80+ Startup Terms Every Entrepreneur Should Know
The entrepreneurial start-up world is full of jargon. One of the prerequisites of becoming an entrepreneur is to get familiar and comfortable with the startup language.
The proper vocabulary gives us the ability to communicate thoughts, ideas, and grow them into something more as quickly as possible. Understanding key terms will make it easier for you to communicate with other people in your network and demonstrate that you understand your industry.
Since you’re bound to come across these terms at some point in your entrepreneurial journey, here’s a handy resource to reference whenever you need to.
Accelerator / Incubator – A hub where start-ups are “incubated” through mentorship, space and sometimes cash.
Accredited Investor – The SEC (Securities and Exchange Commission ) defines an accredited investor as: “A natural person with income exceeding $200,000 in each of the two most recent years or joint income with spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.” What this means for your start-up is you must require potential investors to prove that they can afford to risk their money in your start-up, to comply with the law.
Acquisition – When one company or investment group buys another company.
Advertorials / Advertainment – Paid content that is meant to look and feel like a real story or blog post. More people are fooled than you’d think – or as the “tainment” part implies, readers are interested enough that they don’t care that they are being pitched. As display ad pricing and effectiveness have decreased, more companies are turning to advertorials to capture ad revenue.
Angel Investor – Individual who provides a small amount of capital to a startup for a stake in the company. Typically precedes a Seed Round and usually happens when the startup is in its infancy.
B2B – Business to Business. Your company sells products or services to other companies.
B2C – Business to Consumer. Your company sells products or services to other consumers.
Benchmark – The process by which a startup company measures its current success.
Board of Directors – A group of influential individuals, elected by stockholders, chosen to oversee the affairs of a company. A board typically includes investors and mentors. Not all startups have a board, but investors typically require a board seat in exchange for an investment in a company.
Bootstrapping / Other People’s Money (OPM) – Using “friends and family” cash to get going. These channels are often where you get your first cash to get things going. If you are using little capital and proving your hypothesis, you are successfully bootstrapping.
Bridge Loan / Swing Loan – A loan taken out for a short-term period, typically between two weeks and three years, until long-term financing can be arranged.
Bubble – A moment in an economic cycle where an industry or company does not realize that it might be overvalued and over-inflated.
Burn Rate / Run Rate – How fast you go through your cash. Many startups lose before they break even and then make a profit.
Buyout – A common exit strategy. The purchase of a company’s shares that gives the purchaser controlling interest in the company.
Capital – Monetary assets currently available for use. Entrepreneurs raise capital to start a company and continue raising capital to grow the company.
Cash Flow Positive – More money is coming in than going out.
Churn Rate – The annual percentage rate at which customers stop subscribing to a service or employees leave a job.
Cliff – Usually applies to vesting schedules (shares given to employees over time). Cliffs are a way for the CEO to fire employees or let them leave without giving them stock within a limited period (usually 1 year). Cliffs are also used on CEOs by investors to make sure the CEO sticks around after getting the cash.
Copyright – Usually used in the creative industry, copyrights protect your music, art, and film. It allows the creator to have exclusive rights for its use and distribution. Used to protect your creative content (like film, music, or art) and it allows you to use a “©” symbol on your content.
Cottage Business – 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 successful!
Crowdfunding – The act of using a site like Kickstarter to get a tribe of early fans together to give you money to help you get your product/site launched. You keep 100% of your company and only give away a % the total you raise to the crowdfunding portal.
Crowdsourcing – Getting information for free from people on the internet or using a survey.
Deck / Pitch Deck – A 10-slide presentation that covers all aspects of your business in a succinct and exciting way.
Demographic – An expression that is frequently used to describe the age, gender, income, schooling, and occupation of your ideal customers.
Digital Nomad – A term used to describe someone who works online, and therefore often works from home, in coworking space, or is based abroad.
Disruptive Technology – Any tech that takes an industry, forces consumers to think differently and then adopt that technology as the new norm. For example Uber, Lyft, Airbnb
Due Diligence – An analysis an investor makes of all the facts and figures of a potential investment. Can include an investigation of financial records and a measure of potential ROI.
Early Adopters – The first users of your product.
Ecosystem – The network of organizations—including suppliers, distributors, customers, competitors, government agencies, and so on—involved in the delivery of a specific product or service through both competition and cooperation. Work out where you are and where you want to be then get involved in your startup ecosystem.
Entrepreneur – An individual who starts a business venture, assuming all potential risks and rewards for herself.
Evangelist – Someone inside your organization who is your number one fan. They love your company so much that they often go above and beyond their expected role to help promote your company. If you find an evangelist, hire them!
