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Sept. 16, 2020

Abbreviations you need to know before starting to fundraise.

Abbreviations you need to know before starting to fundraise.

Now we would like to offer you some commonly used (in the startup investment field) abbreviations so that you don’t feel
confused or stupid when investors or other founders through them at you.

1. VC - venture capital or more frequently meaning venture capitalist or
venture capital firm.
Putting aside the official definition of Wikipedia, when someone says “VC”
they usually mean Venture Capital firm - investment organization that
invests in Seed+ stages. If someone at the Pre-Seed stage is saying “We
are talking to a lot of VCs” they are right - they are just talking. VCs rarely
join pre-seed rounds, so don’t spend much time reaching out to them
unless you have great metrics to show them, try reaching out to angel
investors instead.

2. CAC - customer acquisition cost.
So this is the amount of money spent on acquiring one customer. It can be
easily calculated by dividing all money spent on this issue by the number of
customers you really got. So to calculate my Google Ads CAC I’ll divide the
budget spent on Google Ads by the number of customers it brought me.

3. CPC - cost per click.
This is basically the amount of money you have to pay your advertiser for each
click. Facebook and google ads provide this metric, but just so you know -
to calculate CPC you need to divide the budget of the ad on the number
of clicks your ad got.

4. LTV - lifetime value.

Which is a gross income you get from working with one client. The
description for LTV calculation is a bit long and complicated, so click here
if you want to understand how to calculate LTV.

5. MRR - monthly recurring revenue.
In other words MRR measures how much revenue you generate in a
month. MRR is very important because investors look for its steady
growth. One of the most frequent things we hear while talking to Seed-
stage investors is: “MRR has to be growing 10-20% Month Over Month if
you want me to invest”. That’s why you should focus on MRR so much.

6. ARR - annual recurring revenue.
Basically the same as MRR but for the year. Important only at Seed,
Series A+ stages where VCs are trying to see if the company is big
enough for them. If you are an early stage startup, don’t worry about it.

7. SaaS - software as a service.
Which means providing a customer with an already licensed and hosted by
provider software on a subscription basis. The main advantage of this service is
that you do not need to pay for creating and installing software.

8. B2C - business to consumer.
This term mostly refers to such type of commerce which specialise at direct
selling between business and an individual consumer. An example would be
Netflix, that drives most of its profits from individual consumers.

9. B2B - business to business.
This is the type of business that sells products and services to other
businesses. An example of a B2B startup would be Unity Technologies,
whose main customers are other companies.

10. R&D - research and development.
R&D is basically the efforts that a company makes to create something
innovative and give itself some competitive advantage.

If you find this list helpful, please let us know and we might create the second
list of 10 more abbreviations that we hear and use a lot on Fundraising Radio. And follow us on our custom channel: https://www.patreon.com/join/FundraisingRadioPremium?