We have listed a few key concepts of startup jargon that you should know when doing business within the scene:
Aka an incubator. A facilitator that helps Startups grow their business at a faster rate through mentorship and space.
A natural person (as in a rich individual) with notable income that is interested in investing in a company. By law you should require them to prove that they can afford to risk their money.
A strategy for a bigger company to acquire talent from your team, also known as a signing bonus.
When a company buys the controlling stake in another company.
Paid content that is meant to look like a real blog post or an article. Readers are interested enough to not care that they’re being pitched.
A philosophy of software development that promotes incremental development and emphasizes adaptability and collaboration.
A individual who provides a small amount of capital for a stake in the company. Typically precedes a Seed Round and usually happens when the company is in its’ early stages.
A process to measure a startup’s current success. For example measures a company’s growth by determining whether or not a startups has met certain goals, benchmarks i.e. recurring revenue.
Refers to technology that’s been released but is still not ready for the public due to the fact that it hasn’t been tested reliably. In a ”beta” stage released to early adopters.
Using your personal or your family and friends’ money to get your business going, no external input.
Business to business. Your company sells services or products to other companies.
Business to consumer. Your company sells services or products to the consumers (the masses).
A short-term (2weeks to 3 years) loan to close the gap between major financing. Interest rates are relatively high for bridge loans. They’re used for working capital needs and planned to pay back when long-term financing is raised.
A general exit strategy. Purchasing of a company’s shares, that gives the buyer controlling interest in the company.
Run rate. How fast you’re burning through your money. In the first several years startups usually lose large sums of money before breaking even.
Refers to a cap placed on investor notes in a funding round. All parties agree on a mutual cap on the valuation of the company where notes turn to equity.
The amount of money coming in is more than the amount of money going out. (Doesn’t necessarily mean profit though) Someone pretty much gave you a dime.
The percentage rate at which customers stop subscribing to a service or employees leave the job.
Usually applies to shares given to employees over time. It’s a way for the CEOs to fire employees or let them leave without giving them stocks within a time frame.
Cottage Business/Cottage Industry
A good but un-scalable business. Not particularly fit for investments due to this.
A pitch deck. A 10-slide power point presentation that covers all aspects of your business in a concise and compelling way.
Something that completely changes the way society does something. Like Uber/taxis, internet shopping/ in-store shopping
How you sell your company and make your investors heaps of money.
FMA, First Mover Advantage
First position at a market. This has both pros and cons. You may have to educate the market as you go so sales you make will cost more than they would in a market with established demand.
The basic product of your company is free, but you upsell more advanced features to your customers.
When you add a game layer to your website or product experience that encourages people to use your site through rewards, people love games.
A marketing technique that focuses on finding scalable growth quickly, through non-traditional and inexpensive tactics such as social media.
You want your growth curve to resemble a hockey stick-like figure. This is the shape your VCs want to see and means your startup will have to double sales every year.
IP, intellectual property
Patents and other creations of the mind like inventions or new strips of coding.
Giving something a go, failing, then trying again in a slightly different way in order to achieve a better result
Starting/making your company, website etc. public.
VC company or an individual investor that organizes a specific round of funding for a company. Usually invests the most capital in that round.
The core mission of a lean startup is to prove the business concept as quickly and inexpensively as possible.
Using something (technology, partnership etc.) to your advantage.
Loss Leader Pricing
Selling something at a loss because you expect these customers to do business with you repeatedly.
Low Hanging Fruit
The easiest way for your startup to bring money through the door. Crucial for startup success.
How much of your potential market you are capturing and at what rate. Important for VCs to know.
The way you make money or how you plan to make money.
MVP, Minimum Viable Product
This means the pilot phase of your product that you need to achieve proof of concept. Often used in the creation of software (beta- version)
Non-cash costs don’t count.This method doesn't post revenue and expenses based on the movement of cash. GAAP insists in the accrual method, because the financial statemens are a better indicator of the true earnings of a Company, if revenue and expenses aren't based on cash movements.
Changing directions as a company. Usually used to describe moving to a different market segment or using established technology for an entirely new purpose.
Profitable enough to cover costs and basic living, and expenses for everyone working for you, usually founders don’t get paid.
A site built for optimal viewing of a website across all devices.
ROI, Return On Investment
What investors can expect to get for what they put in.
The estimated time it takes until you run out of cash.
Software as a service. Selling of subscriptions to use your software.
Something that has the potential to grow into a much bigger success because the market and demand are big enough or because you’ll be able to move into different markets via pivoting and iterating.
The seed round is the first official round of financing for a startup. This funding round is usually raising money for a prototype or for proof of concept.
Shares of your company given in exchange for the work that’s done. A good recruiting tool to help you attract passionate talent you can’t afford to pay at real market rates.
Startup entrepreneurs like to refer themselves as being players in a given space. (synonym for industry or vertical)
Document that outlines what the investors will get for what they put in. ( % ownership, voting)
Proof that people are actually using and buying your service and/or product.
UI stands for user interface and UX for user experience, usually used when entrepreneurs refer to the aesthetics and usability of their product.
Valuation - Pre-Money Valuation - Post-Money Valuation
What your company is being valued at.
Pre-money valuation is the value before you take any cash from investors.
Post-money valuation is the original value plus the investment put in.
The features and elements that makes your product and business attractive to your clients.
A product you are selling but haven’t actually executed yet, or may never execute. A good way to test market demand.
Venture Capital or Venture Capitalist. A form of financing that’s provided by firm or funds to small, early-stage companies that have high growth potential. VCs usually invest in exchange of equity. Startups that VCs usually invest in are often from high-tech industries.