A–Z reference
The terms every solo founder eventually meets — burn, runway, SAFE, HST, cap table — explained in plain English with examples that actually make sense pre-revenue.
New to founder finance? Start here.
These are the terms you'll see throughout VORNK, explained simply — no accounting degree required.
Under accrual accounting you book a sale the day you deliver the work, even if the customer pays 30 days later. For a founder, this gives a truer picture of the business but requires tracking receivables and payables — most solo founders start on cash and switch to accrual as invoicing grows.
A typical advisor might receive 0.1%–1% of the company vesting monthly over 24 months. As a founder, use a standard FAST (Founder / Advisor Standard Template) agreement so expectations on time commitment and IP are clear from day one.
If you pay $12,000 for a two-year software licence, you amortize $500/month as an expense instead of taking the full hit in month one. This smooths your P&L and matches cost to the period the asset actually helps you generate revenue.
Angels typically write cheques from $10K to $250K and often invest via SAFEs or convertible notes. For a solo founder, a good angel brings intros and pattern-matching, not just cash — treat the first cheque as the start of a multi-year working relationship.
On your balance sheet, assets sit on the left and are ordered by liquidity (cash first, long-term equipment last). A pre-revenue founder's assets are usually just the bank balance and a laptop — that's normal, and it's what runway is measured against.
Balance sheet = Assets − Liabilities = Equity. It answers 'if we froze the company today, what's the picture?' Every founder should be able to read their own balance sheet before their first investor meeting.
Reconcile monthly. Any transaction on the bank that isn't in your books (or vice versa) is a red flag — usually a missed expense receipt or a duplicate categorization. VORNK's statement import handles most of this automatically.
If your monthly costs are $8,000 and your product sells at $80 with $50 of variable cost, you break even at ~267 sales/month. Break-even is the first real financial milestone; hitting it means the business no longer needs the founder's cash to survive.
Gross burn is total monthly spend; net burn subtracts revenue. If you spend $10K/month and earn $2K, net burn is $8K. Combined with cash on hand, burn tells you your runway — the single most important number for a pre-revenue founder.
You get a BN when you register a corporation or sign up for GST/HST. Everything you file with the CRA — HST returns, T4s, T2 corporate return — hangs off this number. Keep it somewhere you can find it in five seconds.
Even as a solo founder holding 100%, start a clean cap table on day one (a simple spreadsheet is fine). As you add advisors, SAFEs, or a co-founder, the cap table becomes the single source of truth investors will ask for first.
In Canada, currently 50% of a capital gain is included in taxable income (the 'inclusion rate'). This matters when a founder eventually sells shares — the Lifetime Capital Gains Exemption on qualified small business shares can shelter a large chunk if you plan early.
Simpler than accrual and fine for most solo founders in year one. The downside: if you invoice $20K in December and get paid in January, your December looks empty and January looks unusually strong — cash accounting hides that timing distortion.
Positive cash flow means more money came in than went out this month, regardless of what your P&L says about profit. Cash flow is what pays rent — a profitable-on-paper business can still die if customers pay too slowly.
A good chart of accounts maps directly to the lines on your tax return (in Canada, the T2125 or T2). VORNK's CRA mapping does this behind the scenes: your founder categories like 'AI/ML' quietly map to 'Professional fees' or 'Office expenses' when you export for tax.
Notes carry interest and a maturity date, and typically convert at a discount or valuation cap when you raise a Series Seed/A. Popular in the 2010s, mostly replaced by SAFEs in Canada and the US because SAFEs skip the debt mechanics.
Sole prop is cheaper and simpler but every debt and lawsuit hits you personally. A CCPC (Canadian-controlled private corporation) unlocks the small business tax rate, deferral, and eventually the LCGE — most founders incorporate once revenue or investor interest appears.
The CRA is your counterparty for GST/HST returns, T4/T4A slips, corporate T2 returns, and payroll remittances. Register a My Business Account early — it's how you'll file returns, respond to reviews, and check your BN accounts.
Debits increase assets and expenses; credits increase liabilities, equity, and revenue. You don't need to think in debits/credits day-to-day if you use software, but knowing the convention helps you read anything an accountant sends you.
A debt ratio of 0.4 means 40% of your assets are funded by debt (loans, credit lines) and 60% by equity. Lenders and investors look at this to judge risk; pre-revenue founders usually keep it near zero because they can't easily service debt.
Common in the pre-revenue phase: you 'owe' yourself $60K in unpaid market-rate salary. Tracking it (VORNK does this as founder sacrifice) matters for future tax planning, shareholder loan repayment, and honest conversations with investors about what the company really costs to run.
If you own 100% and issue 20% to an investor, you now own 80% — you got diluted by 20 points. Dilution isn't bad in itself; the question is always 'am I better off with a smaller slice of a bigger pie?'
In Canada, if you personally pay for a company expense with your own card, the company owes you — that's a shareholder loan (technically a due-to-shareholder balance). Repaying it later is tax-free, which is why tracking every founder-paid expense from day one matters.
