You always dreamed of being a founder and launching your own company. You went through the motions, created an amazing MVP, gathered a team, and are ready to pitch. It goes great until you are hit with questions that sideline you, not because of their difficulty, but because of lingo used.
“Seems to me like you don't have a moat, right?”
“What is the current burn rate? Your churn?”
“Any plans to expand into D2C or will you stick to enterprise SaaS?”
If you want to be a successful founder, it is paramount to understand how everyone in the startup ecosystem talks. This is precisely why we created the most comprehensive startup glossary for founders available anywhere.
Enjoy.
(If we forgot any word, email [email protected] and we will add it to the list!)
Table of Contents
409a valuation
An independent appraisal of the fair market value (FMV) of a private company's common stock. This is the stock that is reserved for the founders and their employees.
83(b) election
A U.S. tax provision that gives a founder or an employee the option to pay taxes on the total fair market value of restricted stock at the time of granting. This informs the Internal Revenue Service (IRS) to tax the elector for the ownership at the time of granting, rather than at the time of stock vesting.
Accelerator
A mentor-based program that provides intensive guidance, support, and structure to startups for 3 to 6 months. Accelerator programs are usually designed for post-product startups and culminate with a Demo Day where startups get on stage and pitch several investors at once. Some accelerators take equity from startups (true accelerator model), others charge a fixed fee (which make them effectively a consulting business), while others are free to join (those are usually backed by public or corporate funding). Famous accelerator programs include YCombinator, Techstars, 500Global.
Accredited investor
An investor who meets certain criteria regarding income, net worth, and qualifications. For example, they must have earned $200,000 in income per year for the past two years. This is important because in the US, only people who are accredited investors can invest in startup under RegD, rule 506(c).
Acquihire
An acquisition of a company not for its product or service but rather for its team and their talent.
Acquisition
A transaction where a company is sold to a new owner. More often than not, a larger company purchases a smaller startup. This is important because an acquisition is one of the two main ways a startup can exit (the other way being an IPO), which is the desired outcome for a venture-backed startup. Acquisitions can range from a few million dollars to several billion dollars, and be paid in a mix of cash and equity. For example, Microsoft acquired Linkedin for $26.1B in 2016.
Advisor
A person who helps the startup and does their best to maximize its success. They provide value in the form of connections, time, and expertise and are often compensated in equity.
Agile
A methodology that involves constant collaboration with stakeholders and continuous improvement at every stage. The process of the team includes planning, executing, and evaluating.
Alpha
A pre-release version of a product. This is often still part of the testing process.
Amazon Web Services
An evolving and comprehensive cloud computing platform offered by Amazon. It offers companies a variety of services to lower costs and innovate faster. Other major cloud players include Microsoft Azure and Google Cloud Platform. Amazon Web Services was instrumental in lowering the cost of starting up a software company and enabling the SaaS startup ecosystem.
Angel group
A group of investors who pool their personal resources to invest in a startup. Unlike venture capital, angel groups use their own net worth.
Angel investor
An individual who provides capital for a business or startup, usually in exchange for convertible debt or ownership equity. Angel investors are often the first outside investors in a startup as they invest even before venture capital firms.
Angel round
A small round of funding that is at the earliest stages of the company. It is meant for angel investors, angel investor groups, friends, and family. Angel rounds in the US are typically done via SAFE notes or convertible notes, under $1M in size and under $10M in valuation cap.
Annual recurring revenue (ARR)
A subscription metric that shows the yearly money that comes in every year from the life of a subscriber. ARR is a key metric for SaaS startups. It is sometimes said that the valuation of a SaaS startup is 10 times its ARR - although this is a very rough approximation.
Articles of Incorporation (or Certificate of Incorporation)
In the U.S., this is the document filed with the state to establish a company. When filing, this informs the state of the corporation's name, purpose, and address of the registered agent.
Authorized shares
Shares in a company that have been sold publicly. They fall within the maximum number of shares a company can sell according to the corporate charter.
