In continuation of our Series on various important terms used in Start-up , here we are sharing our series-2 comprising of important terms used by industry and vital for any startup to model their business accordingly.
| S. No. | Startup Term | Meaning |
| 11 | Churn | It means that every month or quarter or whatever period for which you are evaluating, what percentage of your customers who are paying are you losing? Going out of the system, that revenue has become your loss. Also referred as Customer Turnover , refers to as the number of customers startup is loosing in a predetermined time period. An important measures for companies operating on recurring basis like SaaS. Formula : Churn Rate = (Lost Customers/Total Customers at the start of the period)*100 |
| 12 | Cliff | If you have got ESOPs, then what is the minimum period or what is the cliff before which you will not be granted any ESOP? Usually in startups in India its one year, which means you will have to work in that startup for an year before you get any ESOPs. |
| 13 | Conversion Funnel | “Conversion funnel” (also known as “sales funnel”) is a term that helps you to visualize and understand the flow through which a potential customer lands on your site and then takes a desired action (i.e. converts). This means what all steps does the customer follow to become your paying customer. It could start with them seeing your ad on google or Facebook for the first time. Then they land on a landing page, then may be they give their email, based on it they receive an email and they click on it, then they see the catalog, then they place the order, then they deposit money and then they become a paying customer. Whatever the steps is your conversion funnel. |
| 14 | Convertible Note | A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company. It means start-up don’t know at what value should they raise equity or investment, so what they are going to do is that investors give money to start-up, and when next round of funding happens, whatever will be the valuation at that time, according to that valuation money will be converted in to equity. |
| 15 | CAC- Customer Acquisition Cost | Its an important metric in start-ups that at what cost do you acquire a new customer. It usually not only includes marketing cost but all other costs that are directly attributable to you getting that customer onboard. Formula : CAC= (Adding costs like marketing, advertising, sales personnel etc./Number of customers acquired during the period) CAC is usually linked with the Life Time Value(LTV), in case LTV is more than CAC then it means company’s burn rate is high and turning into losses. |
| 16 | Customer Segment | This means which are your target customers. If you are targeting the whole world, that means you are not targeting anyone. In the whole world which demographics, which income profiles, which industries, which persona, will find your product relevant to themselves, which is who you are going to target. |
| 17 | DAU- Daily Active Users | If your product is a B2C product, then how many users use it on daily basis. This is mostly used for Apps, which means how many people users launch the app on a daily basis. Daily active users (DAU) is a key metric you should follow when you’re in the subscription business. If the number of your daily active users is starting to fall, you could be on the verge of churn. |
| 18 | Decacorn | If you have heard of Unicorn, which means any startup which has got to a one billion dollar valuation, Decacorn means a startup which has got a valuation of 10 Billion Dollars. |
| 19 | Dragon | Dragons are very rare, it means a startup has raised one billion dollars in just one funding round. |
| 20 | Equity | Stocks in the startup. If your buying equity in a startup then it means you are buying stocks of that startup, which means you get Ownership and shareholding in the startup. |
| 21 | ESOPS | These are those options that every startup employee gets, which gives them the right to purchase the startup stocks whenever they want to. It also means that they are not stocks but stock options, very important to Differentiate. It is a very important measure to retain employees who are valued high in the organization and is a good measure to reduce employee turnover. |
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