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Learn more about common financial (and startup) terms here. To learn more about Pilot, fill out the form below.
409A valuation
A 409A valuation is an independent appraisal of the fair market value (FMV) of a private company's common stock. The 409A valuation is required by the IRS for private companies that issue stock options to their employees to ensure these options are not issued at a discount.
Read more →83(b) election
An 83(b) election allows you to pay tax on stock you're issued at the time it was granted, rather than when it vests.
Read more →Accelerator
An accelerator is a program that supports early-stage, growth-driven companies through education, mentorship, and financing. The goal of an accelerator is to expedite the growth of these startups within a fixed, typically short, period.
Read more →Accounting software
Accounting software is a type of computer software used by businesses to manage and process their financial transactions. This software can range from simple, single-entry systems for basic bookkeeping to more complex, double-entry systems that can process accounts payable, accounts receivable, payroll, and more.
Read more →Accounts payable
Accounts payable (AP) represents the money a business owes to its suppliers or vendors for goods or services bought on credit. It is a liability for the company until the debt is paid off.
Read more →Accounts receivable
Accounts receivable (AR) refers to the money owed to a company by its customers for goods or services sold on credit. It's an asset for the company and represents a legally enforceable claim for payment.
Read more →Accounts receivable loans
Accounts receivable loans, also known as invoice financing or factoring, are a form of short-term borrowing where a business sells its outstanding invoices to a lender in exchange for immediate cash.
Read more →Accredited Investor
An accredited investor is a high-net-worth individual or entity that meets certain federal requirements and can invest in securities that aren’t registered with the Securities and Exchange Commission (SEC), like private company stock. If you want to angel invest in startups, you generally need to be an accredited investor.
Read more →Accrual accounting
Accrual accounting is a method of accounting where revenues and expenses are recorded when they are earned or incurred, regardless of when the money is actually received or paid.
Read more →Acquihire
An acquihire, a portmanteau of "acquisition" and "hire", is a strategy where a company is acquired mainly for the skills and expertise of its staff, rather than its products or services. It's often seen in the tech startup industry.
Read more →Acquisition
An acquisition is a corporate action where one company, the acquirer, purchases most or all of another company's, the target, shares to gain control of that company. Acquisitions are commonly made as part of a company's growth strategy.
Read more →Activity-based budgeting
Activity-based budgeting (ABB) is a budgeting method where activities that incur costs are recorded, analyzed, and connected to their outputs. It differs from traditional budgeting as it provides a more detailed view of where funds are being spent and how they contribute to an organization's goals.
Read more →Adjusted gross income
Adjusted Gross Income (AGI) is a measure of income calculated from your gross income and used to determine how much of your income is taxable. It's the total income you receive over the course of the year, including wages, interest, dividends, and capital gains, minus specific deductions.
Read more →Allocation
Allocation refers to the distribution of resources, such as capital or personnel, within a business or investment portfolio. It's a strategic decision made to maximize efficiency, profitability, or to achieve other business objectives.
Read more →Alternative Financing
Alternative financing refers to financial channels, processes, and instruments that have emerged outside of the traditional finance system such as banks and capital markets. It includes crowdfunding, peer-to-peer lending, merchant cash advances, and more.
Read more →Amortization
Amortization is the process of expensing the cost of an asset or loan over time.
Read more →Angel Investor
An angel investor or seed investor is an individual who uses their own money to invest in startup companies.
Read more →Annual Contract Value (ACV)
Your annual contract value (ACV) tells you the annual value of each customer or account regardless of the contract’s length. You can use your ACV to estimate how much you’ll earn from each new customer and how many customers you’ll need to reach your revenue goals.
Read more →Annual Recurring Revenue (ARR)
Annual recurring revenue (ARR) tracks the expected revenue from products and services that are sold with contracts that last at least 12 months. Software as a service (SaaS) companies, and other companies that offer subscriptions, commonly track their ARR.
Read more →Anti-dilution clause
An anti-dilution clause is a provision in an investment agreement that protects investors from dilution of their equity stake if the company issues shares at a lower price than what the investors originally paid.
