into to entrepreneurship

Bridge round

a round of funding that comes between your seed round (see below) and your full-blown Series A round (see below). This can be used to extend your financial runway (see below) as you fully prepare for your Series A.

angel round

a round of investment into a startup company from angel investors not previously affiliated with the founder (e.g., not friends or family). Typically the first money invested in a company after the founder's own money and after the founder's friends and family.

business model

a set of assumptions and hypotheses for the successful operation of a business. At its heart, how you plan to make money. Includes all the activities associated with making something as well as all the activities associated with selling something.

Investment round

a set of one or more investments made in a particular company by one or more investors on essentially similar terms at essentially the same time.

Later-stage company

a stage of company growth characterized by viable products, a developed market, significant customers, sustained revenue growth, and both profits and positive cash flow from operations.

portofolio

a strategic collection of startup companies invested in by an angel, angel group, venture capital fund, or private equity firm

equity financing

a term used for a company's issuance of shares of shares of stock to raise money. In other words, equity financing occurs when a company exchanges equity (stock) for capital. Opposed to debt financing (see above). Investors who have exchanged money for equity realize their investment by an exit. See below.

funding

a term used synonymously with the words "financing" and "capital". It refers to the amount of money that is needed for a business endeavor. For example, a new business owner may seek a certain amount of funding for their startup capital.

Friends & family round

an investment in a company that often follows the founder's own investment, from people who are investing primary because of their relationship with the founder rather than their knowledge of the business. A common way for a startup to fund their initial round of capital.

private equity firm

an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital

angel fund

an organization composed of accredited investors which serves as a platform for them to coordinate investments in seed and early stage startup companies. The group members typically work together consolidating their resources, expertise, and capital through informal networks or formal funds.

proof of concept

evidence, typically derived from an experiment or pilot project, which demonstrates that a design concept, business proposal, etc., is feasible

Bootstrapping

funding a company only by reinvesting initial profits; from "pulling yourself up by your own bootstraps"

down round

when the valuation of a company at the time of an investment round is lower than its valuation at the conclusion of a previous round

Bylaws

written governing agreements established for the purpose of defining how corporations will operate and be managed. Specifically established for corporations, as opposed to LLCs, which is governed by an "operating agreement".

Option Pool

shares of stock set aside for future issuance to employees or advisors of a company. The option pool is a way of attracting talented employees to a cash-strapped startup company. An options pool is normally between 5% and 20% of the company.

Founder's shares/stock

shares owned by a company's founders upon its establishment

portfolio company

startups and other companies in which an angel, angel group, venture capital fund, or private equity firm have invested

minimum viable product

that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort. intended to ensure that the market wants the product before a large amount of time and monetary investments are made.

Scalability

the ability of a startup or small business to leverage its existing resources to grow and operate at a large scale without being encumbered by factors such as capital investment, human resources, etc

Networking

the act of interacting with other people to exchange information and develop contacts, especially to further one's career. "Business is about people. It starts with an idea, and gets off the ground with networking. Whether you're looking for customers, help, or information, it's all much easier to achieve when you start connecting." - Anna Urban; "Success in business is all about people, people, people." - Richard Branson

revenue

the amount of money that is brought into a company by its regular business activities. Also known as sales

Customer Aquisition Cost

the cost associated with convincing a consumer to buy your product or service, including research, marketing, and advertising costs. The calculation of customer valuation helps a company decide how much of its resources can be profitably spent on acquiring a customer.

Equity

the designation given to a stockholder's ownership in a company. In corporations, called "stock", and LLCs or limited partnerships, it is called "interest" or units. Equity is exchanged for value; generally money. Generally, is obtained when an individual or corporation purchases one of more shares of stock (equity shares). The more equity purchased, the greater the ownership.

seed round

the first investments made into a company by someone other than the founder or the founder's family and friends. The term comes from planting a seed for the first time.

Series A financing

the first major round of business financing by private equity investors or venture capitalists (though angels often participate). generally takes place after the founders have used their seed money to provide a proof of concept demonstrating that their business concept is viable and eventually profitable.

cash flows

the incomings and outgoings of cash, representing the operating activities of an organization.The difference between the available cash at the beginning of an accounting period and that at the end of the period

corporation

the legal entity structure that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members. The primary advantage of a corporation is that it shields its investors from personal liability for any losses the corporation may experience. Ownership in a corporation is held by shareholders.

Investment terms

the legal terms and conditions upon which an investment is made, which may include investment amount, valuation and corresponding price of shares, type of stock assigned to investor, participation on the board of directors, anti-dilution provisions, liquidation preferences, and more. The terms of the investment dictate who gets what financially and who gets to do what legally. At their essence, all investment terms are essentially all about control of the company and the economics of an exit event (who gets what cash).

runway

the length of time your company can survive if your income and expenses stay constant

seed capital

the money used to purchase equity-based interest in a new or existing company. usually quite small because the venture is still in the idea or conceptual stage.

risk

the probability that all or part of an original investment of resources, cash or otherwise, will be lost or that investment returns will be lower than anticipated. Numerous factors may impact potential investment and return losses, including but not limited to demand risk, economic risk, environment risk, funding risk, legislative risk, maintenance risk, technology risk, and timing risk

Crowdfunding

the process of raising financial support for a venture via smaller amounts from many investors ("the crowd") rather than the alternative pattern of larger amounts from a smaller number of supporters. Today's internet has vastly increased the ability of fundraisers to communicate information, solicit and receive financial support from anyone online. Think Kickstarter.

