Glossary

Discover straightforward explanations of common tech, SaaS, and e-commerce terminology below.

Tech & SaaS

E-commerce

Key performance indicator (KPI)

A Key Performance Indicator (KPI) is a measurable value that helps assess the performance and progress of a specific aspect of a SaaS or e-commerce business in achieving its strategic objectives. KPIs provide insights into critical areas of performance and help monitor the success of business strategies. Examples of KPIs in the SaaS and e-commerce sectors include monthly recurring revenue (MRR) growth rate, customer churn rate, conversion rate, customer lifetime value (CLTV) to customer acquisition cost (CAC) ratio, and net promoter score (NPS). KPIs are selected based on their relevance to the business's goals and are used to track and guide decision-making at a strategic level.

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A/B testing

A/B testing is a method of comparing two versions of a webpage or other marketing asset to determine which one performs better. It's used to optimise websites and marketing strategies based on data-driven decisions.

Abandoned cart

An abandoned cart refers to a scenario where online shoppers add items to their shopping carts but leave the site without completing the purchase. This is a significant issue in e-commerce, leading to lost sales and reflecting potential issues with the user experience or pricing.

Affiliate marketing

Affiliate marketing is a performance-based marketing strategy where a business pays external partners, known as affiliates, for each visitor or customer brought by the affiliate's marketing efforts. It's a cost-effective approach to increase brand awareness and sales.

Agile

Agile development is a method of software development which involves dividing tasks into short phases of work, with frequent reassessment and adaptation of plans. It's designed to be flexible and improve productivity.

Angels

Angels are individuals who provide funding and mentorship to startups in exchange for equity. They often bring industry expertise, networks, and guidance to early-stage companies, supporting their growth and development.

Annual recurring revenue (ARR)

ARR is the annualised revenue that a company expects to receive from its customers for providing certain services or products. It's particularly relevant in subscription-based businesses, where customers pay on a recurring basis.

Application programming interface (API)

An API is a set of rules and protocols for building and interacting with software applications. APIs dictate how software components should interact and allow different software systems to communicate with each other.

Aquihire

Acquihire is a term used to describe an acquisition primarily driven by the interest in acquiring talented individuals from the target company. Instead of focusing on the company's products or services, the acquiring company is more interested in assimilating the skills, expertise, and experience of the target company's employees.

Asset sale

An asset sale refers to a transaction where the company sells specific assets, such as intellectual property, software licenses, or technology infrastructure, rather than selling the entire business entity. This strategic move allows the company to divest certain assets while retaining other core components, enabling it to focus on its core competencies or pivot its business strategy.

Bad leaver

A bad leaver is an employee or founder who leaves a company under unfavourable circumstances, such as termination or breaching employment agreements. This designation typically results in the forfeiture or diminished value of their equity or ownership rights.

Bill of materials (BOM)

A bill of materials (BOM) is a comprehensive list of components, parts, and raw materials required to manufacture a product. It provides a detailed breakdown of the necessary items and quantities needed for production.

Bonded warehouse

Bonded warehouses are secured storage facilities where imported goods can be stored before paying customs duties or taxes. They allow businesses to defer import duties and taxes until the goods are sold or leave the warehouse, facilitating international trade and customs compliance.

Bootstrapping

Bootstrapping is the process of building and funding a business from personal finances or from the operating revenues of the new company. It allows entrepreneurs to maintain more control but can slow down growth due to limited funds.

Bounce rate

Bounce rate is the percentage of visitors who navigate away from your website after viewing only one page. A high bounce rate can indicate that a site's landing page isn't relevant to visitors.

Breakeven

Breakeven refers to the point at which a company's revenue equals its total costs, resulting in neither profit nor loss. It represents the minimum level of sales or operations required for a business to cover all its expenses.

Business to Business to Consumer (B2B2C)

B2B2C refers to transactions that involve both business-to-business (B2B) and business-to-consumer (B2C) relationships. Here, a business provides products or services to another business that directly interfaces with consumers.

