Startup Talk

There is a lot of startup lingo in the startup world, and I have tried to capture here some of the most commonly used terms.  The list is not exhaustive, and the two links will give many more terms. I have built this list from the articles listed below along with my own terms which I use in teaching entrepreneurship classes.

I have modified and adapted the list developed by Kate Harrison: https://www.forbes.com/sites/kateharrison/2014/08/29/40-start-up-jargon-words-you-need-to-know-to-raise-money/?sh=12128d205d07

I include some of the terms in the much more extensive list on the startup card developed here: https://foundersbook.co/startupcards?utm_content=null&utm_source=Sailthru&utm_medium=email&utm_campaign=Friday%20Email&utm_term=4ABCD

 

Accelerator = If you’re launching a startup, accelerators can help you move your idea quickly by providing you with mentorship and fundraising opportunities during a few months program.

Angel = Investors who tend to be individual family and friends looking to support and fund a promising venture at an early stage for a potentially high return. These are the best groups for a startup to look for.

Bootstrapping = Using “friends and family” cash and personal monies to get going.

B-to-B = Business to Business. Your company sells things to other companies.

B-to-C = Business to Consumer. Your company sells stuff to the masses.

Burn Rate (aka Run Rate) = How fast you are blowing through your cash. It’s not unusual for a start-up to lose large sums of money for several years before breaking even, or — please oh please — making a profit. (See runway below).

Business model canvas = Instead of a hundred-page business model, the business model canvas categorizes the key areas of launching a startup like problem definition, customer segments, value proposition, key partners, revenue model, acquisition channels, cost structure, metrics etc.

Cashflow = The amount of money flowing in and out of the business.  Free cash flow is the amount left in the business after paying expenditures and is an indicator of profitability.

Churn Rate = Customers lost subsequent to acquisition in a subscription-based business model. Because of the churn rate, your growth might not look like you think it will.

Competitive Advantage = It is how a startup is different from its competitors.  Differentiation can be through innovation, intellectual property, exclusive rights and partnerships or other ways like niching down and capturing a small but growing market faster than anyone else.

Cottage Business/ Cottage Industry = A nice business but not something massively scalable.  If you have one, you’re not a good fit for VC, but this does not mean you should not pursue your dream or that you will not be very successful!

Database = the computer place to store, organize and access data.

Deck (aka Pitch Deck) = A 10-slide power point presentation that covers all aspects of your business in a concise and compelling way. There is a standard format and real artistry to making a good deck. Do your homework, get lots of feedback, and consider hiring a graphic designer to polish the final version.

Disruptive Technology = Something that completely changes the way society does something (e.g. Uber/Lyft vs. Taxis or Amazon vs. in-store shopping).

Exit Strategy = How you will sell the company and make your investors lots of money.  Who is going to buy you and why?

Founder = A founder is a doer and the first to execute.  Action has and is being taken to start.

FMA = First Mover Advantage. Not every start-up is the first to market, but if you are, you want to point that out to investors. Be aware that this can be both a pro and con, as you may have to educate your market as you go, so the sales you make will cost more than they would in a market with clearly established demand.

Freemium = You give the basic product away for free and then try to upsell features to your customers. This marketing ploy is often used in directory businesses.

Funnel = The sales funnel is a critical component of building an effective sales process that blueprints your prospects’ journey into becoming a customer while also establishing critical feedback loops to improve your sales and marketing process.

Hockey Stick = The shape of the growth curve VCs want to see and believe! This means your start-up will have to double sales every year.

IP = Intellectual Property. This can be a patent (costs $25k generally and takes time to obtain) or a secret sauce or formula like Coke. Not every start-up has IP, but if your business depends on it, you better protect it!

Incubators = Incubators offer longer term advisement programs that help you with mentorship, connections, and resources like a coworking space. Accelerators are focused on speed and fundraising while incubators usually take earlier stage startups and help them overcome early-stage challenges.

Income = Having deducted expenses from revenue, the difference is the income you retain in the business for reinvestment or withdrawal.  Income is a better performance metric in measuring the stability and health of the business.

Iterate = Code for try something, do it wrong, and try it again in a slightly different way with the hopes of achieving a better result.

KPIs = Key performance indicators, the metrics by which startups judge their performance, progress, and targets.  Some of the most common include customer acquisition cost, customer lifetime value, monthly and annually recurring revenue.

