Whether you're building on your first startup idea or are a seasoned entrepreneur, there's a good chance you will come across a startup term or phrase you're either unsure of or just need to double-check. We are here to get you up to speed and help decipher all things startup. This definitive word list has everything you need to know to help you on your startup journey. Have this list with you, and you'll always have a reference to be on top of all the jibberish startup lingo 🚀
A - B
- A/B Testing
When you're testing two variations of a product or piece of content, in order to figure out which one is the best. For example, sending out an email with two different headlines to see which one has opened more often. It could also be developing two different designs on a product and evaluating it by a test group.
An accelerator is a support program designed to help startups excel in their growth. They usually provide mentorships, education, technical resources, and in many cases, funding. You need to apply for an accelerator program, and the competition is tough.
- Acquisition (Business & Customer)
When you're buying another business, it’s called an acquisition. The term is also used in customer acquisition, which is the process of getting a new customer.
The ability to be flexible and change direction as a reaction to unpredictable changes. The term is often used when talking about leadership and culture in business management. Startups especially have a need to be agile, as the growth of a business involves many fast changes.
- Angel Investor
An angel investor is a solo investor investing from private funds. Occasionally, angel investors team up and help each other look for potential prospects, and sometimes they even co-fund together. An angel investor is typically someone successful in his/her ventures, resulting in private capital. Their own experience and expertise are invaluable for the startup lucky enough to get funded.
- Business-to-Business (B2B or BtB)
Business-to-Business is a term used to describe the overall marketing strategy of a business selling to other businesses.
- Business-to-Consumer (B2C or BtC)
Business-to-Consumer is used to describe the overall market strategy of a business selling to consumers.
- Business Model Canvas
The business model canvas is a method to simplify your business planning by visualising all the building blocks, including customers, market, value proposition, finance, etc. It is well known globally and used by many startups.
- Business Plan
A business plan is everything about your business, in writing, from A to Z. It’s a tool used by startups to develop their business and create a strong strategy. It is also used by established businesses when launching new projects, products, or stages. When applying for funds, a business plan is given as a handout to potential investors, so they’ll know what they’re investing in.
- Board of Directors
The board in a business is a group of elected people that represents shareholders. Their purpose is to help the business by guiding the business management, approving strategy, and hiring senior positions in the company.
Bootstrapping is when a founder builds their startup from the ground up using their personal savings, with little or no help from outside sources.
- Bounce Rate
The bounce rate is the measurement for the number of people landing on your website, then bouncing off without viewing any further pages on your site. It’s used in web analytics to improve landing pages.
- Burn Rate
The burn rate is used to describe the rate at which a newly funded business spends its funds before generating money from sales. It’s a way to measure a negative cash flow.
C - D
A camel is a startup that, unlike unicorns, are reaching for balanced growth. Camels don’t grow as fast as unicorns, and they are usually worth not as much in the short run compared to unicorns. However, they are resilient and have proved to be very profitable in the long run.
- Cap Table
Your cap table (short for capitalization table) is an overview of who owns your business and how the ownership is divided. It includes stocks and convertible notes.
- Cash Flow
Your cash flow is the money coming in and out of your business. A positive cash flow means a business is earning more than its spending, while a negative cash flow means it’s spending more than it’s earning.
- Churn Rate
Churn Rate is a measurement of how well you are able to keep your customers. You can look at it as an indication of your customer loyalty. A high churn rate indicates a high turnover of customers, which is what you want to avoid—the lower your churn rate, the better.
- Cliff Vesting
Cliff vesting is when businesses offer their employees stocks as part of their pay. It’s used to engage employees and keep them employed for longer.
- Competitive and Competitor's Advantage
A competitive advantage is the things you do better than your competitors. A competitor’s advantages are the areas they do better in than you. We use these terms to provide a clear distinction between you and your competitors.
- Consumer Goods
Consumer goods are products stocked on the shelves of a shop before being sold with the purpose of being consumed by the buyer. Examples are food products, clothing, jewelry, and kitchenware.
- Convertible Note
This is a way for an investor to loan money to a startup. Instead of receiving a return on their principal investment, they receive equity in the company. It’s a form of short-term debt that converts to equity.
Copyright is the exclusive legal right given to an originator. The copyright gives the originator the right to print, publish, perform, film, or record literature, music, and arts. When starting a business, you should be cautious not to violate anyone's copyright, as well as protect your own.
- Cottage Business
A cottage business is a small business operating from home. They can sell homemade goods, baked goods, acting as a dropshipping webshop, a catering business, and much more. They are small but can be quite profitable due to the low expenses.