B2B
Business-to-business. It is a form of transaction that takes place between one business and another. The business is the end user. B2B is usually segmented by contract size - small offices, SMBs, mid-market, and enterprise. For example, Salesforce is a B2B company.
B2C
Business-to-consumer. It is a form of transaction that takes place between a business and an individual. The individual is the end user. For example, Tinder is mostly a B2C company.
B2B2C
Business-to-business-to-consumer. It is a business that extends the B2B model to include e-commerce for consumers.
Balance sheet
A financial statement that reports a company's assets, liabilities, and shareholder equity. This is used to evaluate the business at the date of publication.
BAU
Business as usual. This refers to the day-to-day operations of a company.
Beta
A product released to a limited public audience to test the product before it is officially launched.Beta comes after alpha. Some startups may release a "private beta" (invite-based) or a "public beta" (anyone can signup) as a way to bring to market a product that may still be buggy or unpolished. Google Domains famously remained in beta for over 7 years.
BHAG
A big hairy audacious goal. This is a clear and compelling objective that the startup should strive for.
Board of Directors
The governing body of a company. A startup board of directors oversees the finances and is responsible for hiring and firing senior management.
Bootstrapping
The process of starting a company via one's own personal savings. If the company has any sales, that is also used to fuel the growth of the company. Essentially, bootstrapping means self-funding. A company that takes funding from angel investors or VC firms is not a bootstrapped company anymore. Some founders manage to stay bootstrapped all the way to an exit, such as PentyOfFish ($575M exit) or Mailchimp ($12B exit).
Bridge
Short-term funding that helps the startup access money in between rounds of funding. A bridge may be non-dilutive (bridge loan) or dilutive (bridge round). A bridge is usually not perceived as a positive signal as it indicates the company didn't reach its expected target, hence the need for a bridge.
Bubble
Refers to a period when the valuations of startups are abnormally high when compared to historic valuations.
Burn rate
The pace at which a new company is running through its startup capital ahead of it generating any positive cash flow. For example, a company may have a burn rate of $20,000, meaning they spend 20,000 per month.
Business plan competition
A contest between startups, early-stage businesses, and/or growing businesses, the goal of which is for participants to develop and submit an original idea or complete their existing business plan.
Buying the logo
A term for investors who invest a small percentage of their fund into a company so they can add their logo to their portfolio and claim credit.
Buyout
An investment transaction where one party buys all or the majority of a company's shares to gain control of the target company.
CAC
Customer acquisition cost. This is the cost related to acquiring a new customer. This allows companies to gauge how much they are spending on each new customer. CAC is typically used with LTV (Customer Lifetime Value). Ideally, the LTV/CAC ratio should be 3, which means you should make 3x of what you would spend on acquiring a customer
Cap table
A spreadsheet or table that shows the equity capitalization for a company. It showcases all of a company's securities (common shares, preferred shares, options, SAFEs, convertible notes, and warrants) and how much of each security type each investor owns. Additionally, it also shows the value of their respective stakes and their current ownership percentage.
Cash flow positive
Simply put, a company has more money moving into it rather than out of it. It indicates that the liquid assets are growing.
Cash flow statement
A financial document that is used to manage finances by tracking the cash flow of a company. It is one of the three main financial document of a company, along with the balance sheet and P&L.
Centaur
A startup that has $100 million in annual recurring revenue. This is a derivative of the famous "Unicorn startup" concept.
Chasm
The transition from a little-known product to the mainstream. If a startup can successfully cross the chasm, they have the opportunity for mainstream success and hypergrowth. The concept stems from the renowned book "Crossing the chasm" by Geoffrey Moore.
Churn rate
The percentage of existing customers who stop doing business with the startup over a specific time period. For example, successful SaaS companies report annual churn rates between 5% and 7%. A high churn means low retention, which may indicate a low product-market fit. For early-stage startups, it is recommended to fix your churn before focusing on customer acquisition.
Cliff
A period of time required before employees or founders can claim percentages of their shares. It is meant to keep employees and executives committed during the early stages of the startup. For example, founder shares may vest annually over 4 years with a 1-year cliff, meaning that if a founder leaves the company within the first 12 months, they get zero equity.
