Startup Dictionary

A complete list of terms (metrics, KPIs, calculations) used in the startup world.

ARPA

Average Revenue Per Account. This is in fact very similar to ARPU, but it is called differently based on your customer. If you customer is the end user (think B2C) then you call it ARPU, if you sell to a company, that has many users (think B2B like Slack), then you call it ARPA.

ARPU

Average Revenue Per User. How much do you earn per user on an average. For instance if you have 1,000 users and 2,000$ MRR, then your ARPU is 2,000 / 1,000 = 2$.

ASO

App Store Optimization. Like SEO, but for the app stores. This is used to have your app show first for determinate keywords, which translates to more downloads.

Accounts Payable

Is the percentage of net revenue that you owe to others. The opposite of accounts receivable. Basically all the things that you have received, but you still haven't paid for. It is usually better to have your accounts payable bigger than your accounts receivable since it means that you have more cash at your disposal.

Accounts Receivable

Is the percentage of net revenue that your customers still have to pay you, but will pay in less than a year. For instance an invoice that needs to be paid in the next 30 days will reflect here. It is similar to cash, since you will receive it soon.

B2B

Business to Business. This is a business model where you sell your products or services directly to another business. An example is Slack.

B2C

Business to Customer. This is a business model where you sell your products or services directly to the customer. An example is Amazon.

Burn Rate

The amount of negative cash flow (revenue - expenses) during the month. This is common for new startups that are investing heavily in R&D e marketing. With your burn rate you can calculate your runway.

CAC

Customer Acquisition Cost. How much money you need to spend in sales or marketing to acquire a new customer. For instance a CAC of 10$ means that with 100$ of marketing budget you will likely get 10 new customers. In the saas business this number is usually around 1/3 of the CLTV (don't feel bad if yours isn't this is just an indication).

CAPEX

Capital Expenditure. Is the money you spend to buy, maintain, or improve an asset, such as buildings, vehicles, equipment, or land. For instance when you buy a new computer for a new employee it is CAPEX. This is the opposite of OPEX.

CLTV

Customer Life Time Value. The total amount of revenue that a single customer will generate in all it's lifetime using the app. This is a very important metric for subscription based businesses (like saas).
For instance if a customer pays 30$ monthly, and stays with you for 10 months, then the CLTV for that customer is 10 x 30$ = 300$. It is usually calculated by divind the ARPU by the churn rate. In saas this is usally around three times the CAC value.

COGS

Cost of Goods Sold. It is the cost directly related to the producing and selling of a product. For a saas business it usually refers to the load on the infrastructure that each product has. For instance every 1,000 customers you need a new server, so the cost of the server is split among each customer.

CPI

Cost per Install. It's the cost for each app download that you are paying. It's the same as CAC, but for mobile apps it's called CPI.
This number is usually giveng to you by the platofmr that you are using to do paid advertising (like Google or Facebook) or you can calculate it by divind your monthly budget by the numbers of downloads that you had in a month. Be sure to divide by the number of total downloads not by the number of new active user.

CPL

Cost per Install. It's the cost for each app download that you are paying. It's the same as CAC, but for mobile apps it's called CPI.
This number is usually giveng to you by the platofmr that you are using to do paid advertising (like Google or Facebook) or you can calculate it by divind your monthly budget by the numbers of downloads that you had in a month. Be sure to divide by the number of total downloads not by the number of new active user.

Churn Rate

The percentage of subscriptions that don't get renewed each subsequent billing period (usually monthly). This means that if you have a churn rate of 10%, every month you lose 10% of your customers. For instance on a customer base of 1,000, you lose 100 paying customers each and every month.

Conversion Rate

The percentage of users that become customers. Basically the percentage of free users that become paying users. This can mean different thing based on your business model: for saas this is the number of leads that buy a subscription or the number of freemium users that decide to buy a plan. For an app this can be the percentage of active users that perform an IAP.

Deferred Revenue

It is a liability on a company's balance sheet that represents a prepayment by its customers for goods or services that have yet to be delivered. For example if your customer paid for an year in advance, but you are delivering the services each month.

Download Conversion Rate

The percentage of downloads that convert to active users. A lot of people think that after a user downloads your app he will keep using it, the reality is that most people download an app to check if they like it, then uninstall it if they don't need it.
This number is usually around 40%-60% for free apps.

Hiring Plan

The hiring plan is the list of all the people that are working on your startup and that will work on your startup.

IAP

In-App Purchases. Those are the digital products that can be bought inside an app. For example a special upgrade that unlocks some cosmetics.

Impression

Referred to ads, is when a user sees an ad in your app. This is main indicator of how much you will get paid.

MRR

Monthly Recurring Revenue. The total amount of revenue that is sure to come in each month, basically the revenue that comes from subscriptions. This is the main revenue KPI of saas businesses.

OPEX

Operating Expense. Is the ongoing cost of running a product or a service. This is the opposite of CAPEX. This is often used as a synonym of SG&A.

Organic acquisition

Is the amount of traffic (downloads or acuqisitions) that you are able to generate organically, this means without the need to spend any money on advertising. For a saas this usually coincides with SEO while for a mobile app with ASO.

Paid traffic

All the traffic that comes from having spent money. This is usually from marketing. For instance Google Ads or Facebook Ads are all a form of paid traffic. This is the contrary of organic traffic.

Retention Rate

The percentage of active users that keep using your app month after month. For instance if you have 10,000 active users and a retention rate of 80%, at the end of the month, 10,000 x 80% = 8,000 users will remain active in the following month.
This is a metric very similar to the churn rate and very important to take into consideration. This is usually a big mistake that many do when creating projections or plans for their app. They don't take into consideration that some users will stop using the app after a while.
As for this number, it may vary highly. Some free apps have a retention rate of just 15% while other giants like Facebook have a retention rate of more than 90%. My advice is to be very careful and play it on the safe side, taking a low number when creating a financial model or using to make projections.

Revenue

Is the total amount of income generated by the sale of goods or services. AKA gross sales, AKA top line revenue.
Basically is the amount of cash that your startup has earned in a period of time before cutting expenses and everything else. For instance, if I sell ten items at the price of 10$ each, my revenue is 10 x 10$ = 100$.

Runway

How many months you have before running out of money. This is calculated by divind your cash balance by your burn rate.

SEO

Search Engine Optimization. All the techniques that are used to rank higher on search engines and to reach the front page of Google. Why is this useful for your startup? Because with this your potential customers will find you easily and quickly and you will receive more traffic, which translates to more sales.

SG&A

Selling, General & Administrative. This is an expense category that contains all the expenses that aren't directly related to your product being sold, but necessary to maintain the business running.

SaaS

Software as a Service. This is a business model where a service is sold in the form of a software (usually in the form of a subscription). An example is Sturppy.

Session

A session is when a user opens the app and start using it. The session ends, when the app is closed.

Subscriptions Plans

The list of all the plans that you offer and that your customer can buy.

Traffic Sources

Paid Traffic → Paid traffic are customers who click on an advertisement you placed on a social network or search engine.

Organic Traffic → Organic search traffic refers to the total amount of people finding your business by means of clicking a link or using a search engine for free.

Acquisition Channels → A traffic source in it's simplest form can be defined as the origin through which a person finds your company or website.

eCPM

Estimated Cost Per Mille. How much revenue one-thousand ad impressions will generate. This is a metric given by ad networks to evaluate how much revenue your app made in a single day. To calculate the revenue from a single day you need to multiple the total number of impressions in that day by the eCPM, then divide by 1,000.