Explained What is Startup and Common Startup Terms

Startups are young companies that want to disrupt old age traditional industries and change the world at a large scale.

Explained What is Startup and Common Startup Terms

What is Startup and Common Startup Terms ๐Ÿฆ„

A startup's development is compared to launching rocket. You need to put together a team, construct a plan, and then cross your fingers that you can reach space before the money runs out. Because it is not possible to hire a full team of specialists from Day 1, each member will have to fill a variety of roles in the startup.

Startup teams need to manage Sales, Marketing, HR, Management, and customer success throughout the early stages, when it's uncertain whether the ship will soar to the moon or explode in a sad firework.

What is a Startup? ๐Ÿ’ก

Startup refers to a business that is just getting started. Startups are created by one or more founders who desire to provide a goods or service they feel there is a big market for. These startups typically have expenses and less income, which is why they seek funding from a number of sources, including venture capitalists.

It's a new corporation that's just getting started. Startups are often funded by the founders, who may also make attempts to secure outside funding before they take off. Family and friends, Venture Capitalists, crowd funding, and loans are some examples of financial sources. Startups have a significant risk because failure is highly likely, but they may also be very special workplaces with fantastic benefits, a focus on innovation, and excellent learning opportunities.

Understanding Startups ๐Ÿ“š

Startups are businesses or endeavors that are concentrated on a certain good or service that the founders seek to market. These businesses often lack a fully formed business plan and, more importantly, sufficient funding to advance to the next stage of development.

Startups invest in research and create their company concepts with seed money. While at thorough business plan details the company's mission statement, vision, and goals, as well as management and marketing strategies, market research assists in determining the demand for a good or service.

โ€Common Startup Terms ๐Ÿ’ธ

Many of these terms were invented or weren't used in the same context as they are today. Only with the increase in startups around the world has a completely new lexicon emerged.

So much so that words like "pivot" and "unicorn" are increasingly being used even by those outside the startup community.

Here is a helpful resource to refer because you will undoubtedly encounter these terms at some point in the future or during your startup journey.

Acceleratorโ€

A startup accelerator's purpose is to accelerate the growth of your startup. It is a mentor-based programme that provides intensive guidance, support, and structure for a specific time period, usually three months.

Angel investmentโ€

This kind of investment often occurs while a startup is in its early stages; a "startup angel" investor gives businesses initial or expansion funding in exchange for a stake in the business. One of the most well-known angel investors in the world is Amazon CEO Jeff Bezos, who has made investments in household names like Google and Uber.

Acqui-hired

Acqui-hiring is the practise of purchasing a company or organisation primarily for the skills and expertise of its employees rather than for its products or services.

Acquihiring, also known as talent acquisition, is a combination of the words "acquisition" and "hiring." When one company buys another, this is referred to as acquisition, and hiring is when a company hires new employees. Acqui-hiring is simply a strategy that uses the expertise of recruited employees to help the company grow.

โ€โ€โ€Bootstrap โ€

A bootstrapped startup is dependent on the founder's personal ability to validate a concept, build a product largely on his or her own or with the help of a co-founder, and then gain traction. Because no outside funding is available, the founders must rely on personal savings, work elsewhere, and other creative means to fund the company.

Bridge Loan

A short-term loan obtained for a limited time, usually between two weeks and three years, until long-term finance can be arranged. Likewise called a swing loan or Short Term Loan. These loans are usually provided by the banks as Overdraft or Unsecured Loan as temporary financing measuresโ€

Burn rate

The burn rate is the amount of money required by your company in a given time period (usually a month) to cover all expenses. In other words, the burn rate indicates how quickly your company "burns through" capital.
Burn rate is typically used to calculate how quickly a company will deplete its startup capital before becoming cash flow positive. However, regardless of their stage in the business life cycle, all businesses can benefit from knowing their burn rates.

Vesting Cliff

The vesting cliff is the amount of time before employees can collect a portion of their shares. The cliff, which is normally one year long, is designed to keep workers around during the early stages rather than having them take the benefits and resign from the business.

Co-Working Space

An office that is shared by staff members from various businesses is known as a co-working space. Due to the lower cost of using the shared facilities compared to renting or purchasing a whole office space for a small staff, this model is especially beneficial for startups.

Crowdfunding

Crowdfunding is a different, more approachable, and democratic method of raising capital where a firm obtains funding from a variety of investors and customers who contribute funds for a business entirely out of a direct, personal interest in what it is offering. To raise money through crowdfunding, many entrepreneurs offer pre-orders of their goods or services at a discount.

Dragon

Rare startups called "dragons" raise $1 billion in a single round of funding. An illustration of a dragon startup is Uber.

Early Adopters

An influential customer who uses your product or service long before the wider public does is referred to as an early adopter. These customers may typically provide you with insightful and frank criticism to assist you in improving the good or service before introducing it to a bigger target market.

