Essential Startup Terminology

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Stepping into the startup world often feels like you're learning a new language—one filled with jargon, acronyms, and phrases that can leave you scratching your head. Whether you’re an aspiring founder, a first-time entrepreneur, or just curious about how the startup ecosystem works, we’re here to break down the essentials

Startup Support Structures

Accelerator – A high-intensity program designed to propel early-stage startups with mentorship, resources, networking, and sometimes funding, usually in exchange for equity. Accelerators typically run for a few months and culminate in a demo day.
Incubator – A nurturing environment that supports startups in the earliest phase with office space, mentorship, and networking opportunities. Incubators tend to focus on longer-term support.
Venture Studio – A specialized organization that generates new startups internally, developing business ideas, forming teams, and providing hands-on operational support. Venture studios typically take a significant equity stake in the companies they build.
Mentor – A seasoned professional offering guidance and expertise to startup teams, typically without compensation.
Advisor – A strategic expert who lends advice on specific aspects of the business, such as growth, marketing, or operations, often in exchange for equity or fees.

Funding and Financial Insights

Angel Investor – An individual who invests personal capital into early-stage startups in exchange for equity or convertible debt, and may also provide mentorship.
Friends & Family Round – A crucial stage where founders secure funding from close friends and family, often on more favorable terms without strict business metrics.
Seed Funding – The initial round of investment aimed at developing the product, hiring the team, and securing initial market traction.
Series A/B/C Funding – Successively larger rounds of investment used to scale the business, expand market reach, and accelerate growth, typically involving institutional investors.
Convertible Note – A short-term loan that converts into equity at a later financing stage, often used during seed rounds.
Grant – Non-repayable funds provided by governments, foundations, or corporations to support specific projects or initiatives.
Investment – The act of providing capital to a startup in exchange for equity, debt, or other forms of financial return.
Burn Rate – The rate at which a startup spends its available capital before achieving positive cash flow, a crucial metric for financial sustainability.
Runway – The period a startup can operate before running out of funds, based on the current burn rate.
Cash Flow – The movement of money in and out of a business. Positive cash flow means more money is coming in than going out.
Cap Table – A comprehensive breakdown of ownership in a company, showing equity shares, types of shares, and ownership percentages among founders, investors, and employees.
Term Sheet – A non-binding document outlining the key terms of an investment agreement between the startup and investors.
Valuation – The process of determining the financial worth of a startup, based on factors like revenue, growth potential, and market dynamics. A startup’s valuation significantly impacts how much equity investors receive for their capital.

Startup Growth Stages

Seed Stage – The foundational phase where a startup focuses on product development, testing ideas, and gaining early traction. Funding typically comes from seed investors, grants, or personal networks.
Growth Stage – This is where the business begins scaling, acquiring customers, expanding operations, and seeking larger rounds of funding (Series A/B).
Late Stage – At this point, the startup has achieved market traction, consistent revenue, and is often preparing for an exit via acquisition, merger, or IPO.
Unicorn – A private startup valued at $1 billion or more, often a rare and highly successful company.

Key Operational Terms

Product-Market Fit – The sweet spot where your product meets a real market need, validated by strong customer demand, high retention, and rapid growth.
Minimum Viable Product (MVP) – The simplest version of your product that allows you to gather feedback, test assumptions, and validate your concept with minimal investment.
Outsourcing – Engaging external companies or freelancers to handle certain business functions, such as development, marketing, or customer support, to optimize costs and leverage specialized expertise.
In-House – When work is carried out by your internal team, as opposed to outsourcing it to external providers.
Churn Rate – The percentage of customers who stop using your product over a set period, often used as a key indicator of product satisfaction and retention.
Customer Acquisition Cost (CAC) – The cost associated with acquiring a new customer, including marketing, sales efforts, and promotions. Calculated by dividing total acquisition costs by the number of new customers acquired.
SaaS (Software as a Service) – A cloud-based service model where customers access software over the internet. It's especially popular in B2B startups.
Exit – The moment when founders and investors sell their equity in a startup, typically through an acquisition, merger, or initial public offering (IPO).
Vesting – The process by which founders, employees, and other stakeholders earn ownership in the company over time, typically through stock options that vest over a specific period (e.g. four years).

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