Business to business (B2B)

B2B refers to business transactions that occur between two companies, as opposed to a direct consumer. It involves the sale of products, services, or solutions from one business to another, catering to the specific needs and requirements of business customers.

Business to consumer (B2C)

B2C refers to business transactions that occur between a business and an individual consumer. It involves the sale of products or services directly to end consumers, targeting their preferences and addressing their personal needs.

Cap table

A cap table is a spreadsheet or table that shows the equity capitalisation for a company, including the percentage of ownership, equity value, and dilution over time. It provides a clear picture of ownership stakes and equity dilution.

Cash burn (burn rate)

Cash burn, or burn rate, refers to the rate at which a company spends (or burns) its available cash over a specific period. It indicates the net amount of cash being utilised by the business to cover operating expenses, investments, and other cash outflows. It's crucial for start-ups to manage their burn rate to make sure they don't run out of cash before more funding or becoming profitable.

Chargeback

A chargeback occurs when a customer disputes a charge from a business with their credit card issuer. It's meant to protect consumers from fraudulent transactions, but can lead to significant costs for businesses due to associated fees and potential loss of goods sold.

Chart of accounts (CoA)

A chart of accounts (CoA) is a structured list of all the individual financial accounts used by a business to record its financial transactions. It serves as a comprehensive framework that categorises and organises various types of financial activities, such as assets, liabilities, revenue, expenses, and equity. The chart of accounts provides a standardised system for classifying financial information, facilitating accurate bookkeeping, financial reporting, and analysis. Each account is assigned a unique code or number to ensure consistency and ease of reference when recording and analysing financial data.

Churn rate

Churn rate is a business metric that measures the rate at which customers stop subscribing to or using a product or service over a given period. It is typically expressed as a percentage and is used to assess customer retention and loyalty. In the SaaS and e-commerce sectors, churn rate helps businesses understand the effectiveness of their offerings, customer satisfaction levels, and the need for customer retention strategies.

Click-through rate (CTR)

Click-through rate (CTR) is a metric that measures the number of clicks digital ads receive per number of impressions. It's a key indicator of the effectiveness of digital advertising campaigns.

Clicked sales

Clicked sales refer to sales generated through online adverts or links that users click on. They're typically tracked through web analytics or affiliate marketing platforms, allowing businesses to measure the effectiveness of their online marketing efforts.

Comparable company analysis (Comps)

Comparable company analysis, commonly referred to as 'comps', is a valuation method that compares a company's financial metrics, such as revenue, profit, and multiples, to those of similar companies in the market. It helps determine a company's relative value and assess its competitiveness within the industry.

Compound annual growth rate (CAGR)

Compound annual growth rate (CAGR), is a measure of the average annual growth rate of an investment or business over a specific period, assuming steady growth. It provides a smoothed annual growth rate by accounting for compounding effects. CAGR is often used to assess investment performance, evaluate business growth, or project future growth potential. It helps to provide a clear picture of the overall growth rate, taking into account the compounding effect over multiple periods, rather than considering simple arithmetic averages.

Confidential information memorandum (CIM)

A confidential information memorandum (CIM) is a document that provides detailed information about a business to potential buyers or investors. It includes financial data, operational insights, market analysis, and other confidential information to facilitate due diligence and decision-making.

Consignment stock

Consignment stock refers to inventory that's held by a retailer but is still owned by the supplier until it's sold to the end customer. The supplier retains ownership until the retailer sells the goods, allowing for better inventory management and risk allocation.

Contribution margin (CM)

CM1, CM2, and CM3 are contribution margin levels used to assess the profitability of a product or service. CM1 represents the gross profit after deducting the variable costs directly associated with production, while CM2 incorporates additional variable costs, such as shipping, transaction fees, and and CM3 incorporates customer acquisition costs.

Conversion rate

The conversion rate is the percentage of visitors to a website or users of a service who take a desired action. It's a crucial metric in digital marketing used to measure success.

Crowdfunding

Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors. It's often conducted online using crowdfunding platforms, such as Crowdcube and Seedrs.