Read more →Audit
An audit is a systematic review and assessment of information or documents. In the context of finance, it's the process where an independent, third-party auditor examines a company's financial statements to determine whether they are accurate and in compliance with accounting standards.
Read more →Average Revenue Per User (ARPU)
The average revenue per user (ARPU), also called average revenue per unit, is often used by tech, media, and telecom companies to track their revenue per customer.
Read more →B Corporation
A B corporation (or Benefit Corporation) is a type of for-profit company that has an additional mission to contribute positively to society or the environment. It's a legal structure that balances public benefits with profit-making, and is designed to hold companies accountable for producing some kind of societal benefit in addition to profits.
Read more →Balance sheet
A balance sheet is one of the three main financial statements (along with the income statement and cash flow statement) used to evaluate a company's financial health. It provides a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time.
Read more →Bank reconciliation
Bank reconciliation is the process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement. The goal of this process is to ascertain the differences between the two, and to book changes to the accounting records as appropriate.
Read more →Billings
Software as a service (SaaS) companies often track their current and future income in three ways: bookings, billings, and revenue. Billings are the money that you’ve invoiced for and will be paid soon.
Read more →Board Director
Your startups’ board members, the board directors, have a fiduciary duty to the company’s shareholders and they make important decisions, such as whether to sell the company. Generally, founders will be the first board directors and lead investors may get board seats during each funding round.
Read more →Bookings
You book a client when they sign a contract with your company, and your bookings are the total value of the signed contracts.
Read more →Bootstrapping
Bootstrapping in a business context refers to starting and growing a business using existing resources or personal savings, and without the help of outside investors. It's a way of building a company while maintaining full control and ownership.
Read more →Bottom line
The "bottom line" refers to the net income, or profit, a business has earned. It's called the bottom line because it's typically found at the bottom of the income statement, after all expenses, including taxes and interest, have been subtracted from revenues.
Read more →Bridge loan
A bridge loan is a type of short-term loan intended to "bridge" the gap between short-term cash requirements and long-term financing. These loans are commonly used in real estate transactions and by startups awaiting closing on their next round of funding.
Read more →Budget forecasting
Budget forecasting is the process of making projections about revenues and expenditures for a future period based on historical data, market research, and other relevant information. These forecasts form the basis for a company's budget.
Read more →Budget variance analysis
Budget variance analysis is a financial process where the actual budgeted amount is compared to the projected budget. The purpose is to find any discrepancies, or "variances," to help improve financial control and decision-making.
Read more →Burn Multiple
Your burn multiple is your net cash burned divided by your net new ARR in a given period. It’s a measure of capital efficiency, and you’d like to keep it as low as possible.
Read more →Burn Rate
Your company’s burn rate describes how quickly it’s losing (burning) money. Many venture-backed startups need time and money to build their customer base and improve their products or services before becoming profitable.
Read more →Business expenses
Business expenses are the costs associated with operating a business. These may include rent, utilities, salaries, office supplies, marketing expenses, taxes, and more.
Read more →Buy now pay later
"Buy now, pay later" (BNPL) is a type of point-of-sale installment loan that allows consumers to purchase goods or services immediately and pay for them over a period of time. These services can provide interest-free loans if the balance is paid in full by a certain date.
Read more →C Corporation (C Corp)
A C corporation, or C corp, is a type of legal business entity. C corps are the default corporation type and a popular choice for startup founders. Other options include S corporations and limited liability companies (LLCs).
Read more →CFO
A CFO, or Chief Financial Officer, is a senior executive responsible for managing the financial actions of a business. The CFO's duties include tracking cash flow, financial planning, analyzing the company's financial strengths and weaknesses, and proposing corrective actions.
Read more →COO
A COO, or Chief Operating Officer, is a high-ranking executive in a company who oversees the day-to-day administrative and operational functions of a business. The COO reports directly to the CEO (Chief Executive Officer) and is often considered the second in command within the organization.
Read more →CPA
A CPA, or Certified Public Accountant, is a professional accountant who has passed the Uniform Certified Public Accountant Examination and met all other state education and experience requirements to obtain this certification in the United States. CPAs offer financial statement audits and other attestation services to help businesses comply with laws and regulations.
