# First Round Glossary

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## [ARPU](https://review.firstround.com/glossary/arpu/ "ARPU")
ARPU, or average revenue per user, measures how much revenue a company generates from each customer over a specific period. It’s one of the clearest indicators of how effectively a business is monetizing its user base.

## [ARR](https://review.firstround.com/glossary/arr/ "ARR")
Annual Recurring Revenue (ARR) is the amount of predictable subscription revenue a company expects to generate in a year.

## [Beta Testing](https://review.firstround.com/glossary/beta-testing/ "Beta Testing")
Beta testing is the stage where real users test a nearly finished software product in a production environment before its official release. It’s the final checkpoint to uncover bugs, validate usability and confirm market readiness.

## [Bootstrapping](https://review.firstround.com/glossary/what-is-bootstrapping-business/ "Bootstrapping")
Bootstrapping means funding a startup through customer revenue, personal savings, credit cards or other self-generated resources instead of raising from external capital sources, like venture capital firms or angel investors.

## [Break-Even Point](https://review.firstround.com/glossary/break-even-point/ "Break-Even Point")
The break-even point (BEP) is when a company’s total revenue exactly equals its total costs. It’s the moment when sales cover both fixed expenses (like rent and salaries) and variable costs (like raw materials and shipping).

## [Burn Rate](https://review.firstround.com/glossary/burn-rate/ "Burn Rate")
Burn rate measures how quickly a startup spends its cash reserves before reaching positive cash flow or profitability. For early-stage companies, it's one of the clearest indicators of financial health and survival.

## [Cash Runway](https://review.firstround.com/glossary/cash-runway/ "Cash Runway")
Cash runway, sometimes called financial runway, is the amount of time a startup can continue operating before running out of money. It measures how long a company’s cash can support operations given its current spending rate and available resources.

## [Churn Rate](https://review.firstround.com/glossary/churn-rate/ "Churn Rate")
Churn rate measures the percentage of customers or accounts that cancel or fail to renew within a given period. For subscription businesses, it’s one of the clearest signals of customer retention, recurring revenue stability and long-term growth potential.

## [Economic moat](https://review.firstround.com/glossary/economic-moat/ "Economic moat")
An economic moat is a durable competitive advantage that protects a company's profits and market share from competitors over time. It allows a business to sustain pricing power, profitability and long-term value even as rivals try to close the gap.

## [Freemium](https://review.firstround.com/glossary/freemium/ "Freemium")
The Freemium Business Model combines “free” and “premium:” a company offers a basic version of its product indefinitely at no cost, while advanced features, services, or capacity are locked behind a paid upgrade.

## [Gross Margin](https://review.firstround.com/glossary/gross-margin/ "Gross Margin")
Gross margin is the percentage of revenue left after subtracting the cost of goods sold (COGS). It's a financial metric that shows how efficiently a company turns each dollar of revenue into profit before accounting for operating expenses.

## [Gross Merchandise Value (GMV)](https://review.firstround.com/glossary/gross-merchandise-value-gmv/ "Gross Merchandise Value (GMV)")
Gross Merchandise Value (GMV) is the total value of all merchandise sold through a platform over a specific period. It’s a raw measure of sales activity calculated before subtracting fees, expenses, discounts or returns.

## [Growth Hacking](https://review.firstround.com/glossary/growth-hacking/ "Growth Hacking")
Growth hacking is the multidisciplinary practice of identifying and improving key business metrics quickly and meaningfully.

## [K-factor](https://review.firstround.com/glossary/k-factor-virality/ "K-factor")
K-Factor (also called the virality coefficient) measures how many new users each existing user or customer brings in over a defined time period.

## [Key Performance Indicators (KPIs)](https://review.firstround.com/glossary/key-performance-indicators-kpis/ "Key Performance Indicators (KPIs)")
Key performance indicators (KPIs) are focused measurements that track progress against business objectives. They distill performance into a small set of trackable signals that show whether a company, team or project is on course to meet its strategic plan.

## [Lifetime Value](https://review.firstround.com/glossary/lifetime-value/ "Lifetime Value")
Lifetime value (LTV), also called customer lifetime value (CLV or CLTV), is a metric that estimates the total revenue a business can expect from a single customer over the entire duration of their time as a customer.

## [Net Revenue Retention (NRR)](https://review.firstround.com/glossary/net-revenue-retention-nrr-definition/ "Net Revenue Retention (NRR)")
Net Revenue Retention (NRR) measures how much recurring revenue you retain and expand from existing customers over a set period, usually a year.

## [OKRs](https://review.firstround.com/glossary/okrs-meaning/ "OKRs")
OKRs, or objectives and key results, are a simple, lightweight way to translate strategy into measurable work — so every team knows how their daily work rolls up into high-level goals. Use them to set a few ambitious objectives, define outcomes and align the company.

## [Operating Leverage](https://review.firstround.com/glossary/operating-leverage/ "Operating Leverage")
Operating leverage measures how changes in sales volume affect operating income based on your company's cost structure — specifically the mix of fixed costs versus variable costs. It is a crucial tool for predicting how changes in revenue affect profitability

## [Pivot (meaning in business)](https://review.firstround.com/glossary/pivot-meaning-business/ "Pivot (meaning in business)")
A business pivot is a fundamental strategic shift where you change a core component of your company — like your product, business model or target market — to better align with customer needs and market conditions.

## [Run Rate](https://review.firstround.com/glossary/run-rate/ "Run Rate")
Run rate is a financial forecasting metric that projects a company's future performance by extrapolating its current revenue over a longer period of time, usually an entire year. For startups, it's a quick way to estimate annual revenue based on limited data.

## [Scalability](https://review.firstround.com/glossary/scalability-meaning-business/ "Scalability")
Scalability is how a business, product, process or system grows under increased demand while maintaining performance.

## [Stealth Mode](https://review.firstround.com/glossary/stealth-mode/ "Stealth Mode")
A stealth mode startup is a company that deliberately avoids public visibility while developing its product and operations.

## [Technical Debt](https://review.firstround.com/glossary/technical-debt/ "Technical Debt")
Technical debt is the implied cost of additional work created when a team prioritizes faster delivery over the most achievable or maintainable solution.

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