Customer acquisition cost (CAC)

Customer acquisition cost (CAC) is the average cost a company incurs to acquire a new customer. It includes various expenses associated with marketing, sales, advertising, and other activities aimed at acquiring and converting prospects into paying customers.

Customer relationship management (CRM)

CRM is a technology for managing all of a company's relationships and interactions with customers and potential customers. It helps improve profitability, primarily by improving customer retention and driving sales growth.

Customer retention

Customer retention refers to strategies and tactics businesses use to encourage customers to continue using or buying their products or services. High retention rates contribute to business growth and profitability.

Data room

A data room is a secure virtual space used to store and share confidential documents during due diligence processes, such as mergers and acquisitions or fundraising. It allows authorised parties to access and review sensitive information in a controlled and protected environment.

Deferred revenue

Deferred revenue, also known as unearned revenue, refers to the situation where a company receives payment from a customer for goods or services that have not yet been delivered or earned. Instead of recognising the revenue immediately, it's recorded as a liability on the balance sheet until the company fulfils its obligations. Once fulfilled, the deferred revenue is recognised as revenue.

Direct to consumer (D2C)

Direct-to-consumer (D2C) refers to the business model in which companies sell their products or services directly to consumers without involving intermediaries or retailers. It allows brands to establish a direct relationship with customers, control their distribution, and gather valuable consumer data.

Drop-shipping

Drop-shipping is a retail fulfilment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product using the drop-shipping model, it purchases the item from a third party and has it shipped directly to the customer.

Due diligence

Due diligence is a comprehensive investigation and analysis conducted by a potential investor or buyer to assess the financial, legal, and operational aspects of a business. It involves reviewing financial statements, contracts, intellectual property, customer data, and other relevant information to evaluate the risks and potential value of an investment or acquisition.

E-commerce metrics

E-commerce metrics are quantitative measurements used to evaluate the performance, effectiveness, and success of an e-commerce business. These metrics provide insights into various aspects of online sales, customer behaviour, marketing efforts, and overall business operations. Common e-commerce metrics include conversion rate, average order value (AOV), customer acquisition cost (CAC), customer lifetime value (CLTV), repeat purchase rate, cart abandonment rate, website traffic, and revenue.

EMI scheme

An EMI is an approved employee share scheme that is available to most trading companies, allowing employers to grant share options to key employees as a reward for their efforts within the business.

Earn-out

Earn-out is a financial arrangement in which the seller of a business may receive additional payments based on the future performance of the sold entity. It bridges valuation gaps between a buyer and seller, aligning both parties' interests post-acquisition.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA)

EBITDA is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. It can be helpful in comparing profitability between companies and industries. EBITDA is typically used in M&A or investment transactions.

Environmental, social, governance (ESG)

ESG stands for Environmental, Social, and Governance. It refers to the criteria used to evaluate a company's environmental impact, social responsibility, and corporate governance practices. ESG factors are increasingly considered by investors and stakeholders to assess a company's sustainability and long-term performance.

Equity

Equity refers to the ownership interest or stake that individuals or entities hold in a company. It represents the residual value of assets after deducting liabilities and is typically represented by shares or stock. Equity provides ownership rights and the potential to share in the company's profits and value appreciation. It can be obtained through various means, such as investments, stock options, or contributions made by founders or shareholders.

Exit strategy

An exit strategy is a planned approach to selling a company or an owner's stake in a business. It's typically used by start-ups and investors to realise their investment's capital gains.

FOMO (Fear of missing out)

FOMO is a psychological phenomenon where people fear missing out on experiences others are having. Marketers leverage this to create a sense of urgency or exclusivity around their products or services.

Fast moving consumer goods (FMCG)

Fast moving consumer goods (FMCG) are consumer products with a high turnover rate and relatively low cost, such as food, drink, toiletries, and household goods. FMCG companies often focus on high-volume sales, frequent purchases, and wide distribution networks.