Commercialization
The process of bringing new products and services to the market. Similar to "going to market".
Common stock
A class of stock that represents ownership in a company. It is the basic form of stock issued by any company.
Convertible note
A method for seed stage investors and angels to invest in an early stage company that hasn't been explicitly valued. After more information becomes known, the note can be converted into equity.
Convertible preferred stock
Type of stock that lets shareholders convert their preferred shares into common shares after a set date.
Corporate venture capital
The investment of corporate funds into external startup companies. This is often done to gain a competitive advantage.
Cottage industry
Startups that work best if they remain small. They are often able to operate out of a person's home, hence the name. Consequently, those businesses are usually not venture-backable.
Crowdfunding
The use of small amounts of funding from a large number of individuals to finance a new business. Crowdfunding is a generic term that may apply to online pre-sales (e.g. Indiegogo) or equity fundraising from the crowd (e.g. Republic).
Crowdinvesting
A form of crowdsourcing where individuals get equity in return for their funding. Because this is a heavily regulated environment, crowdinvesting is usually done via specialized crowdinvesting platforms.
Crowdsourcing
The practice of referring to a body of people to obtain needed knowledge, goods, or services.
Corporate round
This occurs when a company (not a VC firm) makes an investment into another company.
Customer development model
A process by which a startup can test its assumptions that underpin their initial ideas about the product and the market.
Debt financing
The process of raising funds via an investor or a lender where equity shares are not given by the startup. Instead, the startup borrows the funds and pays it back with interest.
Deck
Presentation used by founders to showcase the potential of their startup. This is what is provided to investors in the hope of raising capital. The deck or "pitch deck" is a heavily codified document and the main marketing material for founders raising funds.
Decacorn
Startups with a valuation of more than $10 billion. Derived from the famous concept of "unicorn startup".
Deal flow
The rate of business proposals and pitches received by VCs, angels, and other financiers.
Deal lead
The investor who takes responsibility for setting the terms and driving the process for the investment. The lead investor bears the costs and responsibility of running the due diligence and getting a board seat. For that reason, most investors prefer "following" rather than "leading" a round, and founders find it hard to secure a lead for their rounds.
Deal memo
Document provided to the investment committee of a VC firm that outlines the key facts of the company, deal, and investment suggestions.
Demo day
An event organized by an accelerator, incubator, or VC firm where founders formed by that organization pitch their product to investors. Demo Days used to be in-person events, but are now increasingly hybrid events with the possibility to join in remotely.
Dilution
When a company issues new shares of stock that decrease an existing stockholder's ownership percentage of the company. Not all stockholders may be affected equally by dilution depending on the class of shares they own - as famously illustrated in the movie "The Social Network".
Diluted founders
Founders of a startup who are gradually losing their equity stake in their own company due to outside investment. Founders should be careful to retain enough equity in their company as they go through funding stages. It is usually considered that the founders should collectively own at least 50% of the company right after Series A.
Discounted convertible note
The discounted rate on the shares an investor will receive when the note matures.
Disruption
The process in which an underrated product or service becomes popular enough to replace or displace the conventional product or service.
Disruptive technology
A new technology that displaces an established technology to the point that a new industry is created.
Dogfooding
The process by which a company makes its employees use the software and hardware that the company makes. This is done so that improvements can be made and bugs discovered before the product is released to the market.
Down round
A funding round in which the startup sells shares of its capital stock at a price per share that is less than the price per share it sold for at an earlier round.
Drag-along rights
A provision in an agreement that allows a majority shareholder to force a minority shareholder to join in the sale or merger of the company.
Dragon
An extremely rare startup that raises $1 billion in a single round of funding. It is yet anothe variation of the Unicorn startup concept.
Due diligence
The process undertaken by a VC that appraises the startup's current state of affairs (its assets, liabilities, and management) and its commercial potential.
