Funding & Growth: key terms, formulas and examples
Startups fund growth through seed money, angels, venture rounds or bootstrapping. Runway is cash divided by monthly burn, and every equity round dilutes founders.
Example
100k cash and 20k burn a month gives 5 months of runway.
Takeaway
Start fundraising with 6+ months of runway, not 6 weeks.
Key terms
- Venture capital
- Funding for risky startups in exchange for equity.
- Burn rate
- How fast a company spends its cash, usually per month.
- IPO
- First time a company sells shares to the public.
- Pivot
- A major change of strategy based on what you learned.
- Seed funding
- The first outside money raised to start a company.
- Runway
- How many months a company can operate before its cash runs out.
- Series A
- The first major venture round after seed funding.
- Equity dilution
- Owners' percentage shrinks when new shares are issued.
- Valuation cap
- The highest price at which an investment converts to shares.
- Cap table
- A record of who owns what share of a company.
Formulas
Growth rate(B − A) ÷ A × 100
CAC payback (months)CAC ÷ (ARPU × GM)
Rule of 40g + m
Annual recurring revenue (ARR)MRR × 12
Startup runway (months)Cash ÷ B
Net burnE − R
LTV to CAC ratioLTV ÷ CAC
Customer acquisition costMarketing ÷ New customers
Cash runway (months)Cash ÷ Burn
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