Glossary

The terms that come up when you raise money, and where Troy works through each one. Definitions are short on purpose — the substance is in the video, at the moment it starts.

1. Customer Acquisition Cost (CAC)

   What it costs, all in, to get one new paying customer. Troy's point is that a blended average hides more than it shows — CAC varies by channel, and even within a channel it changes as you scale.

   Why is Troy Obsessed with CAC?

   Also covered in What are investors REALLY thinking about when they ask about your CAC…?

2. Lifetime Value (LTV)

   The total contribution margin a customer produces before they leave. Troy is specific that it is built on contribution margin — what you actually keep — not on revenue.

   Why is Troy Obsessed with CAC? from 1:07

3. Churn

   The rate at which customers stop paying. Troy treats churn as diagnostic rather than a number to report: the useful question is which customers left and what that says about who you should be selling to.

   How to Learn from Churn

4. Contribution Margin vs Gross Profit

   Two figures that sound interchangeable and are not. Troy's framing: contribution margin is the individual portrait — what one unit or customer leaves you — and gross profit is the group photo.

   Do You KNOW the Difference between Gross Profit and Contribution Margin?

5. Convertible Note and SAFE

   Instruments that let you raise now and set the price later. Troy's view is that they are genuinely easier for small early rounds, and that the trouble starts when they stack up unpriced.

   Convertible Debt/SAFE vs. Equity

   Also covered in The Rule of Two, WAIT – Now Troy Likes Convertible Notes?

6. Pre-money and Post-money Valuation

   Pre-money is what the company is worth before the new investment; post-money is pre-money plus the money in. The gap is where founders most often misread what they have agreed to.

   Back to Basics: Valuations, Option Pools and What You Need to Know Before Raising Capital

   Also covered in Higher Valuations Are Not Always Better

7. Option Pool

   Equity set aside for future hires. Where it sits relative to the round — inside the pre-money or outside it — decides whether the founders or the new investors pay for it.

   Back to Basics: Valuations, Option Pools and What You Need to Know Before Raising Capital

8. Founder Vesting

   Earning your own founding equity over time instead of owning it outright on day one. Troy's analogy: vesting is to a startup what a prenuptial agreement is to a marriage.

   Founders, Allocating Equity and Avoiding the BIG Mistake from 1:06

   Also covered in Founder Vesting, RSU’s and 83(b) Elections – Making Sense of the Mess

9. 83(b) Election

   An IRS form that lets you declare the value of your equity at grant, while it is worth almost nothing, rather than as it vests. It is time-limited, and missing the window is expensive.

   Founder Vesting, RSU’s and 83(b) Elections – Making Sense of the Mess from 2:44

10. Dilution

    The reduction in your ownership percentage as new shares are issued. Troy models it directly: the point is not to avoid dilution but to check that each raise grows the value of your smaller slice.

    Financial Modeling Part 4 – How Fundraising and Dilution Impacts YOUR Equity as a Founder from 2:08

11. Burn Rate and Runway

    Burn is how much cash you consume per month; runway is how many months of it you have left. Troy's argument is that runway buys the time to find what works, so spending it is a decision about learning.

    How to Optimize Use of Capital from 0:30

12. Unit Economics

    Whether a single sale makes money once you account for what it cost to win and serve. Troy's harder point: good unit economics alone are easy — holding them while growing and staying repeatable is the test.

    3 Things You Need to Have a Successful Business from 0:39

13. Recurring Revenue (MRR and ARR)

    Revenue you can expect again next month or next year without selling again. Troy separates the kinds of revenue founders lump together, because investors price them very differently.

    Decoding the Revenue Puzzle from 1:14

14. KPIs

    The few numbers that actually predict whether the business is working. Troy's emphasis is on choosing the right ones and reading them as trends rather than points.

    The Right KPIs Matter

15. Financial Model

    A spreadsheet that makes your assumptions explicit and shows what follows from them. Troy's framing is that its value is the thinking it forces, not the forecast it produces.

    Financial Modeling Part 1 – What is a Financial Model?

    Also covered in Startup Financial Modeling, Part 2: Start with Your Assumptions

15 terms. Definitions here are written for this site; the explanations are Troy's, in his own words, in the linked lesson.