Customer Acquisition Cost (CAC)

The total net revenue a business expects to earn from a single customer over the entire duration of the relationship. LTV is driven by average revenue per user, gross margin, and retention rates, and is directly influenced by brand and relationship intangibles.

A cost-based valuation approach that estimates the value of an intangible asset by calculating the current cost of creating or acquiring a substitute asset with equivalent utility. The replacement cost method is frequently used for valuing assembled workforces, proprietary software, and databases, adjusted for any functional or economic obsolescence.

An intangible asset category representing the value embedded in a company's established customer base, including long-term contracts, loyalty, recurring purchase behaviour, and the cost advantage of retaining versus acquiring customers. Under IFRS 3, customer relationships are separately identified and measured at fair value during purchase price allocations, typically using the Multi-Period Excess Earnings Method (MPEEM) which projects cash flows from the existing customer base over its expected attrition period.

A business combination achieved in stages, where the acquirer held a previously existing equity interest in the acquiree before obtaining control. Under IFRS 3 and ASC 805, the acquirer must remeasure its previously held equity interest at fair value at the acquisition date and recognise any resulting gain or loss in profit or loss.

An adjustment applied to the standard WACC to reflect the additional risk associated with specific intangible assets or early-stage businesses. Intangible-heavy investments typically warrant a higher discount rate than the firm-level WACC because their cash flows are less certain and more sensitive to competitive and technological disruption.

An expenditure that has already been incurred and cannot be recovered, regardless of future decisions. While sunk costs should not influence forward-looking investment decisions, the accumulated effect of past intangible investments — in R&D, brand building, and organisational development — creates the stock of intangible capital that drives future value.

The regulatory requirement for financial institutions and certain other businesses to verify the identity of their clients, assess their risk profile, and monitor transactions for suspicious activity. KYC procedures are mandated by anti-money laundering regulations including the EU's Anti-Money Laundering Directives and the UK's Money Laundering Regulations 2017, and form the first line of defence against financial crime.

An acquisition made by an existing portfolio company to expand its scale, capabilities, or market presence, often used interchangeably with bolt-on acquisition in private equity contexts. Add-on acquisitions may range from small tuck-in deals that fill specific gaps to larger transformative transactions that materially change the portfolio company's competitive position.

What key metrics do Series A investors evaluate before investing?

Series A investors focus on monthly recurring revenue (typically £50-200K+), revenue growth rate (15-20% month-on-month), unit economics (LTV:CAC > 3:1), retention rates, and evidence of product-market fit.