Most commonly used terms in the startup ecosystem
Are you new to the world of startups? You think you have a great startup idea but you get intimidated by the startup ecosystem conversations that are loaded with jargon? Here are some most commonly used words that you need to understand and you will have no reason to fear these conversations.
Accelerator:
Accelerator is a centre or organisation that helps your startup accelerate its growth.
Angel investment
When an investor provides the initial or growth capital at the initial stage of a startup it is called angel investment and the investor is called ‘angel investor’ ( also called business angel).
Boot-Strapping:
Managing capital on your own or from family and friends. Every startup idea does not get an investor from the first day. Bootstrapping is what most of the startups have to be dependant on in the initial days.
B2B or B2C (B to B, B to C):
B2B means Business to Business and B2C means Business to Consumer. When you sell products and services to other business organisations it is B2B ( for example a company selling billing softwares used in business outlets). When you sell your products and services to the public (customers) it is called B2C.
Bridge loan
A short-term loan. ( typically between two weeks and three years). Bridge loans (also known as swing loans) are effective until long-term financing is available.
Burn Rate (Run Rate):
The rate at which you are burning or using up your capital.
Churn Rate
The annual percentage at which customers stop buying a product of stop subscribing to a service or employees leave a job (attrition rate).
Deck (Pitch Deck):
A compact, short PPT covering all aspects of your startup that you present while pitching your idea to investors, incubators etc.
Exit plan or exit strategy
The roadmap of selling ownership to investors or another company by an entrepreneur.
Fintech
The word fintech combines two words- finance and technology. It denotes emerging financial service sector. Fintech companies enhances financial services through innovation.
FMA (First Mover Advantage):
The advantage that a startup has because of being the first player to enter a particular market.
Incubator
As the name suggests, an incubator is a center or organization that supports startups in their early stages. (Note the difference between accelerator and incubator. ) Incubation is essentially provided in the early few moths or years of the startup.
Market Penetration:
The percentage of the market that a venture has captured or is hoping to capture.
ROI (Return On Investment):
The return that can be expected for a particular investment.
Scale up
A company is said to be scaling up when it witnesses growth.
Seed capital
Securities offering that brings investment in exchange for an equity stake in a company.
Sweat Equity:
Equity percentage to an employee for his or her ‘sweat’ or hard work in the company.
Term Sheet:
A document that defines the percentage of ownership and voting rights for the investors.
Traction
Traction is the growth in interest generated among the customers for a product or service.
Unicorn
A unicorn is a startup company that is valued at over $1 billion.
Value Prop:
The most unique or attractive feature of the products or services offered by a startup?
Venture capital (VC)
Venture capital is private equity investment to small, high-risk, startup companies with large growth potential.
Venture Capitalist (VC)
Investors working for venture capital firms.
