Financial Words to Know When Pitching for Funds on Shark Tank India/ Investors:

Here's a list of essential financial words:

• Pre-money Valuation: The value of your company before any investment is made.
• Term Sheet: A non-binding document outlining the key terms of an investment deal.
• Anti-Dilution Provision: A clause in investment agreements that protects investors from dilution in the event of future financings at a lower valuation.
• Down Round: A round of funding where the company is valued lower than in its previous round.
• Bootstrapping: Funding a business using personal savings and revenue generated by the business, without external investment.
• ROI (Return on Investment): A measure of the profitability of an investment, calculated as the gain or loss relative to the initial investment cost.
• Minimum Viable Product (MVP): A basic version of a product used to test market demand.
• TAM (Total Addressable Market): The overall market size for your product or service.
• SAM (Serviceable available market): The portion of TAM that is reachable and can potentially be served by a company's products or service
• SOM (Serviceable obtainable market), share of market, or Target Market: is the percentage of SAM which is realistically reached.

• Burn rate is used to describe how quickly a company is spending its cash reserves to cover overhead costs. It is also a measure of negative cash flow, usually expressed as the amount of cash spent per month. For example, if a company has $250,000 in cash reserves and a burn rate of $50,000 per month, it will run out of cash in five months. The fact that?82% of startups fail because of cash flow?problems tells a story of just how often cash flow is taken for granted by young businesses. You should ideally target having 12 months or more of runway at any given time, particularly in early seed rounds
• Runway: The amount of time your company can operate with its current cash reserves before needing more funding. (Ex: "With our current burn rate, we have a runway of 12 months.")
• Growth Metrics: Key indicators measuring your business's progress (e.g., user acquisition, customer retention). (Ex: "Our monthly active users have grown by 50% in the past 3 months.")
• Due Diligence: Investor's investigation into your business before investing.
• Investment Round: Stage of funding your company is in (e.g., Seed, Series A, Series B). (Ex: "We're currently raising a Seed round of ?5 crore.")

• Customer Acquisition Cost (CAC): The total cost of acquiring a new customer. (Ex: "Our CAC is currently ?500 per customer, but we're working to bring it down.")

• Lifetime Value (LTV): The total revenue a customer generates for your business over their lifetime. (Ex: "Our average LTV is ?10,000, making CAC acquisition profitable.") Also called customer lifetime value (CLV, or CLTV), this is a critical metric for a company trying to gauge the cost efficiency of acquiring new customers and supporting them over time.Customer lifetime value (CLV) is the profit margin a company expects to earn over the entirety of their business relationship with the average customer.Ex: The average sale for the boutique clothing retailer, Vineet Jhabak , is $50, and the average customer shops with them three times per year for two years. The customer lifetime value of this customer is calculated as follows:
• Customer Value = (avg. value of a sale) x ( ave. number of transactions)= $50 × 3= $150
• Customer Lifetime Value = (customer value) x (avg. customer lifespan)= $150 x 2= $300

Simply put, if customer acquisition cost exceeds expected customer lifetime value, the acquisition model is not sustainable.        

• Net Promoter Score (NPS): It give you only an indication of how positively (or negatively) customers feel toward your company. Those feelings don’t always translate directly into revenue and profit.
• Average Order Value (AOV): The average amount spent per customer order.

• Conversion Rate: The percentage of visitors who take a desired action (e.g., purchase, signup)

• Marketing & Sales Funnel: The stages customers go through before buying your product or service.

• Syndication: Partnering with other investors to fund a deal. (Ex: "We're open to co-investing with another Shark or group of investors.")
• Revenue-Based Financing: Investor receives a percentage of future revenue instead of equity
• Proof of Concept (POC): A demonstration to validate the feasibility of a product or technology.
• Alpha Test: Alpha testing is the initial phase of testing whether a product meets business requirements and functions as expected. Alpha tests are carried out by the internal team before moving on to beta testing.
• Beta Test: This is the final phase of testing in which the product is tested by users in a production environment to validate the product’s functionality, usability, and compatibility. Feedback from users helps with debugging and making final adjustments before shipping the product.
• Key Performance Indicator (KPI): A key performance indicator is a way to measure your progress when working toward a certain objective. Common startup KPIs include customer conversion rates, organic traffic, and the number of active users.
• Drag-along Rights: A drag-along right is a provision in an agreement that allows a majority shareholder to force a minority shareholder to join in the sale or merger of the company.
• API (Application Programming Interface): A set of rules and tools for building software applications, allowing them to communicate with each other.Remember, this is not an exhaustive list, but it should equip you with some essential financial terms to narrate towards the Sharks/ Investors. Good luck!