Eat their lunch
Refers to the speed at which a startup can grow and scale in a new market or as a first-mover. The result is that they may be able to take a large chunk of the market before their competitors can move, hence eating their lunch.
Early adopters
Customers who use the startup's product or service before the general public does. These users can offer the startup honest and direct feedback, which can be used to improve the product before expanding to a larger audience. The concept was coined by Rogers in his Diffusion of Innovation (DOI) Theory.
EBITDA
Earnings before interest, taxes, depreciation, and amortization. This is a popular and widely used method for measuring the financial health of a company and their ability to generate cash.
Ecosystem
An environment formed by business-oriented people and startups in various stages and organizations for the creation and scaling of new startup companies. Ecosystems usually include everything from universities to government entities.
EIR
Entrepreneur in residence. It is a position in a company (usually a VC firm) that is a short-term role where an experienced entrepreneur is brought in to develop a new business. The firm is often willing to financially support the EIR's business idea.
Elevator pitch
A brief speech that outlines an idea for a project, service, or product.
Equity
Ownership in a company expressed as a percentage in shares of stock.
Evangelist
A person who believes so much in a product or service that they freely try to convince others to use it.
Exit
When a founder ends their involvement in the business, usually via a liquidity event (selling their shares to investors or to another company). The main two types of exits are an acquisition and an IPO.
Exit strategy
The strategic plan by the founders to sell their company to investors or to another company.
Family office
A private fund investing on behalf of a single high-net-worth individual, family (Single Family Office), or group of families (Multi Family Office). Family offices may invest in startups or in VC funds, although that's just a small part of their activities.
First mover advantage
The ability of the startup to have a competitive advantage by being the first to market in a new product category.
Flat round
A round of funding where the startup valuation is the same as the previous round of funding. This is usually not a good signal for the startup.
Follow-on funding
The process of VC firms investing in the later rounds of companies in their portfolios that they have already invested in in order to avoid dilution.
Founders shares
Stock issued to the originators of the company that provide a method to manage control and ownership of the company.
Freemium
A business model where customers are offered a restricted version of a product or service at no cost. Additional features are available at a cost.
Friends and family round
When a startup raises their first outside capital from their own network. This has more flexible terms and is less formal than later funding rounds.
Friends, family, and fools
The people who fund early-stage startups, often at the pre-seed stage. Also known as the "3F".
Funding round
The primary method of financing that startups undertake to raise external capital.
Gamify
Building the principles of game design into a product to make it more fun, engaging, and rewarding to its users.
General partner
A manager at a VC fund. They sit at the top of the VC job pyramid.
Grant
An award (often financial) that is given by one entity to another in order to help them facilitate a goal. For example, governments and large corporations usually run grant programs to support startups and innovative companies.
Growth hacking
The use of unorthodox, agressive, cost-effective digital marketing tactics to grow and retain a user base, gain exposure, and sell products.
Hackers
Talented programmers who get the job done despite the obstacles.
Hackathons
An event - usually 1 to 2 days - that brings computer programmers and other interested people together to collaborate on the improvement of software or by building a new software program.
Hectocorn
A startup with a valuation of over $100 billion.
Hockey stick
The growth curve of a startup that investors want to see, where metrics such as active users or sales double each year. Also know as "J-Curve" or "Up-and-to-the-right".
Initial coin offering (ICO)
The cryptocurrency equivalent to an IPO. A startup looking to raise funds to create a service, app, or coin can use an ICO to raise funds.
Incubator
A collaborative program that offers startups resources, seed funding, training, and mentorship. Unlike an accelerator, this is a long-term program and aims at pre-product startups.
In-kind support
Resources besides money (i.e. mentorship, connections, service, or supplies).
Intrapreneur
An employee within a company that is tasked with developing an innovative product or project within the company. Essentially an entrepreneur without the risks associated - and usually less reward too.
Issued shares
The total number of authorized shares that the company has issued to all its stockholders.
Iteration
The process of refining the idea or concept of the startup.
