metrics
Warrant – The right to buy or sell a security at a fixed price within a specified period.
Waterfall Methodology – A linear product development approach consisting of sequential phases.
Weekly Active Users (WAU) – The number of users engaging with a product over a seven-day period.
Well – A narrowly focused startup designed to serve a specific audience exceptionally well.
White Label – A product produced by one company and rebranded by another.
Wicked Problem – A complex issue with no clear solution due to shifting requirements or constraints.
Wizard of Oz MVP (WoOMVP) – A product that appears automated but is operated manually behind the scenes.
Y - Startup Culture and Workflow Terms
Yak Shaving – Completing a series of seemingly unrelated tasks that are necessary to achieve a larger goal.
Z - Financial Risk and Insolvency Concepts
Zone of Insolvency – A financial state where a company is close to being unable to meet its obligations.
Lungile is the Digital Editor for Startup.Africa, with a knack for storytelling, technology and innovative ideas. Working with Startup.Africa, she takes simple ideas and turns them into amazing stories.