Crowdfunding is a way of funding your business where you can get your required funds from a group of private individuals. There are several types of crowdfunding - pre-order, equity, and donations, to name a few.
- Customer Acquisition Cost (CAC)
Customer Acquisition Cost is a measurement of how much money a business spends on getting a single sale. The term is used in marketing to measure the financial expense per sale. To calculate your CAC, you simply take the cost of marketing and divide it by the number of new customers from a certain period.
- Customer Relation Management (CRM)
Customer Relation Management is the process of building valuable relationships with customers. These days there are many CRM software options on the market, making it easier to keep track of your customers and reach out to them at exactly the right time. The point of CRM is to learn more about your customers to cater to their needs to retain customers and drive sales.
Decacorns are the step above unicorns. It’s a startup that’s grown to be worth more than $10 billion within a short period of time. Examples of Decacorns are Slack, Uber and Airbnb.
When technology develops and replaces old technology, it’s considered disruptive. For example, USB disrupted the floppy disk, and CD’s disrupted Cassette Tapes.
Dragons are unicorns that succeed in returning their funds to their venture capitalists. They are also called “fund-makers”. Only a small percentage of unicorns become dragons. For a VC to create a dragon, it usually takes an investment at an early stage.
- Due Diligence
Due diligence is a review of a business’s financial records. It’s usually made by investors before they agree to fund startups or before acquiring other businesses.
E - F
- Early Adopters
Early adopters are a segment of consumers who are first movers on new products and have a high willingness to buy them.
The end-user is the consumer that a product or service is ultimately designed for. The goal is for the product or service to be useful to the user.
A metric used to measure the extent to which people are engaging in social media and/or content on a website. High engagement usually indicates a high interest in the product, business, or content.
- Enterprise Product
Products or software developed for use within companies. When developing enterprise products, you have to serve two customers; the people using the product (employees) and the business. This is because they tend to have differing priorities.
An entrepreneur is someone who starts a business, taking on most of the risks but ultimately reaping the benefits of its success. A startup founder would be considered an entrepreneur.
Equity represents the value of the shares of a company if they were all distributed to the respective shareholders, providing all the debts were paid off and all the assets were liquidated. To calculate equity, you take away a company’s total liabilities from its total assets.
Evangelists are people within a business ecosystem who are ambassadors for your product. An evangelist can be a team member, a board member, or anyone else with a purpose in your business. The power of an evangelist is that he or she has the ability to convert non-believers to evangelists of your product. As a founder, you should consider yourself as an evangelist.
- Exit Strategy
An exit strategy is a plan for when a founder or investor will exit the business. It can both be for when to close the business due to poor profitability or when to sell due to reached targets. An exit strategy is usually predetermined based on key metrics.
- First-Mover Advantage
If you’ve invented a new product, you have the advantage of being a first-mover. Being the first will typically enable a business to gain a strong brand and customer loyalty before competitors enter the market. Another advantage of being a first-mover is you usually have more time to develop a cost-efficient scale-up, which will make it hard for your competitors to compete on price.
Freemium is a business model providing the product for free in a basic form, often with ads, without more advanced features for non-paying subscribers. A good example is Spotify, in which you have free use but need to upgrade to avoid interruptive ads.
G - H
- Growth Hacking
An umbrella term for strategies focused on nothing but growth. The goal is to acquire as many customers as possible at the lowest cost possible. It’s often a term used in, but not limited to, marketing.
- Guerilla Marketing
Guerilla marketing is used to create a buzz around the product or service and take the consumers by surprise. The point is to make a big impression on the brand. The hope is to create a memorable experience with the product to improve sales.
- Hockey Stick
A hockey stick is a period of massive growth followed by little growth. When seen on a growth chart, it looks like a hockey stick, thereof the name. It’s very common with startups who have a lot of success at first and then stabilize.
I - J
- Inbound Marketing
Inbound marketing is a technique of acquiring customers by drawing them to your product instead of pushing your product to them. Search Engine Optimisation (SEO), email marketing, social media, and blogs are a few examples of inbound marketing.
An incubator is a program helping startups to get going. They provide resources such as mentoring, legal help, tech resources, and, in most cases, funding.
- Intellectual Property
Intellectual property is the ownership of technologies, music, text, or other things protected by law. If you invent a new technology, you can take ownership through patents, which means that other people and businesses are not allowed to use it without permission from you. Copyright, trademarks, and patents are ownership protected by law.
- Joint Venture
When two individual businesses or investors join forces and collaborate in a project or investment in the startup community. You often hear about it in regards to funding when two investors or capital funds collaborate in funding a startup.
K - L
- Key Metrics
Key metrics are measures of your company’s performance in order to gain insights to help grow the business. Examples of key metrics include net profit margin, sales revenue, monthly website traffic, and even employee happiness.
