Learn the startup lingo to get going on your entrepreneurial journey.
Do you have an idea that you think can change people’s lives for the better? You can make that idea a reality by creating your very own startup. There are many others like you who want to create unique products and services. As of April 2021, there are over 650 startups across the world that have a valuation of over US$1 billion (also known as “unicorns”) which goes to show that startups can be lucrative business ventures.
However, not all startups see such success. Only 40% of startups are able to become profitable, with one of the major challenges they face being competition. One of the ways to set yourself apart from competitors is to build a comprehensive understanding of the startup universe–and we have got you covered. Read on for a list of all the basic startup terminology you need to know before starting a business.
Acqui-hire refers to a talent acquisition strategy where a company is acquired not for its product or service but rather its talented team. This is a method of winding down a failing company and is often synonymous with a distress sale.
An angel investor is a high-net-worth individual (could possibly be a friend or family member of the startup founder) who invests in a company at an early stage. Such an investment is usually made in exchange for equity in the company.
Burn rate refers to the rate at which a company is using up its financial resources over time. It is the rate of negative cash flow on a monthly basis. If a company burns through its finances too fast, it runs the risk of running out of money and, thus, out of business.
Bootstrapping is the process of starting a business either with little or no external capital. Under this financing strategy, the company depends on the owner’s personal resources.
A convertible note is an investment strategy under which an investor loans money to a company in exchange for equity, as opposed to a return of the principal value plus added interest. The holder of a convertible note can convert it either into a specific number of shares or its cash equivalent.
Minimum viable product (MVP)
An MVP is a product at the early stage of development that is tested by early customers of the company. Based on customer feedback, the product is further developed till it becomes a perfect fit for the market.
First mover advantage (FMA)
FMA refers to a company’s ability to outperform its competitors simply because it was the first of its kind in the market. Although such an advantage might not last forever, firms with FMA tend to dominate the market for years on end.
Pivoting in the context of startups refers to a shift in strategy to make your startup more profitable. Startups usually pivot based on feedback received from customers or experts on their current product or service.
Valuation is the process of determining the financial worth of a startup. Valuation helps decide how much equity an investor must get in return for their investment
An exit strategy refers to an entrepreneur’s plan to sell their ownership or stake in the company. If a business is successful, an exit strategy helps the entrepreneur make a profit from their shares in the company. If the business is not successful, then the exit strategy could help the entrepreneur cut their losses.
Whether you are just beginning your startup journey or already have an established business, keeping yourself updated on startup terminology is pertinent to ensuring the success of your venture.
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