IPO
Initial public offering. This is the process of offering shares of a private company to the public in a new stock issuance for the first time. An IPO is the most desirable outcome for a venture-backed startup, as it's usually a massive exit for all the shareholders.
KPIs
Key performance indicators. These show the progress of a startup and highlight areas that need improvement.
Launch
When the product or service of the startup is brought to market. Many startups launch their product on ProductHunt. It is also customary to "relaunch" a product every time a big update or significant new feature is released.
Lead investor
An investor that organizes the funding round and invests the largest amount of capital in that round.
LEAN
Startup methodology where the startup should build and test products as quickly and inexpensively as possible. This is done to improve the product via trial and error instead of creating a fully developed product that might fail to attract customers. The concept was made popular in the 2010's via Eric Ries' book "The Lean Startup Methodology".
Limited partner
An investor in a VC firm who provides capital yet has nothing to do with the day-to-day operations. Limited partners may be institutionals (endowments, pension funds...) or private entities (HNWI, family offices...).
Liquidation preference
A contractual clause that allows an investor to receive preferential rewards if the firm is sold or undergoes a liquidity event.
Liquidation waterfall
The manner in which existing shareholders will be reimbursed in the case of a company's liquidation.
Liquidity event
An event that allows founders and early investors in a company to cash out some or all of their ownership shares. This is often the result of an acquisition, merger, or IPO.
Lockup
A period of time where investors are not allowed to redeem or sell shares of a certain investment.
Loss leader pricing
The practice of selling a product or service at a loss in order to obtain more traffic to the business.
LTV
Lifetime value. This is the amount a startup can expect to earn from a customer during the time they are with the company.
Major investor
Any investor that holds 100,000 shares of preferred or common stock.
Market penetration
A way to measure how much a product or service is being used by customers. This is compared to the total estimated market for that product or service.
Metrics
A way to measure company growth via a quantifiable measure to track, monitor, and assess the success or failure of the business's processes.
Merger
The process of combining two separate companies into a single new entity.
Micro-VC
Venture capital funds that focus on making smaller investments in early-stage companies, often at the seed stage. These funds often have less capital available and smaller fund sizes. Micro-VCs are usually emerging VC fund managers, and may turn into full-fledged VC firms a few years later.
Moat
A metaphor for a business being able to maintain a competitive advantage over their competitors in order to preserve market share and profits. This is usually maintained via low-cost production, high switching costs, intangible assets, network effects, and efficient scale.
Monetize
The process of deriving revenue from the users of your product or service.
Monthly recurring revenue (MRR)
Income that the startup can reliably anticipate for the month. Key metric for SaaS startups. Many SaaS founders see $8,333 MRR as their first big milestone, as it means reaching $100K ARR.
Moonshot
An ambitious and ground-breaking project where the risks and potential benefits are difficult to assess. Moonshot projects often take years to come to fruition.
MVP (Minimum Viable Product)
A product with a limited set of features that can attract early-adopter customers and validate a product idea. This occurs very early in the product development cycle, and the future product often looks completely different from the MVP.
Non-technical founders
A founder who does not have technical skills but has general business experience, relevant connections, and deep domain expertise. They often serve as a CEO or COO.
Non-equity assistance
A funding model in which funds are raised without giving up equity to the investors. Instead, the investors are paid back a stipulated multiple.
OKRs (Objectives and Key Results)
This helps companies define objectives and then track the outcomes. It is designed to achieve far-reaching goals in days instead of months.
Option pool
Shares of a startup specifically reserved for employees. This is used as a way to recruit and incentivize talent.
Options
The right for an investor to buy shares or stock in a company at a predetermined price in the future.
PaaS (Platform as a Service)
A cloud computing service that allows customers to develop, run, and manage applications without having to build and maintain the required infrastructure.
Party round
A funding round where a startup raises from multiple investors, none of which individually has a large enough stake. This differs from a traditional round, which has one lead investor and multiple follow investors. Party rounds have become popular with the advent of SPVs, which made small checks easy to raise.
Pay to play
A provision that requires an existing investor to participate in a subsequent investment round (such as a down round).
