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Glossary

Plain-language definitions for investors and founders.

CAC (Customer Acquisition Cost)

Cost to acquire one new paying customer.

MRR (Monthly Recurring Revenue)

Normalized monthly subscription revenue.

ARR (Annual Recurring Revenue)

Annualized recurring revenue from subscriptions.

ACV (Average Contract Value)

Average annual contract value per customer.

Contribution margin

Revenue minus variable costs, before fixed costs.

Rule of 40

Growth rate + profit margin; healthy if ≥ 40.

Activation rate

Share of new users who reach a defined value moment.

Cohort retention

Percent of a cohort retained at time checkpoints (D30, M3, etc.).

Magic number

Sales efficiency: new ARR growth per $1 of prior S&M spend.

TAM / SAM / SOM

Market sizing: total, served, and obtainable market.

ICP (Ideal Customer Profile)

Clear definition of accounts/users who get the most value.

Sales cycle

Average time from qualified opportunity to closed-won.

Pipeline coverage

Pipeline value relative to quota/target bookings.

Product-led growth (PLG)

Growth motion where product drives acquisition, activation, and expansion.

North Star metric

Primary outcome that best reflects delivered customer value.

SAFE (Simple Agreement for Future Equity)

Agreement to invest now for equity later at conversion.

Convertible note

Debt that converts to equity under agreed conditions.

Pre-money valuation

Company valuation immediately before new investment.

Post-money valuation

Company valuation immediately after new investment.

Dilution

Reduction in ownership % when new shares are issued.

Pro rata rights

Right of existing investors to maintain ownership % in future rounds.

Runway

Months until cash is projected to run out.

Burn rate

Cash outflow rate. Net burn = cash out - cash in (operational).

GMV (Gross Merchandise Value)

Total transaction value processed on the platform.

Take rate

Platform revenue as a share of GMV.

Liquidity (marketplace)

How efficiently supply meets demand on the platform.

Match rate

Share of demand requests that find supply (or vice versa).

Time to first transaction

Median time for a new user to complete their first transaction.

Network effects

Value increases as more users join or content/data accumulates.

Switching costs

Friction (time, money, risk) to change from one solution to another.

LTV (Customer Lifetime Value)

Expected gross profit from a customer over their lifetime.

Payback period

Months to recover CAC from gross profit.

Churn

Share of customers or revenue lost in a period.

LTV:CAC ratio

Value per $1 spent to acquire customers.

NDR (Net Dollar Retention)

Revenue expansion minus revenue lost from churn/downgrades over a period.

GDR (Gross Dollar Retention)

Percent of revenue retained excluding any expansion.

Gross margin

Revenue minus direct costs to deliver the product, as a share of revenue.

ARPU (Average Revenue Per User)

Average revenue per customer per month (usually).