Have you ever been confused by startup jargon?
You had a perfect idea, found the perfect people for the job, and now you’re ready to take the next big step, launching your startup. Whether you’re going the bootstrapping route or getting funding there’s one thing you need to be able to do which you probably haven’t considered.
You need to be able to ‘talk startup’.
Believe it or not, knowing the lingo involved in the startup and VC world can be a big deal, especially if your background isn’t from that atmosphere. Talking the talk makes it easier for you to communicate with other people in your network, like potential investors, that you’ve done your homework.
So to help you in your startup journey, here’s a handy guide of 20 essential startup jargon terms you should know before your startup takes off.
- Acquisition: An acquisition is when one company is bought by another, usually by a large sum of money. A couple of famous acquisitions are when Microsoft acquired LinkedIn and when Facebook acquired Whatsapp and Instagram.
- Aqui-hired: This term is used when one company acquires another to take over their employees with little or no intention to continue with the acquired company’s business model. This usually happens when the “bigger” company wants to enter a new business space and wants to have all the human resources necessary to do so as quickly as possible.
- Accelerator: These are programs that nurture early stage startups so that they can have the highest chance of success. They do this by providing mentorship, consulting, networking and sometimes funding too.
- Angel Investor: This is a type of investor who focuses on investing in promising early stage startups. Angel investors take on more risk, since the startup is at an early stage, but they also tend to invest less in exchange for a greater amount of equity compared to investors that come in at later stages.
- Alpha Release: The term “Alpha Release” is used in software and app development for the first time that the product/service tested with a small group of users within the organization. An alpha release is not expected to be a finished product, rather it’s used to find bugs, stability problems and collect user data that can help make sure the final release is more robust.
- Beta Release: A beta is the next iteration of the product after an alpha. The beta is meant to get a small sample of real users to try out the product. Betas have most of the final functionality but may still have some small bugs and stability issues.
- Bootstrapping: This term refers to how the startup is being funded. To bootstrap your startup means you used your own money to get the company up and running without any external funding from investors.
- Burn Rate: Burn rate is one of the most important financial metrics in the startup world. Your burn refers to how quickly a startup is going through its startup funds. The burn rate gives you an estimate of how much time you have left to either become profitable or to get an additional round of funding.
- Crowdfunding: This is a type of funding made popular by platforms like Kickstarter, Indiegogo, GoFundMe and Patreon where a startup pre-sells their product to early adopters. This funding method is an alternative to going after angel funding or getting early investors. The main benefit is that you exchange a product, usually at a discount, instead of equity for the funds.
- CAC (Customer Acquisition Cost): This is a key marketing metric for every startup, as it lets you forecast how much you need to spend in order to get a new customer. It is often directly linked to marketing budgets and startups do their best to optimize their client acquisition process so this metric is as low as possible.
- Churn Rate: This metric is used to determine how many of the customers you acquired stop using your services after a given time frame. Investors look at this metric closely alongside the CAC because it gives them a better idea of the long term perspective of the revenue that each new customer can generate.
- Equity: The simplest way to think of equity is as a piece of the ownership of a company. Equity is often exchanged for funding to investors, that way they own a portion of the company they are investing in with the hopes that one day that equity will increase its value.
- Exit Strategy: This refers to how a founder believes he or she will end up capitalizing on the startup they founded. This can either mean selling the company, being aqui-hired, going public with an IPO or some other way where you can exchange equity for cash.
- Low Hanging Fruit: This term is also used often in business consulting, and it refers to being able to get quick wins or performance increases with minimal investing. When there is plenty of low hanging fruit it can also imply that there hasn’t been a lot of development or that there are many opportunities.
- Non-technical: This term is used to describe a founder that doesn’t code or that has a different background other than the technology sector.
- Seed: A “seed round” is the type of funding that is given to a startup so that it can start its operations. Seed funding is usually given by an Angel.
- Series A,B, and C: Startups will often not be ready to launch and be profitable with just their seed funding. In this case is where series A, B, and C funding comes in place. These are subsequent rounds of funding that allow a startup to continue developing it’s products until they are ready to launch.
- Going Public: Going public or IPO (Initial Public Offering) is the process of when a business first releases its stock to sell to the public. Some of the more famous IPOs were when Facebook went public in 2012 and Tesla in 2010.
- Pivot: This is what happens when a startup finds out that they don’t have a good product match for their audience, so they change their business strategy in order to pursue new opportunities. In other words, what they thought was going to work didn’t, so they’ll try a different idea.
- Runway: Cash runway is an all-to-familiar term for startups who’ve taken on investors, debt or self-funded their operations. It’s the amount of money you have left to operate (typically measured in months). Runway should be a part of any startup budget you make.
- Unicorn: A unicorn is a startup that is valued at over billion dollars. This doesn’t mean that the startup was worth a billion dollars, but that investors can foresee it having this value once it goes public. Some famous unicorns were AirBnB, DoorDash, Uber, Facebook and Dropbox.
These are just a few of the most common startup jargon terms, but there are dozens more when you get into more technical conversations. However, these are a good foundation to get you up to speed on the lingo that will help you communicate with your network and get your startup off the ground.