Understanding and naturally using key startup terms in the day to day operation of a business is a must for every entrepreneur. Chances are you have seen or heard these terms in one way or another. I remember many years ago when reading an article about startups used to take me 10 times longer what it does today. Back and forth translating every other word was a hassle.
One of the prerequisites of becoming an entrepreneur is to get familiar and comfortable with the business and more specifically in this case the startup language. Technical or non-technical, the best entrepreneurs may not be experts at everything but are certainly able to wear many hats and speak many languages whether it is with the finance team, programmers, designers, marketers, business developers, or other areas.
In this infograpahic, find 91 startup terms with a brief definition for each that you can use as a reference for learning, enhancing or remembering some of the most commonly used words in the field. Below the infographic, you’ll find a more detailed definition of each term.
Founder: Anyone can create a site and business cards then call themselves founders of a startup. A real founder is a doer. It doesn’t matter how much of an impact or progress you’re able to make as long as action has and is being taken. Founders execute.
Wantrepreneur: In short, a wantrepreneur is an idea person. No matter whether they have a technical or non-technical background, they’re always planning to launch a startup, they have many ideas but they haven’t started yet. Many wantrepreneurs stay wantrepreneurs. Don’t be a wantrepreneur!
Non-technical: When it comes to technology startups, founders are often classified into technical and non-technical. Technical founders are those with a programming background or have taught themselves code. Non-technical founders tend to be business or marketing people. Not that technical founders can’t sell!
Validation: There are many metrics that signal idea validation but at the end of the day, it’s about proving there is a need and demand for the product. One of the strongest validation signals is when people pay for the product, use it and recommend it to others with similar needs.
Scalability: The goal of every startup is to build a scalable business model. Thanks to technology and automation, a startup product can serve hundreds of thousands of users without needing the same number of service providers. A startup is called scalable when it creates and validates a repeatable business model that addresses user needs around the clock.
Accelerator: If you’re launching a startup, accelerators can help you move your idea quickly by providing you with mentorship and fundraising opportunities during a few months program.
Incubators: Unlike accelerators, incubators tend to offer longer term advisement programs that help you with mentorship, connections and resources like a coworking space. Accelerators are focused on speed and fundraising while incubators usually take earlier stage startups and help them overcome early stage challenges.
Unicorn: There are only a few startups that reach and exceed a billion dollar valuation. Those startups are called unicorns.
Dragon: There’s an even smaller number of startups that raise over one billion dollars in one single round of funding. Those are called Dragons. Uber is one of those companies.
Bootstrapping: Over 90% of startups are self-funded. In fact, I would argue that close to 100% of startups start with their own funds especially nowadays that the funding bar is getting higher. Bootstrappers are entrepreneurs that combine human capital (knowledge, experience and skills) with savings to launch and grow a startup without raising capital. An entrepreneur can also bootstrap the early stages and then raise funds for growth. A path taken by most founders.
Iteration: At the end of the day, an idea is just an educated guess. What are the odds that entrepreneurs will guess right all the time? When you realize you need to make a minor change to the product, the target or any important aspect of the business model, you are iterating.
Pivot: Sometimes we’re confident the plan is right but quickly realize it isn’t. When there’s a major change to the business model like the way you make money, ideal customer profile or the solution (product), you are pivoting. Entrepreneurs must be open to iterations and pivots even if they had spent a lot of resources getting the latest version right. For this reason, spending too much time and money testing ideas or versions of a product is not a wise execution strategy. Instead, build, test and adjust quickly.
Disruption: If you ask what investors look for in a startup, it’s founders that aim to create products and business models that introduce an innovation that make a significant difference in the market and the world. Take the example of Uber that completely changed how people commute.
MVP: To test ideas quickly without spending a lot of resources in building a product that may or may not work, entrepreneurs are encouraged to create a minimum viable product. It’s the first versions of the product that only include the core features that aim to test the riskiest assumptions before building the next versions with more advanced features.
Lean: Minimum viable products are part of the lean methodology which entails going through the build-measure-learn loop which essentially enforces the idea of building and testing quickly instead of building an advanced product hoping that customers will come.