Clean books, a proper cap table, signed IP assignments, and complete tax filings save weeks in due diligence. Founders who wait until a term sheet is on the table to organize this often watch deals slow down or fall apart.
Equity grows when the business earns money (retained earnings) or when you raise a round (paid-in capital). Negative equity means the business owes more than it owns — common early on and not fatal, but a signal to watch closely.
Consistent categorization is what makes month-over-month reports actually comparable. VORNK auto-categorizes into founder-friendly buckets and quietly maps them to CRA accounting categories in the background for your accountant.
Even as a solo founder, generate an expense report every month — it's the fastest way to spot subscription creep, catch miscategorized personal charges, and prepare for tax season without a scramble in April.
In VORNK's Fund Tracer, FIFO assumes that when you spend money, you drain the oldest deposits first, so newer deposits stay 'protected' the longest. It's a standard accounting convention — useful for tracing which round of funding paid for which expense.
A Canadian corporation can pick any fiscal year end (subject to CRA rules). Many founders align to Dec 31 for simplicity; others pick a slow month (e.g., Aug 31) so year-end filings don't collide with peak sales. Your first year end is locked in when you file your first T2.
Solo founders skip this — but the moment a second person joins, sign one before writing another line of code together. The single most common cause of startup death after 'no market' is a founder dispute with no paperwork.
Useful title for early employees or contractors who take below-market comp in exchange for a small equity grant. Document their arrangement with the same care as a co-founder agreement — vesting, IP, and exit terms all still apply.
A SaaS product might have 85% gross margin; a hardware product 40%. Gross margin dictates how much room you have to spend on sales, marketing, and R&D — investors care about it more than raw revenue for early-stage software companies.
Also called 'top line.' Useful for measuring growth, misleading as a health metric on its own — a business can grow gross revenue while losing money on every sale. Always pair it with gross margin and net income.
Rates vary by province (5% GST in Alberta, 13% HST in Ontario, 15% in most Atlantic provinces). You charge it on your invoices, remit the collected amount to the CRA, and claim back the GST/HST you paid on business expenses (input tax credits).
If a senior engineer bills $150/hour and you work 200 hours/month unpaid, you're contributing $30K/month in sweat equity. VORNK uses your hourly rate to calculate founder sacrifice — real dollars you're investing that don't show up on any bank statement.
Below the threshold, registration is optional (a 'small supplier'). Many founders register voluntarily anyway so they can claim input tax credits on startup expenses — worth doing the math with your accountant in year one.
In Canada, you can incorporate federally (CBCA) or provincially. Federal is portable across provinces and often chosen by tech founders; provincial is cheaper and faster. Incorporation kicks off a series of ongoing obligations: annual returns, minute books, T2 filings.
Every expense before this date is a 'pre-incorporation expense' with its own tax treatment. VORNK tracks your incorporation date so it knows which expenses qualify as founder shareholder loans versus pre-incorp reimbursements.
Transfers must be flagged and excluded from revenue/expense totals or your P&L will double-count everything. VORNK auto-detects matched transfers between your linked accounts to keep the numbers clean.
Sent as a warm-intro attachment before a first meeting. It should answer 'why this, why now, why you' in under 60 seconds of reading. Keep numbers current — an out-of-date one-pager in circulation is worse than none.
Without signed IP assignments from every person who ever touched the code or design, your company doesn't cleanly own its own product — and no investor will fund it. Sign these day one, even for a solo founder incorporating into their own company.
Pick 3–5 max. Common early-stage KPIs: MRR, active users, gross margin, cash on hand, burn rate. Vanity metrics (page views, followers) are not KPIs unless they directly connect to revenue.
Split into current (due within 12 months) and long-term. For a founder, the biggest hidden liability is often the shareholder loan they've built up by paying for company expenses on personal cards without tracking it.
Cheaper than a credit card, more flexible than a term loan. Founders often secure a small business LOC once they have some revenue history — mostly as insurance against timing gaps between invoicing and getting paid.
Cash is fully liquid; a partially-built product is not. High liquidity means the business can survive a bad month; low liquidity means one slow-paying customer can force layoffs or shutdown.
An annual plan at $1,200 counts as $100 MRR. MRR is the north-star metric for SaaS founders because it's the input to churn, growth rate, LTV, and runway — all the numbers investors ask about.
Losses are borne by the capital provider (unless caused by founder negligence). Useful for founders raising from Muslim investors who won't take interest-based instruments — the structure is documented, enforceable, and increasingly familiar to Canadian venture lawyers.
Useful for contractors, potential hires, and enterprise pilots. Most reputable VCs won't sign an NDA to look at a pitch deck — that's normal and not a red flag, because they see too many similar ideas to accept the legal risk.
Also called profit or 'the bottom line.' Positive net income means the business made money this period; negative means it lost money. Pre-revenue founders will see net income as a negative number for a while — that's the runway equation working itself out.