Launch = To start a company or push a website live. However, according to Mirta Desir, Co-founder & CEO of Smart Coos  this term can be replaced by the word “activate,” as in “we activated in March.” [Insert eye roll here.]

Lean Startup = Similar to Growth Hacking. The core mission of a lean start-up is to prove the business concept as quickly and cheaply as possible. Learn more about this “movement” at Theleanstartup.com.

Leverage = Use something — technology, partnerships, etc. — to your advantage.

Loss Leader Pricing = Selling something at a loss as a form of marketing expense to bring in customers you expect repeat business from.

Low Hanging Fruit = The easiest thing your company can do to bring cash in the door.  Often hard to identify, but crucial for start-up success.

Market Penetration = How much of your potential market are you capturing and how quickly. VCs want to know. Do not say, “if we just capture 1% of the market, we will…” – they want you getting a lot more than that.

Monetize = How you are making money — or more often, how you plan to make money.

MVP = Minimum Viable Product. The bare-bones version of a product required to achieve proof of concept. Often used in the creation of new software that will be Beta tested, and later upgraded with extra features.

Pitch Deck = Before making an investment, most of the time investors expect a quick presentation that highlights the key areas of a startup like team, product, market, traction, and plan.  Entrepreneurs create and use a pitch deck to investor presentations.

Open source = One of the reasons behind the sharp decrease in the cost of launching startups is the availability of code created by everyone to be used by anyone.  Open-source software is publicly available original source code.

Pivot = Change directions as a company. This is usually used to describe going after a different market segment or using an established technology for an entirely new purpose.

Ramen Profitable = Profitable enough to cover costs and basic living expenses for everyone working at a startup.

Responsive Design = A site built for optimal viewing of a website across all devices. The other options are adaptive design and bad design.

Revenue = At the top of the financial statement comes revenue, which is the amount you generate before paying expenses. As a stand-alone metric, it is not an accurate measure of startup performance since expenses, especially in early stages and be higher than revenue generation.

ROI = Return On Investment. What the investor can expect to get for what they put in. It can also be used to describe the results of a particular marketing campaign’s success. You want things to be “ROI positive.”

Run rate = One of the key startup metrics is run rate. It projects the performance of the startup in the future based on current data.  For example, if a startup generates $100,000 in the first quarter, its 12 months run rate is $400,000.

Runway = How long you have until the cash runs out and you must turn off the lights.

Scaleable = Something that can grow to a huge size because the market and demand is big enough or because you will be able to move into different markets with your product via Pivoting or Iterating (see above).

Seed = After an angel round comes a seed round, although there is no required sequence. A seed round tends to indicate a viable business model with customers.

SEO = Search Engine Optimization is the strategies and tactics through which companies can gain higher search engine ranking. Google and Yahoo and others are becoming more and more essential to growth.  Without them, a startup has to invest in paid ads to get new customers.

Serial entrepreneur = Someone who launches a number of businesses either simultaneously or one after another.

Sweat Equity = Shares of your company given in exchange for work done. This is a good recruiting tool to help you attract passionate talent you can’t afford to pay at market rates.

Term Sheet = The document that outlines what the Investors will get for what they put in — including % ownership and voting rights.  If you get a term sheet, you should get excited (and get a good lawyer).

Traction = Proof that people are actually buying and using your stuff.

Validation = There are many metrics that signal validation but at the end of the day, it’s about proving there is a need and demand for the product.  One of the strongest validation signals is when people pay for the product, use it, and recommend it to others with similar needs.

Valuation = What your company is being valued at. “Pre-money valuation” is the value before you take investors’ cash. “Post-money valuation” is that amount plus the investment put in.

Value Prop = The feature(s) or elements that make your business or product uniquely attractive to consumers.

Vaporware = A product you are selling but have not actually made (and may never make).  It is a way to test market demand. Some people think it is sleazy, but it is very common.

VC = Venture Capital or Venture Capitalist. Unlike angels, most venture capitalists invest for a living.  Usually, they are interested in startups with traction and proof that an investment will  help accelerate their path to goals.

Larry W. Sharp, BAM Support Specialist, IBEC Ventures
Larry.Sharp@ibecventures.com

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