Top 25 startup terms you should know | Verzeo

Demystifying 25 Startup Jargons and Terms

The word “startup” has arguably become the most influential term of usage in the modern world of entrepreneurial activity. The seedling of any act of enterprise starts with plenty of gusto and this has particularly become the trait of the millennial generation which is thronging to open up shops more frequently than visiting them.


BY Kaushik

10th August 2020

Top 25 startup terms -Verzeo

Such proliferation in the entrepreneurial spectrum is down to the instinct of the Gen-Next to become producers. This has led to the surplus growth of “startups” in every direction and beyond.

The culture has also given birth to many new and official terms that do sound classy to hear but rather tough to discern. So here’s Verzeo’s dictionary of 25 such terms used in startup lingo that sounds fancy and sophisticated to understand, and some which you might have not even heard of before.

1. Accelerator

They are growth accentuators that help boost the startup’s growth in the initial phase with mentorship and access to fundraising in the early stages of the company’s existence.

2. Angel Investor

When the Devil calls for crisis, an angel stands by your side as God’s accomplice. Similarly, when you start a business, an angel investor helps you scale your business with funding, mentorship and as a partner with a hand on your shoulder. They usually enter businesses which don’t start so well but have the potential to grow in the future. A typical investment by an angel investor is estimated to be about US$300,000.

Angel Investors if closely connected do not look for profits at the start of the business’ growth curve. But once the business becomes profitable, they can settle for a share of the profits that is commensurate with their investment.

3. Burn Rate

The ratio of the amount of investment by a company to its capital. A very important question that investors ask founders (could be you) during discussions for funding.

4. Business Bootstrapping

As a startup you can’t straight away go for funding without an era-defining business plan or without making yourself look silly. It is important to bootstrap a business with your own funding, ideas, capital and potential. This helps you understand the essence of running a business and the knack for resistance to profligacy.

5. Cliff Vesting

A cliff period is a timeframe post which the investment is provided by others to a company for usage. It is usually a period of probation to assess the loyalty and commitment of the company and its staff for the overall growth.

6. Dragon (Companies)

A ‘Dragon’ company is defined as one that has received more than US$1 billion in a funding round. Prominent examples of Dragons include Drogon, Rhaegal and Viserion. Oh okay, sorry, it’s Uber, Facebook, Twitter and Linkedin among many others. Can’t get rid of that Game of Thrones itch in me.

7. Equity

Equity has a ton of different meanings to it. In fact, it is the most mystifying term out of all mentioned here. Equity though, simply put, is the money put in by investors in a company to which the founders and the organization work towards realising profits and good returns as agreed through discussions.

8. Exit Strategy

An exit strategy is the decisions that are taken for the future of the company to generate money. Getting acquired, merging, filing for an IPO or liquidating a business are factors of this strategy. It is basically a way out or a mechanism to stave the company off troubled waters.

9. Funding

The money that a company obtains from external investors that is strictly for the use of growing the company and not for personal use. It is a loan for you, not pocket money.

10. Growth Hacking

Growth Hacking is defined as the analysis of growth of the business activities to view pressure points where investment is minimal and the return is one that generates profit. It includes many methods and techniques that help companies cut on costs but generate good returns on their investments.

11. Hockey Stick

A hockey stick is a representation of the performance of a startup which shows a lot of peaks and troughs in the early stages. Like the shape of a hockey stick that resembles a curve at the bottom, there are many inflexions on the graph as well.

12. Incubation/Incubator

Incubation is the process using which one can help a select startup or a group of startups scale within the industry through assistance and fundraising for an equity stake within the company.

13. Insolvency

Insolvency is an undesirable period of financial distress where a group is unable to pay its debts and obligations to lenders. This usually occurs due to improper cash flows, unprofessionalism, lack of capital and improper fund management.

14. Liquidation

Liquidation is the process of selling off and ending a business to return all assets to claimants. It also refers to selling off unfulfilled inventory that isn’t worth the investment.

Liquidation usually occurs in a situation where a company or individual (founder etc) is unable to return his dues and obligations to lenders or is unable to meet a certain financial goal that might set into the terms as discussed with the investors.

It can also be as a result of acqui-hiring (companies hiring other companies for their talent and employees), selling off a business, partnering up etc.

15. MVP (Minimum Viable Product)

A market product is a continuous iteration of smaller increments to it before it sees the day of light. An MVP (Minimum Viable Product) is thus created containing the most prominent of features to test its core capabilities in the riskier environments and test equivalents. Think of it as a base prototype of any product.

16. Nesting Period

A nesting period is defined as the time when you learn the ropes of the business from people who act as your mentors. Think of yourself as a small bird in a nest where the parent bird teaches you all the tips, tricks, and skills for survival before letting you flap your wings and fly for the horizon.

17. Pivot

A good pivot is capable of handling and driving a structure in the right direction as it is hardened to. Similarly in business, a pivot is a phase where you see that the intention of doing a particular process is going according to a plan and doesn’t seem to give fruition so you ‘pivot’ or look out for alternatives and iterations that offer better outcomes. Hence it is important to learn, build, test and adapt quickly.

18. Quality Index

Although it is not used quite a lot, a quality index is a formal scale of assessment by investors on new companies based on their observations and assessment of potential.

Some companies use these indices to rate the possibility and feasibility of their investment and can some use this inherently as part of their assessments.

19. Run Rate

The run rate is a futuristic projection of the company’s performance based on the current trend. Using Analytics and Machine Learning, companies can do this and settle on a mathematical number which may or may not suit their requirements.

Typically like the Run-Rate in a cricket match that leads to stats drawing up projected scores. Run-rate is similar in this situation as well.

20. Seed and Series Round

One of the most prominently mentioned in startup circles. We have all come across these terms once at least. A seed round is a round of investment after an angel round. Series is a set of investment rounds with increased funding and development objectives.

There are usually Series A,B,C,D and further rounds if necessary. Series A is the investment that leads the company towards IPO status and in the further rounds, the amounts invested gradually increase.

21. Term Sheet

A term sheet outlines the terms of investment between the investors and founders. It is not the final settlement though and can also be started as part of negotiations.

22. Unicorn

A company that has a market valuation exceeding US$1 billion

23. Venture Capitalist

A venture capitalist pumps money into a business that is working well in order to obtain an equity share in the company and also a possible seat in the board of directors. A typical investment of a venture capitalist is reported to average about US$11.7 million.

A venture capitalist could be an investment company or a particular individual looking to improve his portfolio by extending his private equity to a fledgling business or startup in return for a decent share of the returns generated. Prominent venture capitalists and groups include Sequoia Capital, Accel Partners, Kleiner-Perkins Ventures, and Blume Ventures etc.

24. Vesting

Vesting is defined as the period where a company must stay and work through the full timeline of receiving their entire influx of equity from the investors. This usually happens in staggered phases as decided upon the term sheet by the two parties.

25. Wantrepreneur

Someone who has the idea and is about to start a business. Every one of us is a Wantrepreneur but who out there wants to change the first two letters to an ‘E’? Get started today.

Conclusion

Now that you know about these terminologies, you are ready to flaunt your new startup idea and these fancy terms. Stay around for more great content and also find the same on our Instagram page as well.

Just so you liked this article and finished reading this, we thought of giving you some exercise by finding terms that start with the missing letters in this dictionary (not all letters are present in the order, and if you didn’t see it, it means you liked this article. Thanks for that). Comment below on the terms that you’ve come across in startup lingo.

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