- Key Performance Indicator (KPI)
Key Performance Indicators are targets for your business's performance. They need to be measurable and able to help you track the progress you make.
Launching is when you finally put your business on the market. It means that you are past the initial development, all the troubles of establishing your business, and are finally ready to make a revenue.
- Lean Startup
A startup philosophy focusing on validated learning through the process of test, adjust, repeat. The lean startup is based on the idea that startups should test their product, ideas and market-need at a fast pace. This will weed out the bad ideas that can fail early in the process, leaving resources for new ones.
Liquidity is the trade-off between the price at which an asset can be sold and the ease/speed of selling it. Cash is the most liquid asset that exists. Stocks in a company are also relatively liquid. Assets considered being liquid-poor include houses, cars, and land.
- Loss Leader Pricing
A marketing strategy that involves selling a product below its cost in the hopes of attracting customers. Hopefully, those customers will buy the more expensive products as well or buy the product again at full price. Black Friday is a good example of a concept created by the principle of loss leader pricing.
- Low Hanging Fruit
It can be a term used to describe a problem that’s easy to solve, a sale easy to make, or a goal easily achieved. However, it can also be a strategy of focusing on the easiest tasks first. It’s a strategy often used when you need to meet targets quickly. It’s rarely a strategy that benefits in the long run.
M - N
- Market Penetration
A product or business’ market penetration is a measure of the size of the potential market, measured as a percentage. If there are one million households in a city, and 100.000 of them use a cleaning service, then the market penetration of cleaning services is 10%, which makes the potential market 90%. That calculation will indicate the potential for growth in a market. Market penetration is also a word used to describe a strategy. When you aim for market penetration, you are strategizing to gain big market shares. It’s often only possible by having low prices and aggressive marketing.
- Minimal Viable Product (MVP)
Minimal Viable Product is the prototype of a product that is completed just enough to create value for its target group. Your MVP is usually a BETA version of a website or a first-generation device, but it can, in reality, take on many shapes depending on your business, product and industry. Common to all is that it gives a precise vision of a product.
O - P
- Organic/Inorganic Traffic
Organic and inorganic are terms used in online marketing referring to non-paid vs paid traffic. Organic is a key metric that you haven’t paid for, whereas inorganic is a key metric you have paid for through ads. As an example, on websites, there are organic visitors and inorganic visitors. The organic visitors either found you through referrals from your existing customers or through search engines, while the inorganic visitors found you through online ads.
- Outbound Marketing
Outbound marketing covers all marketing initiatives where you reach out to customers instead of attracting them to you. Initiatives such as online ads, TV spots, bus ads, and billboards are types of outbound marketing.
Outsourcing is when you leave certain tasks or areas of your business in the hands of other businesses or individuals. Typical areas to outsource are accounting, marketing, or web development. The purpose of outsourcing is to give you more time to concentrate on the things you do best.
A patent is an exclusive right granted for inventions of products, software, or technology. It’s a way to protect your intellectual property by making sure that no one is allowed to copy your development. If you or your business are the inventors of your product, you can apply for a patent. As the owner of a patent, you can license other businesses to make use of it, and you are also able to sell its rights.
A pitch is a short and impactful presentation of an idea. When you’re applying for funding, there’s no way around the pitch, as this is where you’ll dazzle your investors. Besides trying to win investments, it’s also an excellent tool for validating your idea by presenting it in front of your target market.
- Pitch Deck
Your pitch deck is a power presentation made for the purpose of making investors fall in love with your business. If you’ve ever watched Shark Tank on TV, then You’ll know what a pitch is. What the entrepreneurs are presenting in a very short time is a pitch, and their presentation is their pitch deck.
A startup pivot is when a startup is changing its strategy to accommodate changes in its market, customers' preferences, or other changes that make the previous strategy inadequate. Pivoting starts with feedback from your customers. From there, you may find that your business plan, product, or segment is no longer a good option for your business, and you will have to change direction.
- Post-Money Valuation
Estimation of a startups’ worth after financing or capital injections is called a post-money valuation. Post-money valuation equals the pre-money valuation + the new capital. That means that if a startup is evaluated at $5 million before a funding round and receives $2 million in funding, its post-money valuation is $7 million.
- Pre-Money Valuation
Before a funding round, an estimation of a startup’s worth is called a pre-money valuation. A valuation before a funding round does not only give investors an idea of what the startup is worth but also sets the value of each issued share.