Same idea as equity on the balance sheet. Founders sometimes track their personal net position too (personal assets − debts + shareholder loans owed to them) to understand their real exposure to the business.
Sometimes shortened to OpEx, contrasted with CapEx (capital expenditures like equipment). For a solo software founder, nearly everything is OpEx, which keeps the accounting simple.
Not a salary and not an expense — it reduces owner's equity on the balance sheet. In a corporation the equivalent is a dividend or a salary, both of which have different tax consequences worth planning with an accountant.
Also called an income statement. Read top-to-bottom: revenue at the top, cost of revenue, gross margin, operating expenses, net income at the bottom. Every founder should be able to read their own P&L before hiring anyone.
Banks and landlords often require personal guarantees on startup loans and leases. This is the single most important thing incorporation does NOT protect you from — read every contract and know exactly what you've personally guaranteed.
Under CRA rules, a newly incorporated company can reimburse the founder for reasonable pre-incorp expenses and treat them as business deductions. Keep every receipt — VORNK flags pre-incorp expenses in the shareholder loan tracker so nothing is missed.
If you raise $500K at a $2M pre-money, the post-money is $2.5M and the investor owns 20%. The pre-money number is the negotiation — everything else follows from it.
Pre-revenue founders are financed by savings, sweat, and sometimes SAFEs — not by their customers. This is the highest-risk phase, which is why runway discipline and honest bookkeeping matter more here than at any later stage.
A standard CRA expense category. Track legal setup costs, accounting fees, and advisory retainers here — they're fully deductible and often add up to more than founders expect in year one.
Opposite of FIFO. In VORNK's Fund Tracer, Proportional assumes spend depletes every deposit evenly, so no single source of funds is 'protected.' Useful when funds are truly commingled and you want to spread the depletion across all sources.
Also called accounts receivable or AR. High receivables plus low cash is a warning sign — you're technically profitable but you can't pay rent. Track days-sales-outstanding (DSO) once you invoice regularly.
Monthly reconciliation catches errors while they're still small: a missing receipt, a duplicate transaction, an unrecorded transfer. VORNK runs statement reconciliation automatically when you upload monthly PDFs.
Must be a physical address in the jurisdiction of incorporation, not a PO box. Many solo founders use a lawyer's office or a registered agent service to keep their home address off the public record.
Sits inside equity on the balance sheet. Pre-revenue founders usually have negative retained earnings (accumulated losses) — that's the total historical burn. Turning it positive is a long-term milestone.
Runway = Cash on hand ÷ Net monthly burn. If you have $60K and burn $10K/month, you have 6 months of runway. It's the single most important number for a pre-revenue founder, and it changes every month — VORNK recalculates it every time you sync a statement.
Invented by Y Combinator, now standard in Canada and the US for early cheques ($10K–$1M). Key terms: valuation cap and discount. Cleaner than convertible notes because there's no maturity date and no interest to service.
You report business income on your personal T1 (form T2125). Simplest and cheapest structure, but you're personally on the hook for every debt and lawsuit. Most tech founders outgrow this within a year.
You can't put sweat equity on a balance sheet, but it's real. VORNK measures it via founder sacrifice: hours logged × your hourly rate. This is the number you compare against outside offers when deciding to stay all-in.
If you put yourself on payroll, you'll issue yourself a T4 every February. If you pay a contractor $500+ in a year, you may need to issue them a T4A. Getting this wrong is a common CRA audit trigger for early-stage companies.
Tax readiness means: every transaction categorized, every receipt attached, reconciled bank statements, a clean shareholder loan balance, and a Chart of Accounts that maps to CRA categories. VORNK's Tax Prep Export is designed to hand this to your accountant in one file.
Signing a term sheet doesn't close the deal, but it signals serious intent and typically triggers due diligence and legal drafting. Read every line with a lawyer; the terms you accept in a Seed round shape every later round.
Cash contributions + shareholder loan balance + founder sacrifice = total invested. This is the real cost of building the company from the founder's side, and it's rarely what shows up on the balance sheet alone.
Pre-revenue valuations are mostly negotiation and pattern-matching, not math. Post-revenue, common frameworks include ARR multiples for SaaS and DCF for cash-generating businesses. Your valuation is a floor for future rounds — set it thoughtfully.
Tracking vendors (not just amounts) lets you see subscription creep, negotiate on volume, and quickly answer 'who did we pay $5K to last April?' VORNK groups transactions by counterparty automatically to make this easier.
A standard schedule: nothing vests in year one, then 25% vests at the 12-month cliff, then monthly for the next 36 months. Founders should vest their own shares too — it protects the cap table if a co-founder leaves in year one.
Positive working capital means the business can pay its next 12 months of bills from what it already has coming in. Negative working capital in a growing business isn't always fatal (it's how some retailers operate) but for a solo founder it's usually a warning to raise or cut.
Everyday use ('I'll write that off') just means it's a deductible business expense. Not everything is deductible: personal expenses, entertainment above 50%, and certain club dues are limited or excluded — always check with your accountant on the edge cases.