Peer-to-peer lending
Technology-enabled ability for people to lend or borrow money from one another without going through a bank.
Pitch
A speech or brief presentation meant to excite the audience about the opportunity.
Pitch competition
A competitive event where founders pitch their startups to a group of people, often investors. The winners receive capital, connections, and other business resources.
Pitch deck
A presentation on key aspects of the startup. This includes the problem, how the startup is a solution, the target market, the team, and the business plan.
Pivot
A shift in business strategy that is the result of changes in its industry, customer preferences, etc.
Pony
A startup with a valuation of more than $10 million.
Portfolio company
A company that a VC, holding company, or startup studio has invested in and owns equity in.
Post-IPO equity
Occurs when a firm invests in a company after the IPO is complete.
Post-IPO debt
Similar to debt funding, this occurs when a firm borrows money after the IPO and must pay it back within a set timeframe with interest.
Post-IPO secondary
Occurs when an investor sells their shares to the public on the secondary market after an initial public offering (IPO). The proceeds go to the investors themselves, and not the company.
Post-money valuation
The approximate market value given to a startup after a round of financing from angel investors or venture capitalists has been completed. The post-money valuation is equal to the pre-money valuation plus the amount invested.
Pre-money valuation
The value of a company not including external funding or the latest round of funding. Essentially, how much a startup is worth before the investment.
Preferred stock
Type of stock that comes with special privileges that is given to VCs to mitigate their investment risk.
Pre-seed funding
Funding round where the startup is funded by friends, family, fools, and the founders themselves. Angle investors and certain VCs also invest in this round. At this stage, the startup usually has a basic product and little revenue.
Priced round
Funding round where investors purchase newly issued stock in a company at an agreed-upon price per share. The price per share is determined by the valuation.
Private equity
Investment funds, generally organized as limited partnerships, that buy and restructure companies. Venture capital is a type of private equity.
Problem-founder fit
An idea put forward by Paul Graham that states great founders need to work on a problem to make themselves worthy of solving it.
Product-market fit
When a new product launched on the market generates non-trivial revenue and growth, therefore proving that there was a demand for that innovation. Product-market fit (PMF) is the first major milestone of every startup.
Proof-of-concept
A demonstration of the product viability. The proof-of-concept is a feasibility check, testing to see if the product should be funded and built. The proof-of-concept should demonstrate that the product or concept not only works but will fulfill customer requirements and that the customer will adopt it.
Pro-rata rights
A right that can be given to an investor to allow them to maintain their level of percentage ownership in a company during subsequent funding rounds.
Prototype
An initial model of an object built to test a design. This allows the startup to see if the concept can be viable before building and launching at scale.
Ramen profitable
A startup that is barely profitable, only making enough money to allow the founders to live on the cheapest diet.
REG A
An offering that allows companies to sell their securities on the public markets without having to register the offering with the SEC.
REG CF
An offering that allows companies to sell their securities via crowdfunding.
REG D
An offering intended to make access to the capital markets possible for small companies that could not otherwise bear the costs of a normal SEC registration. Reg D includes two famous exceptions : Rule 506(b) and Rule 506(c).
Representations and warranties
A series of statements that the venture capitalist requires the startup to make in the securities purchase agreement.
R&D (Research and Development)
The process by which companies innovate and improve their existing offerings and/or introduce new products and services to the market.
Retention
The rate at which the startup retains its users or customers. This signifies higher levels of customer loyalty, increased revenue generation, and higher levels of customer satisfaction. Retention is a leading indicator of Product-Market Fit. Retention is often measured with its opposite concept of "churn".
Return on investment (ROI)
The money an investor in a business earns for their investment of capital into the company. Any return is from the net profit the business makes. A good ROI is considered 7% or greater.
Revenue
The total amount of money that is generated before expenses.
Revenue-based financing
A funding model where an investor provides funds to a startup but not for equity. Instead, the investor is paid back a certain percentage of the business's total revenue or sales over a given period. This continues until the investor makes back a predetermined multiple of the given amount. RBF is typically used by post-revenue eCommerce and SaaS startups.