Flywheel

In the context of growth, the flywheel represents how customer-centric actions and positive customer experiences can create a self-sustaining cycle of business growth. It emphasises that customer satisfaction, referrals, and repeat purchases can act as driving forces for accelerating business growth and momentum. By focusing on customer delight and creating positive feedback loops, companies can build a flywheel effect that drives sustainable growth.

Freemium

Freemium is a business model where a company offers both complimentary (free) services and premium (paid) services. It's often used to attract an initial user base while offering additional paid features.

Fulfilment Centre

A fulfilment centre is a warehouse where e-commerce businesses store their inventory and from where they process and ship orders. These facilities enable online retailers to outsource warehousing and shipping, thereby focusing more on sales and marketing.

GDPR

GDPR is a regulation enacted by the EU to enhance privacy protections and provide a framework for the handling of personal data. It applies to all businesses operating within the EU and those processing the data of EU citizens.

General partners

General partners (GPs) in VC funds are the individuals or entities responsible for making investment decisions and managing portfolio companies. They play an active role in the fund's operations and bear the primary fiduciary responsibility. They also typically invest their own capital into the fund.

Geo-targeting

Geo-targeting in e-commerce refers to the practice of delivering different content or adverts to consumers based on their geographic locations. This can be as broad as a country or as specific as a postcode.

Good leaver

A good leaver is an employee or founder who leaves a company under favourable circumstances, such as retirement, completion of a contract, or in accordance with predefined terms. Good leavers typically retain their equity or ownership rights and may be entitled to certain benefits or privileges.

Goods in transit (GIT)

Goods in transit (GIT) refers to inventory or goods that are being transported from one location to another. They're typically in transit between suppliers, warehouses, distribution centres, or retail stores, and are considered part of the company's assets until they reach their final destination.

Growth hacking

Growth hacking is a marketing strategy focused on rapid growth. It involves experiment-driven techniques to identify the most effective ways of growing a business.

Growth rate

Growth rate refers to the amount a specific variable or measure has grown over a specific time, expressed as a percentage. In businesses, it can refer to measures such as revenue, earnings, customers, or even an entire economy.

Hold-harmless

A hold-harmless agreement is a legal contract between two parties that releases one party from liability for any claims, damages, or losses arising from a specific activity, transaction, or relationship. It provides protection to one party (the indemnitee) by transferring the responsibility for potential risks or legal consequences to the other party (the indemnitor). Hold-harmless agreements are commonly used during transactions when advisors share information between each others.

Impression

An impression in digital marketing refers to an instance where an ad is displayed on a webpage. It's used as a measure for the number of potential customers who had an opportunity to see the ad, regardless of whether they interacted with it.

Information Commissioner's Office (ICO)

The Information Commissioner's Office (ICO) is an independent authority in the UK responsible for upholding information rights and promoting data privacy. The ICO oversees and enforces compliance with data protection laws, such as the General Data Protection Regulation (GDPR) and the Data Protection Act 2018, to enforce the fair and lawful processing of personal data, protect individuals' privacy rights, and regulate the handling of sensitive information by organisations operating in the UK. All companies in the UK need to register with the ICO.

Initial Public Offering (IPO)

An IPO is when a private company offers its shares to the public for the first time. It's a way to raise capital and often serves as a stepping stone for a company to expand.

Inventory management system (IMS)

An inventory management system (IMS) is software or a system used to track and manage inventory levels, orders, and stock movements. It enables businesses to optimise inventory control, streamline procurement, monitor stock levels, and improve overall supply chain efficiency.

Inventory turnover

Inventory turnover is a ratio that shows the number of times a business has sold and replaced its inventory during a certain period. A high turnover rate indicates strong sales, while a low rate may suggest weak sales or high inventory levels.

Investment Committee (IC)

An Investment Committee (IC) is a group of individuals within an organisation responsible for making investment decisions. The committee reviews and evaluates potential investment opportunities, conducts due diligence, and provides recommendations based on financial, strategic, and risk assessment considerations.