Agile: While lean describes the business side of the build-measure-learn loop, agile development focuses on the development part of the loop and entails building incrementally and iteratively while testing quickly.
Exit: Entrepreneurs build startups for many reasons. Many want to make a major impact in the world while others, in addition to the impact, they aim to exit their ventures either through an IPO or mergers and acquisitions.
SaaS: Nowadays, one of the most common startup business models are software as a service. This is when you create a product with features that customers can use under a monthly subscription. Exactly like paying a monthly fee for hosting or using an email marketing platform.
PaaS: SaaS companies need a platform to build their software on. Instead of building one from scratch, a faster and cost-efficient way is to build it on top of an existing established platform. SaaS companies use platform as a service companies like Heroku.
Acqui-hire: One of the most valuable assets in a startup, especially in the early stages, is the team behind it. Building a passionate team that includes members with complementary skills isn’t easy. Many established companies decide to aquire smaller firms or startups just for the human capital (team) they built. Such acquisitions are called acqui-hire.
Alpha release: Since continuous testing is important to the success of software, teams run alpha tests internally early on before releasing the beta version of the product for public testing.
Beta release: Having conducted internal alpha tests, beta tests involve customers or potential users who provide feedback and help the team make changes before launch.
Board of directors: Mentorship, guidance and connections are key to the success of a startup. The board of directors tends to include members who can help the founders make wiser decisions while contributing to areas like hiring, business development and fundraising.
Business development: At a high level, there are two key roles in a technology startup. The technical founder is responsible for building and improving the product. The non-technical founder takes the business role whether it’s partnership development or strategic planning and execution. Non-technical founders tend to be business developers.
Business model canvas: Instead of a hundred page business model, the business model canvas categorizes the key areas of launching a startup like customer segments, value proposition, key partners, revenue model and acquisition channels.
Hokey stick: Every entrepreneur strives to grow their startup exponentially. In reality, such fast and predictable growth is rarely attainable. The common launch and growth path is characterized by numerous fluctuations and near death experiences.
Pitch deck: Before making an investment, most of the time, investors expect a quick presentation that highlights the key areas of a startup like team, product, market, traction and plan. Entrepreneurs create and use a pitch deck for investor presentations.
Freemium: A common customer acquisition strategy for SaaS startups is offering a free plan that includes a few product features while enticing subscribers to upgrade to paid plans for more features and advantages.
Value proposition: Business is about solving a problem for a customer by offering a solution that’s better or have unique benefits over the competition.
Consumer products: This can also be defined by looking at it from a B2C and B2B stand point. Business to consumers companies create consumer products. Those are products purchased and used by individual buyers not companies. For instance, Apple sells the iPhone which is a consumer product. Furthermore, Uber offers a consumer product although, over the years, it expanded to also offer enterprise solutions.
Enterprise products: Unlike consumer products, enterprise products are used by companies.
Competitive advantage: It is how a startup is different from its competitors. Differentiation can be through innovation, intellectual property, exclusive rights and partnerships or other way like niching down and capturing a small but growing market faster than anyone else.
Hackers: Describes a talented programmer who always finds a way to get a project done no matter the obstacles.
Intellectual property: A protected invention through patents, copyrights, trademarks or others.
Customer development: Part of the lean methodology, customer development is the stage during which you discover and validate the customer mainly by interviewing them and testing hypotheses qualitatively and quantitatively.
Product/Market fit: There are various definitions for p/m fit. Essentially, you reach p/m fit when your customer acquisition cost is lower than the life-time value of your customers and existing customers are referring buyers like them therefore lowering you acquisition cost and increasing your net promoter score.
Growth Hacking: A successful marketing campaign achieves its target at a cost below the return generated. Growth hackers use unconventional strategies to fuel exponential growth at costs significantly lower than the “average” amounts needed to accomplish the same results.
Evangelists: In the product adoption lifecycle, you find different categories of buyers adopting the product in different time periods. The evangelists are those who come early on, they are the first to believe in the product and convince others to adopt it.
The chasm: Many startups succeed at acquiring believers, called the innovators, but fail to capture the rest of the market. That gap between the innovators and the rest is called the chasm.