โ€Exit

Entrepreneurial founders occasionally plan their exit either before or during the venture. An exit is a way to give another company control of your business while also repaying your investors.

Freemium

For entrepreneurs, a freemium business model is a common option. It refers to providing customers with a limited version of a good or service for free while charging them extra for more sophisticated options.

For instance, even if you join up for Canva, a well-known design platform, for free, you won't have access to premium stock pictures, extra storage, or some templates unless you pay for a Pro subscription.

Growth Hacking

This marketing slang phrase describes a targeted approach employing low-cost techniques to expand a business swiftly. Nowadays, a lot of businesses use social media for growth hacking in the hopes of making their goods or services popular without spending a lot of money on advertising.

Hockey Stick Growth

Investors prefer startups with growth curves that resemble hockey sticks and could potentially double key performance indicators (KPIs) like sales or the number of active users per year.

โ€Incubator s

In contrast to an accelerator, an incubator helps startups throughout their first stages of development. In essence, it's a company that supports startup businesses throughout their initial months or years, typically in exchange for shares.

โ€IPO (Initial Public Offering) โ€

An IPO is the first time the stock of a startup is made publicly available. A private organization becomes a public firm at this stage.

Launch

The official release of a startup's product or service is known as a launch. A soft launch, which functions more like a test run with less media attention and beta versions of products and services, can also be used to measure consumer interest in businesses.

โ€Lean Startup โ€

The Lean Startup method takes a scientific approach to creating and managing startups in order to get a desired product into the hands of customers faster. The Lean Startup method teaches you how to steer a startupโ€”when to turn and when to persevereโ€”and grow a business as quickly as possible. It's a straightforward approach to new product development.

MVP (Minimum viable product) โ€

A strategy that entails creating a basic version of a new product with the intention of appeasing its early users. Additional features are only added to the product after taking early users' input into accounts.

โ€Pitch deck โ€

If you've ever had to present an idea to your manager, you likely made every effort to persuade them. In a similar vein, a pitch deck is a condensed version of a business plan that highlights crucial data in an effort to attract investors.โ€

Pivot โ€

The phrase "pivot" in the startup business refers to when a company swiftly shifts paths after initially focusing on a distinct market segment, which is similar to its meaning when used to describe a mechanism pivoting on a central point.โ€

โ€Scale up

When your business has expanded in terms of size, reach, market, etc., you can say you've scaled up. Scale up is a word that describes a business that has successfully tested its product in a market and is profitable.โ€

Seed funding โ€

Seed funding is a term used to describe the initial tiny, early-stage investment from family, friends, banks, or an investor.

Scrum

The term "Scrum" refers to an agile project management technique that was initially created for decision-making within development teams, while it can be used in other parts of a corporation.

The three groups that make up the scrum framework focus on learning, creativity, and cooperation -

  • The product owner - A single individual who maintains and prioritises products and has considerable user expertise.
  • The scrum master - The scrum master assists in clearing obstacles so that the entire scrum team can finish its work
  • The scrum team - As the scrum team's primary member, developers collaborate and make decisions about how to complete their task as well as what resources and methods the startup should employ.

Solopreneur

Typically, an founder has ideas for how to launch and expand a business. On the other side, a solopreneur launches and perhaps even grows a firm by themselves. With the increase in independent writers, designers, and developers, this business model is spreading more widely.

Sweat Equity

Sweat Equity share is one such method by which a company makes a share-based payment to its employees at a discount or for consideration other than cash. It is a reward given to employees for their contributions to the company's growth.

โ€Term Sheet / Letter Of Intent (LOI)

The agreement, which is typically non-binding and contains the fundamental terms and conditions for financing, between an investor and a startup. A binding contract based on the term sheet is created once an agreement has been reached between the parties.

Unicorn Startups

A company with a $1 billion valuation is referred to as a unicorn startup. These companies are uncommon, but not as uncommon as dragons, firms that receive $1 billion in a single round of fundraising.

Valuation

Your company's valuation, which can be calculated in two different methods (pre and post money valuation), relates to how much it is worth.

Pre-money valuation : This is an assessment of the worth of your business prior to receiving any funding. Investors may use it to decide whether your business is worthwhile.
Post-money valuation : The value of your firm following a round of fundraising plus the pre-money valuation is known as the post-money valuation.

โ€VC (Venture capital/Venture capitalist) โ€

Venture capital is funding offered by businesses in exchange for shares to start-up small, high-risk businesses with significant development potential. VCs are the term used to refer to investors who choose to fund particular businesses through venture capital firms.โ€

Vesting โ€

A procedure that entails granting or gaining the right to a present or future benefit, payment, or asset.

About Jordensky

At Jordensky, we specialize in accounting, taxes, MIS, and CFO services for Startups and growing business and are focused on delivering an experience of unparalleled quality.

When you work with Jordensky, you get a team of finance experts who take the finance work off your plate โ€“ โ€so you can focus on your business.โ€