Right of first refusal
A provision giving the investor the right to buy stock on the same terms offered to a third party.
Run rate
The process in which the founders can project the performance of the startup in the future based on current data.
Runway
The period of time that the startup can remain in business, given the current amount of funding. It is also imperative for the startup as it helps determine the budgeting, strategizing, forecasting, and fundraising throughout the startup lifecycle.
SaaS (Software as a Service)
Software as a service is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. Instead of purchasing and installing the software, it is accessed via the internet.
SAFE note
A type of convertible security. They are documents that early-stage companies use to help raise pre-seed or seed capital. This note acts as a legally binding promise to allow an investor to purchase a specified number of shares for an agreed-upon price at some point in the future. SAFE notes are quick and cheap to set up, so they are usually preferred for smaller rounds. Although people tend to use the YC SAFE template as is, it has been criticized for offering too much protection to investors and new versions have been suggested.
Scaling
The ability for the startup to grow without being impeded. This often requires capital, planning, the right systems in place, partners, technology, and processes. Scaling usually happens after Product-Market Fit.
Scalable
A startup that aims to become an extremely high-growth, profitable company but is only just beginning. The model needs external capital in order to create the demand and expand.
Scout
Operators or ex-founders with great startup networks that work with VC funds to create more deal flow opportunities.
SEC
The Securities and Exchange Commission. It is a U.S. government oversight agency responsible for regulating the securities markets and protecting investors.
Scrum
An agile project management methodology that focuses on pivots, execution, and speed. It is designed to help small teams build complex products.
Seed funding
The earliest form of outside capital a startup will raise. Some startups never mature past this funding stage.
Secondary market
The process where private company stock is sold to another private party (rather than selling directly to investors).
Serial entrepreneur
A person who can routinely transform creative business ideas into successful business ventures. Once they have an exit from a startup, they often begin a new startup funded by the proceeds. Serial entrepreneurs are sought after by investors because their experience is perceived as a positive signal.
Series A
Funding round where the startup has proved its business model and has demonstrated the possibility to grow and generate revenue. This is often the first official round of investment from VCs.
Series A crunch
The notion that many startups who raise a seed round won't be able to attract investors for a Series A round.
Series B
Funding round where the startup has met key milestones and continues to grow. Series B investors pay a higher share price than Series A investors.
Series C
Funding round where the funds will be used to scale the company, growing it as quickly and successfully as possible. There's no theoretical limit to the number of rounds.
Shareholders' agreement
A document that establishes certain rights and responsibilities of the founders and the board of directors. This is separate from the agreement that founders sign to purchase their shares.
Smart money
Value brought by an investor that goes beyond a check. This includes connections, time, and guidance, which is usually provided by the investor to the founders.
Social proof
The process of showcasing reviews for your product or offering via testimonials, product reviews, earned media, influencers, public relations, social media, and community.
Social venture
An undertaking by a firm or organization established by a social entrepreneur that seeks to provide systemic solutions to achieve a sustainable, social objective. These are often mission-driven.
Soft landing
A controlled launch to test a new market/ecosystem via a tailor-made program. This is often done when a startup is expanding into a new country and doesn't want to invest all of their resources at once.
Solopreneur
An entrepreneur who starts and grows a business alone.
SPAC
Special purpose acquisition company. A SPAC raises capital through an initial public offering (IPO) for the purpose of acquiring an existing operating company.
Stack
The list of technologies required to build and launch an application.
Stealth mode
The startup's temporary state of secretiveness, usually undertaken to avoid alerting competitors to a pending product launch or another business initiative. While some startups may require to be in stealth mode (for example ahead of patent filing), some founders wrongly use stealth mode because it looks cool or because their product is vaporware.
Success fee
A compensation structure paid to a broker-dealer for successfully closing a transaction (i.e., providing funding via their network).
Sweat equity
A person or company's contribution toward the startup. Sweat equity is generally not monetary and, in most cases, comes in the form of physical labor, mental effort, and time.