Investor model

An investor model, also known as a cashflow forecast, is a financial projection that outlines the expected cash inflows and outflows for potential investors. It demonstrates the anticipated returns and cash flow generation of a business, helping investors evaluate the financial viability and potential risks of an investment opportunity.

Landed cost

Landed cost refers to the total price of a product once it has arrived at a buyer's doorstep. It includes the original price of the product, transportation fees, customs, duties, taxes, insurance, currency conversion, crating, handling, and payment fees, providing a comprehensive view of all expenses involved in purchasing and delivering goods.

Landing page

A landing page is a standalone web page created specifically for a marketing or advertising campaign. It's where a visitor lands after clicking on a link in an email, ads from Google, YouTube, Facebook, Instagram, Twitter, or similar places on the web.

Lean startup

Lean Startup is a methodology for developing businesses and products based on 'validated learning', getting customer feedback quickly, and iterating on your product. The aim is to reduce market risks and sidestep the need for large amounts of initial funding.

Lifetime value (LTV)

Customer lifetime value is a metric that represents the total estimated value a customer will generate for a business over the duration of their relationship. It takes into account factors such as the customer's average purchase value, purchase frequency, and customer retention rate. In both the SaaS and e-commerce sectors, CLTV is a critical metric for understanding the long-term value of customers, informing customer acquisition strategies, and identifying opportunities for increasing customer loyalty and profitability.

Limited partners

Limited partners (LPs) in VC funds are passive investors who provide capital to the fund. They do not participate in the fund's day-to-day operations or investment decisions. Their liability is limited to their committed investment, and they expect returns on their investment from the fund's performance.

Liquidation preference

Liquidation preference determines the payout order in case of a corporate liquidation. It's often used in VC deals to favour investors, allowing them to recoup their investment before other shareholders.

Lookalike audience

A lookalike audience is a group of people who share characteristics with a business's existing customer base, making them more likely to be interested in the company's products or services. It's a concept used in digital marketing to target users for ad campaigns.

Machine learning (ML)

Machine learning is a subset of artificial intelligence that involves the development of algorithms allowing computers to learn from and make decisions based on data. It's used for tasks like spam filtering, image recognition, and predictive analytics.

Marketplace

A marketplace is a digital platform or website where multiple third-party sellers can list and sell their products or services to customers. It acts as an intermediary, facilitating transactions between buyers and sellers while providing a centralised location for a wide range of offerings. Marketplaces often handle logistics, payment processing, and customer support, offering a convenient and diverse shopping experience for customers and a scalable sales channel for sellers.

Metric

A metric is a quantifiable measurement or data point used to assess specific aspects of performance or operations. Metrics provide detailed insights into various operational areas and help monitor progress and trends. Unlike KPIs, which are strategic indicators, metrics are more focused on specific processes or activities. Examples of metrics in the SaaS and e-commerce sectors include monthly recurring revenue (MRR), customer acquisition cost (CAC), customer churn rate, conversion rate, average order value (AOV), and website traffic. Metrics are crucial for tracking performance, identifying areas for improvement, and making data-driven operational decisions.

Minimum viable product (MVP)

An MVP is a version of a new product with enough features to satisfy early adopters and provide feedback for future development. It's a cost-effective way to test a product in the market.

Mobile commerce (m-commerce)

Mobile commerce, or m-commerce, refers to the buying and selling of goods and services through smartphones and tablets. It's an advancement of e-commerce, enabling people to conduct transactions on the go.

Monthly recurring revenue (MRR)

MRR is similar to ARR but broken down to a monthly level. It's the predictable revenue a company can expect every month from its subscriptions or recurring services.

Net promoter score (NPS)

NPS is a customer loyalty metric that measures how likely customers are to recommend a company, product, or service to others. It's determined by asking customers a single question: "How likely is it that you would recommend our company/product/service to a friend or colleague?" Customers respond on a scale from 0 to 10, and based on their responses, they are classified into three categories: Promoters (9-10), Passives (7-8), and Detractors (0-6).