SEO: Searching engines like Google and Yahoo are becoming more and more essential to the growth of a startup. Without them, a startup has to continue investing in paid ads to get new customers. Search engine optimization is the strategies and tactics through which companies can gain higher search engine ranking.
Target market: Your ideal buyers. A group of customers with similar needs and objectives. You can define your ideal customers through their demographics, psychographics and other categories.
Traction: The evaluation of your key metrics. Investors will look at your traction over time to evaluate the investment opportunity. As a startup founder, you can build traction even before building a product. Companies like Buffer and Robinhood built a list of tens of thousands of potential users before they released the first version of their products. One common and effective way to build traction is through inbound marketing.
Inbound marketing: Time consuming but very effective over the long-run. This is when you create valuable content for your ideal customers that obtains high search engine ranking and pulls the lead to your site. Writing guides, producing educational videos and trainings, releasing podcast episodes and creating infographics are some channels through which you can deliver your content.
Outbound marketing: Inbound marketing requires an investment in time while outbound marketing require a financial commitment as it entails paying platforms like Facebook, Google and LinkedIn to push your product to the customer.
KPI: It stands for key performance indicators, the metrics by which startups judge their performance, progress and targets. Some of the most common KPIs include customer acquisition cost, customer lifetime value, monthly and annually recurring revenue.
Bounce: An important metric that measures how long website visitors spend on the page before leaving. The goal is to have a low bounce rate meaning that the site content or features are worthy of visitor’s time.
A/B testing: In order to learn what may optimize important metrics, you could run a test with different variations like call to action or copy. Those are called A/B tests. Nowadays, many platforms can help you run A/B tests with a click of button.
LTV: Stands for lifetime value of the customer. The basic formula to calculate LTV is multiplying the average revenue per account by gross margin and dividing the total by customer churn rate. Today, many platforms can help you calculate and project your LTV.
CAC: One of the most important metrics in business is the customer acquisition cost. In other words, how much does it cost you to acquire a customer? Without knowing this number, it is hard to budget marketing campaigns or make any projections.
Churn: One of the most asked investor questions is, what is your churn rate? That is, what percentage of your paying users cancel the service. Your goal is to make churn as low as possible.
Retention: Keep churn low and retention high. A high retention rate signals a healthy business especially if it is significantly higher than churn.
Activation: Most software as a service startups offer a free trial period or a freemium plan. The company will only make money if the users activate their membership after the trial. The goal is to increase activations and there are many strategies that can help you boost this number. For example, a good onboarding process makes a difference.
Angel: If you’re seeking funding for an idea, angel investors are the best groups to look for. They tend to be individual investors, family and friends looking to support and fund a promising venture at an early stage for a potentially high return.
VC: Unlike angels, most venture capitals invest for a living. Usually, they are interested in startups with traction and proof that an investment will help accelerate their path to goals.
Seed: Right after an angel round comes a seed round, although there is no required sequence to follow. Companies that receive a seed round tend to have found a viable business model with customers.
Series A, B, C: Companies that receive a series A round tend to have reached product/market fit and the funds will help them scale faster. Series B and C are for startups that continue to grow towards an acquisition or IPO.
Cashflow: The amount of money flowing in and out of the business. Free cash flow is the amount left in the business after paying expenditures. Free cash flow is used as a profitability measure of the business.
Pre-money valuation: It is important for founders, investors and other stockholders to know the valuation of a startup before they receive capital. This helps in determining startup value after it is funded.
Post-money valuation: The value of a startup either increases or decreases after a round of funding. It decreases if the new funding round puts a lower valuation on the startup to what it was worth before getting funded. Although, in most cases, investors fund a venture to increase the valuation and thus we often see the value of a startup after funding, post-money valuation, higher than previous rounds.
Burn: One of the most asked investor questions is, what is your burn rate or how much do you project you will burn over the next 18 months? It simply means the amount the startup will spend over a predetermined period.
Cap table: Investors and founders use a cap table to organize the stakes of each owner or investor in the startup.
