Startup Terms Glossary — MVP, TAM/SAM/SOM, Pivot, Bootstrapping, Runway, CAC and LTV, Unicorn, Valuation, Term Sheet, Liquidation Preference, Incubators
Video Explanation & Insights
What is an incubator?
12 videos on this topic
Product and market terms
| Term | Meaning | The point |
|---|---|---|
| MVP — minimum viable product | The simplest working version of your idea, with only the feature customers need most | Launch it to real customers, take feedback, improve. It saves time and money, and a working MVP is what investors and startup grant schemes want to see |
| TAM / SAM / SOM | Total addressable market (everyone who could buy); serviceable available market (the part you can actually reach, e.g. one city); serviceable obtainable market (the share you can win given competition, budget and team) | TAM is the dream, SAM the plan, SOM the target. Pitch the SOM, support with the SAM, mention the TAM — never say 'my market is 140 crore people' |
| Pivot | Changing the product, business model or strategy when the original plan is not delivering | Instagram began as a check-in app called Burbn and pivoted to photo sharing. A pivot is adaptation, not failure |
| Bootstrapping | Building the business on your own savings and reinvested profits — no VC, no investor, no loan | Full control and full profit; slower growth and all the risk is yours. Most startups start bootstrapped: spend less, earn early, reinvest |
| Incubator | A platform that gives an early-stage startup workspace, mentoring, resources and sometimes seed money for 12 to 24 months | Charges a small fee and typically 1% to 5% equity; DPIIT-recognised incubators also route Startup India Seed Fund grants |
Cash and unit-economics terms
| Term | Meaning | The numbers |
|---|---|---|
| Burn rate | Total cash spent per month | Track it monthly |
| Runway | Months the company can survive on current cash without new funding or extra revenue: cash ÷ monthly burn | ₹12 lakh in the bank and ₹2 lakh burn = 6 months of runway. Raise or cut costs well before it ends |
| CAC — customer acquisition cost | Total marketing and sales spend ÷ number of new customers | ₹50,000 on ads bringing 100 customers = ₹500 CAC |
| LTV — lifetime value | Profit a customer brings over the relationship | If LTV is ₹2,000 against ₹500 CAC you are profitable; if ₹300, you are losing money on every customer — fix channels, run referrals, build organic content |
| Valuation | The price of the whole company today, implied by what an investor pays for a stake | ₹2 crore for 10% values the company at ₹20 crore. It is driven by revenue growth, customers, team, market size and edge — and it is a number, not cash. Build real value; the number follows |
| Unicorn | A private startup valued at $1 billion or more (about ₹8,000 crore) | ₹100 crore for 1% = ₹10,000 crore valuation. Valuation is investor belief, not profit; many unicorns still run losses. Get profitable first |
Term sheet and liquidation preference
When an investor says yes, the money still does not arrive — a term sheet does. It summarises the deal: valuation, investment amount, equity percentage, board seat, liquidation preference, anti-dilution rights and more. It is a blueprint for the legal agreements that follow, and most of its clauses are non-binding — but some (exclusivity, confidentiality) bind you at once. Founders look only at the valuation; a high valuation with bad terms costs more than a lower valuation with good ones. Have a CA and a lawyer review it, and negotiate — a term sheet is an offer.
Liquidation preference decides who is paid first when the company is sold or wound up: the investor, always; the founder, if anything is left. Non-participating: the investor takes either its money back or its share, whichever is higher. Participating: the investor takes its money back first and then its share of the rest. A multiple — 2x or 3x — means the investor takes twice or thrice its money before anyone else. The video's example: an investor puts ₹10 crore for 20% with a 1x preference; two years later the company sells for ₹10 crore; the investor takes all ₹10 crore and the founder with 80% gets nothing. Run the exit maths at several sale prices before you sign.
Startup terms: quick answers
The minimum viable product — the simplest working version of your idea that real customers can use, so you learn before you build everything.
Total addressable market, serviceable available market and serviceable obtainable market — the dream, the plan and the target. Investors want the SOM.
Cash in the bank divided by monthly burn rate. Six months of runway means you must raise or cut costs within a few months.
One that is well below the customer's lifetime value. If acquiring a customer costs more than the profit the customer brings, the model is broken.
The investor's right to be paid first on a sale or liquidation, sometimes at a multiple and sometimes with participation. It can leave a majority-owning founder with nothing on a small exit.
Mostly not, but exclusivity and confidentiality clauses usually are. Review it with a CA and a lawyer before signing.
A modest fee and typically 1% to 5% equity for a 12–24 month programme with workspace, mentoring and access to funding.
Our pages on DPIIT recognition, Section 80-IAC, the Startup India Seed Fund, CGSS and valuation — and the startup funding hub.