LTV (Lifetime Value)

Definition

The total revenue you expect from one customer during their entire relationship with your company—usually wildly overestimated.

Example Usage

We calculate our LTV at $5,000 per customer, but based on our 4-month average retention, it's actually closer to $800.

Origin

Marketing and business metrics terminology; became critical to SaaS valuation formulas.

Fun Fact

The best SaaS companies maintain LTV:CAC ratios of 3:1 or higher; most startups can't achieve 1:1.

Source: SaaS and business metrics terminology

Related Terms

Beginner

Freemium

A business model where the basic product is free but all the useful features cost money, like a restaurant that gives you a free plate but charges for the food. It's the startup equivalent of a drug dealer's first-one's-free strategy, but legal and with worse margins.

🚀 Startup / VC

Advanced

death spiral financing

A toxic funding structure where conversion price drops as stock price falls, creating a downward spiral that destroys equity value. The financial equivalent of quicksand—struggling only makes it worse.

🚀 Startup / VC

Advanced

signaling risk

The danger that passing on an investment or accepting certain terms sends negative messages to future investors. In VC, optics matter as much as economics—sometimes you reject money because taking it would look desperate.

🚀 Startup / VC

Intermediate

Path to Profitability

A theoretical timeline for when a company will stop losing money and become self-sustaining; usually a fictional document written for investors.

🚀 Startup / VC

Advanced

cram down round

A financing round where new investors impose harsh terms on existing shareholders who lack the votes to block it. It's democracy in action, if democracy meant 'whoever has the most money wins.'

🚀 Startup / VC

Intermediate

founder mode

An operating style where founders maintain deep involvement in company details rather than delegating everything to managers. Popularized by Paul Graham as a counterpoint to conventional management wisdom that says CEOs should stay hands-off.

🚀 Startup / VC

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