Target market
The group of consumers at which a product or service is aimed. These are usually in the billions of dollars (the larger the target market, the more exciting the opportunity).
Technical founder
The founder responsible for all the tech-related processes of the startup. They have hard technical skills (for example, PHP development). They use their technical ability to build the product and have a share of the overall profit.
Term sheet
A nonbinding agreement that shows the basic terms and conditions of an investment. It acts as a summary of the proposed key terms of an investment into a startup. When investors are truly interested, the next stage is filling out a term sheet.
Thought leader
An individual or firm recognized as an authority in a specific field. Their views and opinions are seen as influential and authoritative.
Traction
The progress of the startup and its momentum as it grows. In other words, it is getting somewhere in regards to customers discovering and using their product or service.
Trough of sorrow
The period of struggle a startup faces after a setback. This is often where the startup is struggling to find product-market fit.
Two pizza rule
Jeff Bezos' rule that no meeting should be so large that two pizzas can't feed the whole group. This prevents ideas from being drowned out.
Unicorn
A startup with a value of over $1 billion. The concept was coined by Aileen Lee from Cowboy Venture.
UI (User interface)
The design of an application, website, or software. In other words, anything the user can see and interact with.
USP
The unique selling proposition. This is the one-of-a-kind benefit that the startup offers the customer.
UX (User Experience)
The extremely important process that the design teams use to create products that provide meaningful and relevant experiences to users.
Validation
The process of determining whether your product is of interest to a given target market and if there is a demand for it.
Valley of death
A period in the startup lifecycle that occurs after the startup launches a product but has not seen any revenue. This term is the result of plotting the shape of a company's cash flow onto a graph. The valley is the location on the graph where the cash flow is at a very low point.
Valuation
The worth of a startup at a given time. The valuation is determined by the founders and their team, the development stage of the product or service, proof-of-concept in its market, existing strategic alliances and relationships, valuations of similar startups, customers, and any sales.
Value proposition
What defines the startup and distinguishes it from their competitors. After reading a value proposition, the reader should have no misunderstandings about the company or what it offers.
Venture capital (VC)
A form of private equity that is provided to companies that have long-term growth potential.
Visionary
A person who has an idea in their mind that few others can see besides them. Many of the great startup founders were visionaries. For example, Steve Jobs and his vision of what the home computing industry could be.
Vesting
The process of accumulating a full right that cannot be taken away by a third party. It allows startup founders or employees to stay with the company for the long term as their stock will "vest," i.e., accrue over time. For example, if a founder has a monthly vesting over 4 years (i.e. 48 months), he would leave the company with only 37.5% of his shares after 18 months of work.
Vulture capitalist
An investor who specifically seeks to acquire distressed firms in the hopes of making them more profitable so as to ultimately sell them for a profit.
Waterfall
A methodology for startups that begins with the requirements gathering stage and then moves on to the design stage before development begins. Once the product has been created, it moves through various testing phases. It is a linear, sequential process.
Warrants
An option to purchase a certain number of shares (common or preferred) at a future date at a fixed price, which can be the price of the current round of financing or set at a premium to the current price per share. The holder has the right to purchase but is under no obligation to do so.
The X of Y
A way founders use to describe their startup to customers and investors so they can quickly grasp how their product works. It is done by comparing the startup to another successful company that pioneered its business model. For example, the founder may claim that they are "the UBER of fish and chips."
YC
Y Combinator. A startup accelerator that launched in March of 2005. Since then, it has launched more than 3,000 companies, including Airbnb, Coinbase, Cruise, DoorDash, Dropbox, Instacart, Quora, PagerDuty, Reddit, Stripe, and Twitch.
Zebra
A premise focused on building a sustainable startup culture rather than focusing on building the next unicorn.
Zombie
A startup that looks promising yet has failed to gain traction and grow into a successful enterprise.
Zombie unicorn
Startups that continue to operate after funding has run out but don't actually grow. Investors no longer see them as attractive.