Exit Strategy – How you plan to sell your company to give you and your investors a return on their investment. Who is going to buy you and why?
First Mover Advantage (FMA) – 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.
Gamify – Adding a game layer to a website or product experience that encourages people to use it with rewards of various kinds. People love games.
Growth Hacking – A term coined by Sean Ellis (Dropbox) to describe a marketing technique that focuses on quickly finding scalable growth through non-traditional and inexpensive tactics such as the use of social media.
Hockey Stick – An expression used by investors to describe the shape of the growth curve they want to see in businesses they invest in. They want to see their startups grow quickly and at least double sales every year.
Initial Public Offering (IPO) – When a startup’s shares of stock are made public for the first time, it’s called an IPO. At this point, a private organization turns into a public company.
Intellectual Property (IP) – Covers patents, trademarks, and copyrights. It is a good way to protect your “secret sauce”. Not every start-up has IP, but if your business depends on it, you better protect it!
Iterate – To try something, do it wrong, and try it again in a slightly different way with the hopes of achieving a better result.
Laggards – Users who join your movement or buy from you much later than other customers.
Launch / Activation – When you start a company, website, or app. A soft launch keeps things low key. A launch event is often a larger production and may include a party and media coverage.
Lean Startup – A startup that has been launched with as little startup capital as possible while getting data that can be used to improve the product. Speed is the key factor here.
Leverage – Using something, such as technology or partnerships, to accelerate your growth or success.
Lifetime Value (LTV) Cost to Acquire (CAC) – This compares the lifetime value (LTV) of a customer to the cost to acquire them (CAC).
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 things your company can do to bring cash in the door.
Market Penetration – How much of your potential market are you capturing and how quickly.
Merger – When two companies join forces and become a joint entity.
Minimum Viable Product (MVP) – The simplest form of your product. This can be used to attract Beta users/early adopters or to pitch for funding.
Monetize – How you are making money — or more often, how you plan to make money. Do you sell online, offer consulting services, or sell face to face? Without a way to monetize, most businesses die.
Non-Disclosure Agreement (NDA) – An agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being shared with outside parties.
Patent – Patents are one type of Intellectual Property. They are typically used to protect your design.
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.
Responsive Design – An integral part of a website that has been built to function well across all devices.
Return on Investment (ROI) – What the investor can expect to get for what they put in and how long it will take to get.
Runway – How long you have until the cash runs out and you must turn off the lights. Often used as an indicator for when to pitch for investment.
Scale Up – When your company has grown in terms of size, geographical location, market, etc.
Scalable – How big your business can grow, how much market demand you have, and which markets you can grow into.
Seed Funding – The first round of small, early-stage investment from family members, friends, banks, or an investor is commonly referred to as seed funding.
Serial Entrepreneur – Someone who launches several businesses either simultaneously or one after another.
Software as a Service (SaaS) – You sell subscriptions to use your software.
Startup – A company in the early or growth stages of operation, usually under three years old and (if not already) becoming profitable. Startups are usually seeking to solve a problem or fill a need, but there is no hard-and-fast rule for what makes a startup. A company is considered a startup until they stop referring to themselves as a startup.
Stealth Mode – When a startup keeps its products or services under wraps, so it doesn’t alert potential competition.
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. If you take a chance with a startup, your shares might become lucrative when the company sells.
Target Market – Identify who will be buying your product, their demographic, and their location.
Term Sheet – The document that outlines what the Investors will get for what they put in — including % ownership and voting rights.
Thought Leader – Someone who is seen as being a leader in their field.
Traction – Proof that your executive summary is working. People are buying and using your stuff.
Trademark – A type of Intellectual Property used to protect your brand. Depending on which one you register, you can add a “™“ or “®” (Registered Trademark) next to your logo.
Unicorn – A private company with a valuation of over $1 billion. See this article for a list of unicorn companies – https://www.cbinsights.com/research-unicorn-companies.
User Experience (UX) – The process of enhancing user satisfaction with a product by improving the usability, accessibility, and pleasure provided in the interaction with the product.
User Interface (UI) – How the user and computer system interact.
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 Proposition / Unique Selling Points (USPs) – The feature(s) or elements that make your business or product uniquely attractive to consumers.
Vanity Metrics – Figures and statistics that are often used to show the growth of a startup that doesn’t mean anything, i.e., 2,000 to 200,000 impressions on Instagram.
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 quite common.
Venture Capital or Venture Capitalist (VC) – They have cash, but you might not want it. Do your diligence on them and make sure you have investors who align with your beliefs.
Vesting – A process that involves giving or earning a right to a present or future payment, benefit, or asset.
Visionary – An entrepreneur who sees the change in the world before it has happened.