Read more →California Sales Tax Exemption
The California sales tax exemption applies to certain types of sales and is designed to encourage economic development or to benefit certain categories of purchasers. The type of goods that may be exempted from sales tax vary, but generally include items like groceries, prescription medicines, and certain agricultural supplies.
Read more →California Statement of Information
The California Statement of Information is a document that most businesses are required to file with the California Secretary of State on a regular basis. This document includes important information about the business, such as its address, the names of its officers, and the nature of its business activities.
Read more →Cap Table
A capitalization table (cap table) tells you who owns what percentage of a company. It often starts as a spreadsheet, but there are programs that can help you create and manage your cap table.
Read more →Capital Expenditures (CapEx)
Capital expenditures (CapEx) are when you spend money to buy, maintain, or improve assets that you plan to use for longer than a year. These can include tangible assets, such as equipment and property, and intangible assets, like patents or licenses.
Read more →Carry or carried interest
Carry, or carried interest, refers to the share of profits that a fund manager receives as compensation, regardless of whether they contributed any initial funds. This is a common form of compensation in venture capital and private equity firms, where managers are often rewarded based on the fund's performance.
Read more →Cash accounting
Cash accounting is a method of accounting where revenues are recorded when cash is received, and expenses are recorded when they are paid. This method does not recognize accounts receivable or accounts payable.
Read more →Cash burn
Cash burn refers to the rate at which a company spends its cash reserves, particularly common in startups that may not yet be profitable. It's an important measure of a company's financial health and sustainability.
Read more →Cash burn rate
A cash burn rate is a measure of how quickly a company uses up its cash reserves in its operations. This is especially important for startups and other companies that may not yet be profitable.
Read more →Cash disbursement
Cash disbursement is the outflow of cash from a business for expenses, investments, or any other operational or financial costs. It's an important part of managing a company's cash flow and maintaining accurate financial records.
Read more →Cash flow
Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, pay expenses, and provide a buffer against future financial challenges.
Read more →Cash flow from operating activities
Cash flow from operating activities (CFO) is a measure of the amount of cash generated by a company's normal business operations. It is an important indicator of a company's financial health, as it shows the company's ability to generate consistent positive cash flow from its core business operations.
Read more →Cash management
Cash management refers to the process by which a business manages its financial operations, including collecting receivables, managing payments, and ensuring liquidity. It's essential to the financial health of a business and ensures that the company can meet its obligations.
Read more →Cash out date
A cash out date refers to the specific date when a business will run out of cash if nothing changes in its income and expenses. It's a crucial metric in cash management and financial forecasting for startups.
Read more →Cash projection model
A cash projection model is a vital tool that provides insights into the future financial health of your startup by predicting your cash inflows and outflows. It helps you understand when and where your startup might run out of cash, thereby assisting you in making informed business decisions.
Read more →Cash zero date
A "cash zero date" is the forecasted date at which a company will run out of cash if it does not raise additional funds, reduce costs, or generate more revenue. This date is a crucial financial milestone for startups as it highlights the importance of cash flow management and the need for financial planning.
Read more →Chart of accounts
A "chart of accounts" is a structured list of all the accounts used by a business to track its financial transactions and to prepare financial statements. It serves as the backbone of a company's accounting system, categorizing transactions into different buckets for clear and easy financial reporting.
Read more →Chief executive officer (CEO)
A Chief Executive Officer, or CEO, is the highest-ranking executive in a company, responsible for making major corporate decisions and managing the overall operations and resources of a company. The CEO is the main point of communication between the board of directors and corporate operations.
Read more →Chief financial officer (CFO)
A Chief Financial Officer, or CFO, is the executive responsible for managing the financial actions of a company. Their duties include tracking cash flow, financial planning, analyzing the company's financial strengths and weaknesses, and proposing corrective actions.
Read more →Chief operating officer (COO)
A Chief Operating Officer, or COO, is a high-ranking executive responsible for the day-to-day administration and operation of a company. The COO typically reports directly to the Chief Executive Officer (CEO) and is considered second-in-command.
