5 exercises — burn rate and runway, ARR growth rates, TAM/SAM/SOM market sizing, cap table and dilution, and Series A valuation math.
0 / 10 completed
1 / 10
A startup CTO is preparing materials for an investor meeting. They say: "We need to show our burn rate, runway, and MRR clearly." A new engineer asks what these three things mean. How would you explain them?
The three investor-critical financial metrics every startup engineer should know:
Burn Rate How much money the company spends per month. • Gross burn = total monthly spending (salaries, servers, rent, marketing) • Net burn = gross burn minus revenue (what you're actually losing per month) • "We're burning $80K/month" = the company spends $80,000 per month
Runway How long until the money runs out: Cash in bank ÷ monthly burn • $800K cash, $80K burn = 10 months of runway • "We have 12 months of runway" = the company has 12 months before needing new funding • Raising a new round typically takes 3-6 months, so <12 months runway = fundraising urgency
MRR (Monthly Recurring Revenue) The predictable monthly income from subscriptions — the engine of SaaS business valuation. • Does NOT include one-time payments, professional services, setup fees • ARR (Annual Recurring Revenue) = MRR × 12 • "We're at $50K MRR" = monthly subscription revenue is $50,000
Why engineers care: Burn rate includes engineering salaries and infrastructure costs. When runway is low, engineering decisions change — technical debt is tolerated less; new hires are frozen; cloud costs are optimised aggressively.
Funding vocabulary primer: • cash flow — money coming in and going out of the business • default alive — if you cut costs to zero growth spending, the company survives on current revenue • default dead — the company will run out of money without raising more • fundraising round — a structured process of raising investment capital
2 / 10
An investor asks in a pitch meeting: "What's your current ARR and what does your growth curve look like?" The CEO answers: "We're at $600K ARR and growing 15% month-over-month." What does this answer communicate, and is it impressive?
ARR, growth rates, and investor benchmarks:
ARR (Annual Recurring Revenue) = MRR × 12 $600K ARR = $50K MRR — very early stage for most venture-funded companies, but the stage matters: seed-stage $600K ARR is expected; Series A $600K ARR would be a concern.
Month-over-month (MoM) growth compounding: 15% MoM is extraordinary. To illustrate: • 15% MoM for 12 months = MRR multiplies by 1.15¹² ≈ 5.35× • $50K MRR × 5.35 = $267K MRR = ~$3.2M ARR after 12 months • 24 months: ~$17M ARR
T2D3 benchmark: "Triple, Triple, Double, Double, Double" — a rough ARR growth model for top SaaS companies (triple ARR for 2 years, then double for 3 years). Used as a benchmark for "fundable" SaaS growth.
Investor metrics vocabulary: • ARR — Annual Recurring Revenue (MRR × 12) • MoM / YoY — month-over-month / year-over-year growth • hypergrowth — >3× YoY growth; typically VC-funded companies targeting market leadership • growth curve — a visualisation of revenue growth over time (linear, exponential, S-curve) • traction — evidence of market adoption (revenue, users, retention, engagement)
3 / 10
A VC partner reviews a seed deck and says: "The TAM looks big, but I want to understand the SAM and SOM. What's the realistic addressable market this team can actually capture in 3 years?" What do TAM, SAM, and SOM mean?
TAM / SAM / SOM — market sizing vocabulary investors expect:
TAM (Total Addressable Market) The total global revenue opportunity if you captured 100% of the market. Example: "The global HR software market is $24B TAM." • Investors want TAM to be large (>$1B) — small TAM = small exit potential • Large TAM that's real but remote is still weak; investors look at SAM
SAM (Serviceable Addressable Market) The portion of TAM you can actually reach with your current product and channels. Example: "Our product serves SMBs (small/medium businesses) in English-speaking markets — SAM is $3B." • Defined by: geography, language, industry, product capabilities • Should be large enough to build a significant business
SOM (Serviceable Obtainable Market) The realistic share of SAM you can capture in 3-5 years given your resources, team, and go-to-market strategy. Example: "We expect to capture 1-2% of SAM in 3 years — $30-60M ARR." • Should match financial projections • Unrealistically high SOM = credibility problem with investors
How investors evaluate market sizing slides: • Bottom-up estimate (preferred): "X customers × $Y ACV = addressable revenue" — shows you understand the customer • Top-down estimate (weaker): "1% of a $10B market" — circular; shows nothing about go-to-market
Vocabulary: • GTM (Go-to-Market) — strategy for how you acquire customers (sales, product-led, marketing) • ACV (Annual Contract Value) — annual revenue from one customer • market penetration — percentage of TAM/SAM captured • seed deck / pitch deck — investor presentation (typically 10-15 slides)
4 / 10
After a Series A closing, a startup engineer hears: "The cap table is getting complex — we need to model the dilution from this round and the option pool expansion." What do cap table and dilution mean?