- Product/Market Fit (P/M Fit)
Product/market fit is the process of making your product fit the needs of the market. When focusing on product/market fit, you will define your target group, test your product on a test group, and make adjustments to fit their needs. This process will be repeated until you’ve got the best possible product. It’s a part of your market analysis and is crucial to building a strong business. Your future investors will be very interested in the results of your P/M fit.
Q - R
- Ramen Profitable
Being Ramen Profitable means that a startup is profitable enough to pay its founders' living expenses. It’s a term popularized by the venture capitalist Paul Graham. When you talk about profitability in general, it means that your business pays off the investments put into it. Ramen Profitability instead means that it buys you time to reach that point.
The customer retention rate is a metric used to measure your ability to keep your customers. It’s used in businesses with subscription-based business models. A positive number of customer acquisitions is not enough to define a healthy business - you need to keep them as well. The retention rate is the percentage of customers retained in a certain period of time. When calculating your retention rate, you divide your number of active users that have continued their subscription with the total number of active users at the beginning of the time period. It is logical that a high retention rate equals a low Churn Rate.
- Return On Investment (ROI)
Return on Investment is a term describing how much you gain from the money you spend. It can be used to measure investment in machinery, employees - and anything else; although it’s referred to mostly when marketing your product. When calculating your ROI, you divide the current value of the investment by deducting the cost of your investment. We’ll use an example: If you spend $5000 on Facebook ads that have generated $15000 in revenue, the calculation looks like this: ($15.000-$5.000)/$5000 => $10.000/$5.000 = 2. Converted to percentages, you will have an ROI of 200%. It means that every dollar you spend on your investment will convert into three.
Your revenue is the money coming into your business from sales. It is not to be confused with capital or profit. Profit is the money left from your revenue when you’ve deducted expenses and capital. Your revenue is simply a term describing the money you get from sales.
- Risk Analysis
Risk analysis is a way of measuring the risks involved with starting a business, as well as the ongoing risks that happen along the way. It’s useful to help identify any potential problems that may arise and reduce the risks of them occurring.
A roadmap is a strategic plan that outlines the goals and milestones of every stage of your startup’s development. It is also used to communicate the startup’s strategic direction to all employees to articulate the company’s direction.
- Runway (Run Rate)
Your runway - or run rate - is a way of measuring how many months you have left in your business, dependent on your current capital and your monthly burn rate. To calculate your runway, you’ll take your monthly spendings and divide them with your current capital. That will equal the number of months left before you can no longer pay your bills. A runway is a great tool for staying on track with your money.
S - T
Scalability describes a business's ability to adapt to an increase or expansion of workload. If a business is scalable, it’s much more likely to get funding, as the business is able to create massive growth. If a manufacturing startup is only able to produce a limited amount of goods, it’s not scalable, and it’s not likely to receive as much funding as a scalable one.
- Search Engine Optimisation (SEO)
Search Engine Optimization is a way of increasing the quantity and quality of traffic to your website through organic search engine results. This is done by optimizing your website’s content so that a search engine will display it as a top result when a specific keyword is searched.
In entrepreneurship, the word seed is used to describe a certain stage of a startup’s funding process. Seed is the first official round of funding, which typically happens in a very early stage of the startup’s development in return for equity. While seed funds can come from many sources, it’s typically given by Angel Investors. It's also possible to have multiple seed funding rounds.
Segmentation is when you divide your customers into groups according to common features with the goal of making an efficient marketing strategy. Segments are often made from a mix of demographics, psychographics, behavior, and geographics. When marketing your product, it’s impossible to target every person in the world, which is why you should divide your customers into segments. Segmentation will give your marketing strategy much better results, as it will help you focus on the right people.
- Serial Entrepreneur
A serial entrepreneur is an experienced entrepreneur with multiple ventures behind them. Famous serial entrepreneurs include Richard Branson, Josh Kopelman, Elon Musk, Warren Buffet, and Naveen Jain.
- Series A, B, C
When we’re talking about funding a startup, there are different stepping stones. Usually, a startup begins with pre-seed and seed investments to get the business off the ground. From there, some startups move on to Series A funding, which is significant venture capital used to develop the business. From Series A, it moves to Series B, which provides even larger amounts of venture capital to grow the startup. Few startups make it to Series C rounds, which provide even higher capital investment. To enter a Series C round, you are already a successful business and will probably use the funds to acquire other businesses or expand to new markets.
- Serviceable Addressable Market (SAM)
A Serviceable Addressable Market is the part of the market you’re able to address in regards to accessibility, such as geography and language. If you’re starting a fast-food restaurant, then your total addressable market is the global market of fast-food restaurants. However, as a restaurant, you are geographically limited, so your Serviceable Addressable Market is the group of people living in reach of your restaurant.