Read more →Churn
Customer churn refers to how many customers you’ve lost during a period, while revenue churn can refer to the annual or monthly recurring revenue change from losing customers. Depending on your business, churn could refer to someone who stops using your service, uninstalls your app, downgrades their plan, or cancels a subscription.
Read more →Cliff vesting
"Cliff vesting" is a term used in equity-based compensation that refers to the period before an employee fully owns their shares or options. With cliff vesting, the employee earns the right to their full benefits after a specified period, typically one year, rather than gradually over time.
Read more →Cloud accounting
Cloud accounting, also known as online accounting, refers to the use of accounting software where both the software and the data are stored online on remote servers. This approach provides access to real-time data from any device with an internet connection, which is a significant advantage over traditional desktop-based software.
Read more →Cohort Analysis
Cohort analysis involves segmented populations based on a shared characteristic, such as customers who signed up for a service during the same month, to better analyze and understand trends.
Read more →Common stock
Common stock is a type of equity ownership in a corporation, representing a claim on part of the corporation's assets and earnings. Common shareholders typically have the right to vote on major corporate issues, such as electing the board of directors and authorizing major corporate initiatives.
Read more →Competitive Analysis
Competitive analysis is the process of understanding your competitors in business, including their strengths and weaknesses, and how your product or service compares. This analysis aids in defining your value proposition, identifying market opportunities, and developing competitive strategies.
Read more →Compounded monthly growth rate (CMGR)
A compounded monthly growth rate (CMGR) is a metric used to calculate the average rate at which something (such as revenue, user base, etc.) has grown every month, over a specified period. CMGR is a common metric in the startup world, where monthly growth rates can be a valuable indicator of a company's momentum and potential.
Read more →Contra revenue
Contra revenue refers to deductions from gross revenue that result in net revenue. It includes items such as sales returns, discounts, and allowances that are deducted from gross sales to arrive at a company's total net sales.
Read more →Contraction
Contraction in a business context refers to a period of economic decline or slowdown. It is a phase in the business cycle where the growth of a company or economy slows, stalls, or shrinks.
Read more →Contribution Margin
Contribution margin is a company’s or product’s line revenue minus variable expenses. Your contribution margins can be a factor in deciding which products or services to invest in and which to discontinue.
Read more →Convertible Note
A convertible note is a loan that can convert into equity during a conversion event, such as a funding round. They are an option for raising money from venture capitalists and angel investors. However, the simple agreement for future equity (SAFE) has become a popular alternative.
Read more →Cost Per Click (CPC)
Cost per click (CPC) advertising is when you pay based on how many people click on your ad. With CPC advertising, you can be certain that you’re not paying for ads that don’t result in someone visiting your website.
Read more →Cost of Goods Sold (COGS)
Cost of goods sold (COGS) — sometimes called cost of revenue (COR) or cost of sales (COS) — is the costs that are directly associated with making a company’s products or services.
Read more →Cram-down round
A "cram-down round" refers to a financing round where investors purchase equity from a company at a lower valuation than the valuation placed on the company during previous financing rounds. This usually happens when a company is struggling financially and cannot negotiate terms that are more favorable.
Read more →Credit risk
Credit risk is the possibility that a borrower will default on any type of debt by failing to make required payments. If a company lends money to customers or other businesses, there's always a risk that the borrowers may not repay the loan, leading to a financial loss for the company.
Read more →Cross-Selling
Cross-selling is when you sell current customers an additional related product or service. A successful cross-selling strategy can increase the customer lifetime value (CLTV). Often, it costs less to cross-sell a customer than to acquire a new one.
Read more →Crowdfunding
Crowdfunding is a method of funding a venture or project by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding platforms such as Kickstarter and Indiegogo allow individuals to solicit funds from a large pool of backers.
Read more →Customer Acquisition Cost
This is how much it costs for you to secure a new customer. Customer acquisition costs — more commonly known as CACs — cover all of the marketing and sales expenses, including salaries, that are incurred as part of your lead generation activities.
Read more →Data Room
A data room is a secure location that’s set up to store and limit access to confidential and privileged information. They’re often used for mergers and acquisitions (M&A), initial public offerings (IPOs), audits, and venture capital (VC) financing deals.