Crowdfunding: A new funding model that allows entrepreneurs to raise money from a large group of backers or angel investors without necessarily going through the venture capital route.
ROI: Every startup expects a return on investments in time and money whether it is on marketing, hiring, acquisitions or other initiatives.
Term sheet: Upon interest between investors and founders, a term sheet is used to outline the terms of the investment. Term sheets don’t guarantee an investment. They’re also used as a starting point for negotiations.
Sweat equity: Self-funded entrepreneurs turn human capital (time, skills and knowledge) into financial capital (money). Human capital is equivalent to sweat equity since it doesn’t require a monetary commitment but can lead to future financial returns.
Run rate: One of the key startup metrics is run rate. It projects the performance of the startup in the future based on current data. For instance, if a startup generates $100,000 in the first quarter, its 12 months run rate is $400,000 ($100,000 x 4).
Revenue: At the top of your financial statement comes revenue which is the amount you generate before paying expenses. Revenue as a standalone metric is not an accurate measure of startup performance since expenses, especially in the early stages, can be significantly higher than the amounts generated.
Income: Having deducted expenses from revenue, the leftover is the income you retain in the business for reinvestment or withdrawal. Income is a better performance metric in measuring the stability and health of the business. On the other hand, high revenue even at losses (negative income) can signal potential.
Vesting: In order to ensure investors and employees’ long-term commitment to the startup, vesting schedules require stockholders’ involvement in the startup for a predetermined period, usually 4 years, before they can claim their shares.
Cliff: With vesting, a cliff period is used to require stockholders to remain with the startup, usually for at least 1 year, before they can claim a percentage of their shares. Both vesting and cliff periods help stockholders align interests.
Stack: To build a complete web or mobile product, programmers need a tech stack that includes programming languages, frameworks, tools and databases. It’s the list of technologies you need to build and launch a functional application.
QA: To make sure the developed application functions properly and meets expectations, teams run quality assurance tests. There are many types of QA tests. The chosen tests depend on the application, stage and other variables.
DevOps: To create faster and more efficient development cycles, DevOps is a practice that combines software development and IT operations.
Full stack: Programmers that are proficient with coding both the back-end and front-end of an application are called full stack developers.
Front-end: This is what the user sees when interacting with an application.
Back-end: The front-end is supported by the back-end which is where the development and maintenance of the application, server and database happens.
Compilers: Are used to convert programming languages into a machine language a processor can understand. The opposite scenario is done by a decompiler.
API: For an application to be able to communicate with another, it needs a programming interface. An API is the key with which two applications can work together.
Open source: One of the reasons behind the sharp decrease in the cost of launching startups over the years is the availability of code to be used by other programmers. Open source software is publicly available original source code.
Framework: A software framework is like a library of code available for use and integrations to simplify the development environment.
Concurrency: For speed and efficiency, concurrency enables programs to perform several tasks at the same time.
CRUD: An application that uses several forms to get data in and out of a database. It stands for create, read, update and delete.
Database: To store, organize and access data, you need a database.
Cache: You may have websites that you visit frequently. Many of those sites use cache to store recently used information for easy access. You can see the difference when you open the same site on incognito.
Operating system: Every software needs a hardware to deliver the functionality and interact with the user. Operating systems make it possible for software to work on hardware without worrying about the type of hardware it’s on.
User interface: The design of an application as seen by the user.
User experience: How designs of many pages and sections of an application synchronize to provide users with an experience that helps them solve the problem or accomplish the goal they use the application for.
Usability: Under the user experience umbrella, usability is the degree to which a product can be used effectively and efficiently allowing users to accomplish the desired outcome with maximum clarity of use.
Accessibility: Usability and accessibility work hand in hand. Usability focuses on how easy it is for the user to get their job done through the app while accessibility focuses on ease of access to the different pages and key features of the app.
Wireframing: Before designing a web or mobile application, a skeleton of the product is created to be used as a roadmap for the designer to base the designs on. It is also an important step in ensuring understanding of expected outcome between team members in a startup.
Interaction design: Also under the user experience umbrella, interaction design is about designing products with the user in mind. The design of products that allow users to complete tasks on the web in the best way possible.