- Serviceable Obtainable Market (SOM)
SOM is the part of the market you expect to obtain, in other words: Your market share. If you are a fast-food restaurant in Los Angeles, Serviceable Addressable Market (SAM) is everyone living in reach of your restaurant. However, depending on your product and the number of competitors, they probably won’t all come to your restaurant. Your share of the market is the ones who do (SOM).
Shares and stocks are the same and differ depending on what country you live in. They are the unit of capital that details the ownership relation between the company and the people who invest in it. These people are known as shareholders/stockholders.
- Software as a Service (SaaS)
A term often mentioned in the startup ecosystem is SaaS, which means Software as a Service, which has been a booming industry for the past ten years. Common to SaaS startups is that they are providing their service from the cloud and are mostly subscription-based, as opposed to “old-school” software, in which you pay a one-time fee and download the software to your computer.
A stakeholder is a member of a group that has an interest in the company's business for multiple reasons apart from just stock/share performance and can affect or be affected by how the business operates.
- Stealth Mode
When a startup is working in stealth mode, it’s taking a secretive approach and avoiding attention from the public. The advantages of doing so are to keep out of sight from competitors and to protect ideas and intellectual property. There are, however, several disadvantages to operating in stealth mode. First of all, testing and validating your product is difficult. Networking, getting investors on board, and hiring is also made quite complicated when you can’t reveal what you're working on.
Suppliers are organizations/businesses that provide what is needed to another business, such as a product or service. They are an important element in the supply chain of a business.
- Sweat Equity
Most equity is bought through investment, but sweat equity is earned by providing time and expertise to a startup. It’s quite common for startups to offer equity in addition to or instead of salary for their first hires.
- Total Addressable Market (TAM)
Your TAM is the entire market for products or services like yours. It is a term used in the analysis and assessment of market size when determining your market.
- Target Market
The group of people you are expecting will buy your product. They are the ones whose problem you are solving by putting your product on the market.
- Term Sheet
The term sheet is the paperwork showing the basic terms and conditions of a funding agreement. A term sheet is not a binding agreement but is used as a template for more detailed and legally binding documents. Usually, a term sheet will provide information about the startup’s valuation, liquidation terms, voting rights, and investor commitment.
- The Chasm
The Chasm is the huge gap between early adopters and the early majority. When going to market with a new product or technology, your first customers will be the early adopters. Those are the customers willing to take chances on new products.
When we in the startup community talk about traction, it’s the preliminary results a startup has made. There is no one way to measure traction, as there are many ways to indicate success. Traction can be the number of customers, as well as numbers of subscribers to a newsletter. It can just as easily be customer feedback from a market analysis or clicks on a website. It all depends on the industry and the goals of the individual startup.
U - V
A startup that’s managed to get a post-money valuation above $1 billion in a funding round. Examples of unicorns are SpaceX, Stripe, Shein, and Reddit.
- User Experience (UX)
User experience is the customer experience related to your product. When measuring user experience, you are defining how well your product met the expectations of your chosen target group.
- User Interface (UI)
The user interface is the part of a device or software that customers use and are presented with. It’s not about the backend and technical part of your product but focuses on the details visible to the user. Examples are the design of an app or the screen on an ATM. The goal is to make a product easy-to-use and functional for the user.
Validation is the process of getting a thumbs up on your idea from your target group. Validating your product is both valuable and educational. Potential investors use your validation as a top priority when deciding to invest and will tell you if your idea is as great as you think it is. You’ll also learn a lot from the feedback from your target group, as well as get a chance to adjust your product before going to market.
A valuation is when you calculate a business’s worth. In the startup scene, you’ll often hear about it in regards to funding, as a startup will be valued before and after receiving funding. That’s what we call pre- and post-valuation. It’s important in funding situations because it determines the worth of the equity an investor receives in return for funds.
- Value Proposition
Your value proposition – or Unique Value Proposition (UVP) - is a short description presenting your solution. It should describe the uniqueness of your product, directly linked to the problem you’re solving in the market.
- Venture Capital (VC)
Startups need a certain amount of investment to grow. Venture capital is an investment that startups and early-stage companies can receive if they show they have a high potential for long-term growth. Venture capital funds exist purely for this reason and can be found all over the world, especially in startup hotspots like Silicon Valley.
- Vesting Period
A vesting period is a time an employee must work for an employer in order to own outright employee stock options, shares of company stock, or employer contributions for a retirement plan. Vesting periods can come in a variety of timeframes and are usually negotiated as part of contract discussions.
W - X
A wireframe is a way to design a website service useful to help programmers and designers think and communicate about the structure of the software or website being built. It should take into account user needs and user journeys.