Read more →Debt capital
Debt capital refers to borrowed money that a business uses to fund its operations or growth. This can come in the form of loans from banks, bonds issued to investors, or other types of debt instruments. The business agrees to repay the principal amount along with interest over a specified period.
Read more →Debt-to-equity ratio
The debt-to-equity ratio is a financial metric used to assess a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity. It indicates the proportion of a company's funding that comes from debt versus equity.
Read more →Deferred Revenue
Deferred revenue, also called unearned revenue or customer deposits, is money that you received for products or services you haven’t delivered yet. With accrual-based accounting, you don’t recognize the revenue until you’ve fulfilled your side of the transaction.
Read more →Delaware Annual Report
A Delaware annual report is a report that businesses incorporated in Delaware must file by March 1 each year with the Delaware Secretary of State. When completing your annual report, you also have to pay a filing fee and Delaware Franchise Tax.
Read more →Delaware C corporation
A Delaware C corporation is a type of business entity that is very popular among U.S. startups. Incorporating as a C corporation in Delaware has become a standard practice because of the state's well-developed and business-friendly law, its efficient and expert courts, and the prestige associated with being a Delaware corporation.
Read more →Delaware Franchise Tax
The Delaware Franchise Tax is a fee that businesses incorporated in Delaware need to pay. Franchise is not a reference to a business owned by a franchisee. Many startups and large corporations are incorporated as C corporations in Delaware and pay the Delaware Franchise Tax quarterly or annually.
Read more →Depreciation
Depreciation is how a company writes off the value of fixed assets over their useful life. It can apply to tangible assets, such as office equipment, computers, and buildings.
Read more →Depreciation
Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. It represents how much of an asset's value has been used up over time. Depreciation is used in accounting to try and match the expense of an asset to the income that the asset helps the company earn.
Read more →Digital wallet
A digital wallet is a system that securely stores users' payment information and passwords for numerous payment methods and websites. Essentially, it's a digital version of a physical wallet that allows you to complete transactions electronically.
Read more →Dilution
Dilution refers to the reduction in the ownership percentage of a company due to the issuance of new shares. Essentially, if a company issues more shares, existing shareholders' stake in the company gets diluted.
Read more →Discounted cash flow
Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its future cash flows. The idea is that money today is worth more than the same amount in the future due to its earning potential.
Read more →Doing Business As (DBA)
A doing business as (DBA or d/b/a) name is a pseudonym that you can use for your business. DBAs are also called trade names, fictitious names, or assumed names. You can register a DBA if you don’t want to use your personal name or legal business entity name with customers and clients.
Read more →Dollar-Based Net Expansion Rate (DBNER)
Dollar-based net expansion rate (DBNER) is a measure of how much revenue you earned from existing customers due to add-ons, upselling, and cross-selling.
Read more →Double-Trigger Acceleration
Double-trigger acceleration is when someone's stock or options can be vested ahead of schedule if there are two triggering events. As a founder, your unvested equity might be accelerated if you sell the company and you’re involuntarily fired.
Read more →Down round
A down round is a financing round where a company raises capital by selling its shares at a lower price than in the previous funding round, hence, reducing the company's valuation.
Read more →Due diligence
Due diligence refers to the comprehensive appraisal or investigation conducted by a prospective buyer or investor into a company's business, assets, liabilities, and financial performance before a business transaction such as a merger, acquisition, or investment.
Read more →EBITDA
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a financial metric that can help you understand your company’s cash flow from its core activities.
Read more →Earnings before interest and taxes
Earnings Before Interest and Taxes (EBIT) is a measure of a company's profitability that excludes interest and income tax expenses. It represents the earnings of a company purely from its core business operations.
Read more →Earnings before interest taxes depreciation and amortization
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a measure of a company's operational profitability, disregarding non-operating expenses like interest, taxes, and non-cash expenses of depreciation and amortization.
Read more →Entrepreneur in Residence (EIR)
An entrepreneur-in-residence (EIR) is typically a former startup founder who now works for a VC firm. The EIR helps the firm with due diligence on potential investments and may serve as an advisor or mentor to the VC fund’s portfolio companies.
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