Non-disclosure agreement (NDA)

An NDA is a legal contract creating a confidential relationship between parties to protect any type of confidential and proprietary information. It enforces that the information shared for specific purposes won't be disclosed to others.

Omnichannel

Omnichannel is a multichannel sales approach that provides customers with a seamless shopping experience, whether they're shopping online from a mobile device, desktop, or in a physical store. It integrates touchpoints and connects the dots between online and offline platforms.

Order acquisition cost (OAC)

Order acquisition cost (OAC) refers to the average cost incurred by a company to process and fulfil a customer's order. It includes expenses associated with order management, packaging, shipping, and customer support, providing insights into the cost efficiency of order fulfilment processes.

Organic growth

Organic growth refers to the growth of a business achieved through its own resources and efforts, without any acquisitions or mergers. It includes growth from existing and new businesses.

PPC (Pay-per-click)

PPC is an online advertising model in which advertisers pay each time a user clicks on one of their online ads. It's commonly associated with first-tier search engines like Google Ads and Bing Ads.

Payment gateway

A payment gateway is a technology that captures and transfers payment data from the customer to the acquirer and then transfers the payment acceptance or decline back to the customer. It's a crucial component for e-commerce websites to facilitate online transactions.

Personalisation

In e-commerce, personalisation is the process of tailoring the shopping experience to individual customers. This can be based on their behaviour, demographics, or purchase history, and it can improve customer satisfaction and sales.

Pivot

A pivot is a fundamental change to a business model, often after the realisation that the previous model will not work as expected. Start-ups often pivot when they find a different customer need that provides a better market opportunity.

Post-money valuation

Post-money valuation is a company's estimated worth after outside financing and capital injections are added to its balance sheet. It includes the pre-money valuation plus the amount of new equity received from outside financing.

Pre-money valuation

Pre-money valuation is the value of a company before it goes public or receives external funding or financing. It's important for determining the equity that investors receive as a result of their investment.

Preference shares

Preference shares, also known as preferred shares, are a type of equity security that gives holders priority over common shareholders in terms of dividends and asset distribution.

Private equity firm (PE firm)

A private equity (PE) firm is a company or fund that invests in and acquires private companies in order to generate returns. PE firms typically provide capital, strategic guidance, and operational expertise to portfolio companies, aiming to enhance their value and profitability before exiting the investment.

Product-led growth

Product-led growth (PLG) is a go-to-market strategy where the success and growth of a business are primarily driven by the value and quality of its product or service. In a PLG approach, the product itself becomes the primary driver for customer acquisition, retention, and expansion, leveraging user experience, product features, and viral loops to fuel growth. By prioritising product excellence and customer satisfaction, businesses aim to organically attract and retain customers, leading to sustainable growth and market success.

Product-market fit

Product-market fit represents the stage at which a product or service satisfies the needs and demands of a specific target market. It indicates a strong alignment between the offering and customer requirements, leading to market acceptance, customer satisfaction, and sustainable growth.

R&D tax credits

R&D tax credits are a government incentive in the UK that encourages and rewards companies for investing in research and development activities. They provide financial benefits to businesses engaged in eligible R&D projects by reducing their tax liability or providing cash refunds. R&D tax credits are applicable to various industries, including the SaaS and e-commerce sectors, and can help businesses offset costs associated with innovation, technological advancements, and product development.

Responsive design

Responsive design is a web design approach that ensures web pages render well on different devices and window or screen sizes. It's particularly important in e-commerce, as more consumers use mobile devices for online shopping.

Rest of world (ROW)

Rest of world (ROW) refers to international markets outside the home country or a specific geographic region. It represents global market opportunities beyond local or regional markets, allowing businesses to expand their reach and tap into new customer segments or regions.

Retargeting

Retargeting is a type of online advertising that helps businesses stay in front of bounced traffic after they leave a website. It involves showing tailored ads to users who have already visited or taken action on your website.

Return on ad spend (ROAS)

Return on ad spend (ROAS) is a marketing metric that measures the revenue earned per pound spent on advertising. It's used to evaluate the effectiveness of online advertising campaigns.