Cap table and dilution — ownership vocabulary for startup engineers:
Cap Table (Capitalization Table) A spreadsheet/document showing who owns what percentage of the company: • Founders • Angel investors • VC firms (from each round: seed, Series A, B...) • Employee stock option pool (ESOP) Example: Founder A: 35%, Founder B: 35%, Seed investor: 20%, Option pool: 10%
Dilution When new shares are created (for a new investor or for employee options), everyone's existing percentage goes down — even though they still own the same number of shares. Example: You own 35% before Series A. New shares are issued for the Series A investor. Your 35% may become 28% after the round — you were diluted by 7 percentage points. • Dilution is not inherently bad: you own less of a more valuable company • "Anti-dilution protection" is a clause that protects investors from dilution in down rounds
Option pool / ESOP vocabulary: • ESOP (Employee Stock Option Plan) — a pool of shares reserved for employees • vesting — the schedule under which you earn your equity (typical: 4-year vest, 1-year cliff) • cliff — the point at which vesting begins (usually 1 year: you get 25% of shares after 1 year, then monthly) • strike price — the price at which you can buy your options • liquidity event — when you can actually sell shares: acquisition, IPO, or secondary sale • 409A valuation — independent third-party valuation of the company, used to set strike price
Common terms in term sheets: • pre-money valuation — company value before new investment • post-money valuation — company value after new investment • pro rata rights — investor's right to maintain their ownership % in future rounds
5 / 10
A startup CEO says in an all-hands: "We're raising our Series A — a $10M round at a $40M pre-money valuation. The lead investor is taking a 20% stake." Is the math correct, and what does it mean for the team?
Funding round math — how investors and founders calculate stakes:
The formula: • Post-money valuation = Pre-money valuation + new investment • Investor stake = new investment ÷ post-money valuation
What this means for the team: • The company is valued at $50M after the round closes • Existing shareholders keep 80% of a $50M company = $40M worth (matching the pre-money) • If the company exits for $100M: lead investor gets $20M; existing shareholders share $80M • The founders' original equity is diluted — they now own a smaller percentage of a more valuable company
Funding stages vocabulary: • Pre-seed / Friends & Family — first money in; usually $50K-$500K from angels or founders themselves • Seed — $500K-$3M; product validation, team building • Series A — $5-15M; proven product, initial growth, scaling team • Series B — $15-50M; accelerate growth, enter new markets • Series C+ — $50M+; mature company, pre-IPO expansion • Bridge round — small round to extend runway while preparing a larger raise • Lead investor — the largest investor in a round who sets the terms and often joins the board • term sheet — a non-binding agreement outlining the key terms of an investment • due diligence — investor's investigation of the company before committing (code review, financials, legal)
6 / 10
You're reviewing a PR from Sarah, a junior engineer. She's added logging to the user authentication service and writes in the comment: 'Added detailed logs for debugging.' Which of the following best explains what Sarah is trying to achieve with this change?
Sarah is employing a common technique: adding detailed logging. This allows developers to track the flow of execution and identify potential problems. However, she needs to provide more context – specifying *what* data is being logged and *where* it's stored – for effective debugging. Simply stating 'detailed logs' isn't sufficient.
7 / 10
Mark from Sales sends a Slack message to the engineering team: 'We just closed a deal with Acme Corp for $50k ARR!'. Which of the following accurately reflects Mark's statement and its implications?
Mark is reporting a closed deal worth $50k in Annual Recurring Revenue (ARR). While this is good news, it lacks crucial context. The contract duration and the overall impact on the company's growth are important factors to consider when evaluating such a sale. Celebrating ARR without these details can be misleading.
8 / 10
You're analyzing an API response from the payment gateway: `{"status": "success", "transaction_id": "TXN12345", "amount": 75.00}`. What does this response primarily indicate?
This response confirms that a payment transaction was successfully completed for $75.00 and provides a unique identifier (transaction_id) for tracking purposes. The 'status' field clearly indicates the outcome of the operation. While further details might be useful, this is a fundamental confirmation of a successful payment.
9 / 10
You're writing a PR description for a change that refactors the user profile service. You want to clearly communicate the purpose of the update to your team. Which of the following best describes a suitable PR description?
A good PR description should be clear and concise, stating the primary change. 'Refactored user profile service' accurately describes the work performed. However, a stronger description would briefly explain *why* the refactoring was done (e.g., improved performance, reduced complexity) and highlight any benefits.
10 / 10
During a daily stand-up, David says: 'I spent yesterday working on the new analytics dashboard. I'm still figuring out how to integrate with the existing data pipeline.' What does this statement primarily communicate?
David is providing a brief update on his work and highlighting the remaining challenge of integrating with the data pipeline. This communicates that he's making progress but also identifies a potential obstacle. It's an opportunity for team members to offer assistance or discuss solutions.
What will I learn from the "Investor Pitch Language — Startup English | Exercises" exercise?
Practice investor and fundraising vocabulary in English. Burn rate, runway, MRR/ARR, TAM/SAM/SOM, cap table, dilution, and funding round valuation math. 5 exercises.
Is this exercise free to use?
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How many questions are in this exercise?
This set contains 10 multiple-choice questions, each with a detailed explanation shown after you answer.
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No account is required. Your progress bar and score reset each time you reload the page, but you can retry the exercise as many times as you like.
Who is this Startup & Product Language exercise for?
This exercise is built for IT professionals and non-native English speakers who need to read, write, and discuss startup & product language topics confidently at work.
What happens if I answer a question incorrectly?
You will see the correct answer highlighted along with a detailed explanation of why it is correct -- so every wrong answer becomes a learning moment, not just a lost point.
Can I retry this exercise?
Yes -- click "Try again" on the results screen at any time to reset your score and go through all the questions again.
How long does this exercise take to complete?
Most learners finish all 10 questions in under 10 minutes, since each question is answered by clicking a single option.
Where can I find more Startup & Product Language exercises?
See the full Startup & Product Language exercises hub for more vocabulary drills on this topic.
Is this exercise mobile-friendly?
Yes -- the exercise works on any device with a modern browser, including phones and tablets, with no app download required.