Entrepreneurship

the pursuit of opportunity beyond resources controlled

burn rate

the rate at which a company expends net cash over a certain period, usually a month

conversion rate

the rate at which customer leads are "converted" into paying customers

Initial Public Offering (IPO)

the sale of distribution of the stock of a company to the public for the first time. often an opportunity for existing investors to receive significant returns on their original investment

exit

the sale or exchange of a significant amount of company ownership for cash, debt, or equity of another company. generally happen in one of two ways: acquisition by a bigger company, or going public

chief executive officer

the senior executive officer responsible for the overall management of a corporation/company.

B2B

"business to business" product or service to other businesses

capitalization table

(aka cap table) - a table (spreadsheet) depicting the quantity of shares or unit ownership which is held by each investor in a corporation or LLC, typically including the founders' equity, investor equity, and advisor/employee stock options pool. In other words, a detailed list of exactly how much stock each entity or person owns in a company. A spreadsheet that lists names and percentage ownership stakes, all adding up to 100%

profit

A financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something

director

A person elected by shareholders to serve on the board of directors. The directors generally appoint the president, vice president, and all other operating officers, and decide when dividends should be paid (among other matters)

Acquisition

A process under which a company acquires the controlling interest of another company. In other words, taking majority ownership of another business. Frequently used in conjunction with the word merger, as in mergers and acquisitions (or M&A's).

patent

A property right granted by the federal government that gives an inventor an exclusive right to make, use, sell, or offer to sell an invention in the United States for a limited time.

liquidity event

An event that allows stockholders to realize a gain or a loss on an investment. When a corporation is purchased (through a merger or acquisition) or when an IPO is made, equity is converted to cash.

Accelerator

Startups are admitted to an Accelerator in cohorts and generally given a deadline to complete intensive training and iteration (typically 1 week to 6 months). Startups end an accelerator program with a Demo Day in which they pitch to investors. Well-known accelerators include Y-Combinator and Techstars. In an accelerator, a seed investment (usually between $15k - $50k) may be made in return for equity.

Income Statement

The financial statement that shows a company's financial performance over a specific period of time. It delineates revenue and expenses, as well as net income (which is total revenue minus total expenses)

Elevator Pitch

a brief presentation, typically 30-60 seconds in duration, presenting the entrepreneur's concept/solution, business model, "go to market" strategy and value proposition to potential angel or venture capital investors, in order to obtain the attention of the investors such that they are compelled to learn more about the opportunity

lifestyle business

a business established and operated by its founders for the purpose of developing and maintaining a particular lifestyle or level of income. Such businesses typically have limited scalability because of issues such as limited access to capital, owner decisions relating to business operating models and staging and reinvestment objectives. many are sole practitioners or small groups like husband/wife teams. They are typically highly dependent on the experience, skills, drive, and engagement of the owners.

preffered stock

a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Both angel investors and venture capitalists prefer to invest with preferred stock because of the superior rights and protective provisions associated with these shares

Private Equity

a company ownership position that is not listed and cannot be traded on a public securities exchange (has not yet had an IPO). are not subject to the same high-level of government regulation as stock offerings to the general public, and is also far less liquid than publicly traded stock

public company

a company that has securities that have been sold in a registered offering and that are traded on a stock exchange or NASDAQ. A company that "goes public" offers their securities to be sold to the public through a registered public offering, and through the sale of such assets, a corporation can raise capital for their company.

competitive advantage

a condition or circumstance that puts a company in a favorable or superior business position.

business plan

a document that entrepreneurs use in detailing their business concept as well as their company's overall strategic and financial objectives. In recent years, the Business Model Canvas has become increasingly popular with both entrepreneurs and managers as a guide or framework for the startup's efforts, and in many cases is now utilized in lieu of the business plan by these parties

lifestyle value of a customer

a forecast or prediction of the total net profit related to the entire lifetime (present and future) of a specific customer relationship. In other words, how much money is this customer going to make for you over the course of their entire relationship with the company?

Non-Disclosure Agreement (NDA)

a formal legal agreement between two or more parties undertaken by the parties to keep information shared or provided by one party to another confidential.

advisory board

a group of external advisors to a company. Less formal than a board of directors.

board of directors

a group of persons elected by the company's stockholders that make decisions on major company issues, including hiring/firing the Chief Executive Officer. A corporation is legally required to have a board of directors

merger

a joining together of two previously separate corporations. in the legal sense occurs when both businesses dissolve and move their assets and liabilities into a newly created entity.

LLC

a legal entity that is not taxable itself, and distributes profits to its owners, but shields personal assets from business debt like a corporation

Fiduciary Duty

a legal obligation of founders to act in the best interest of the company and all of its shareholders by maximizing value and returns

convertible note

a loan made to a company that can be converted into stock upon certain triggering events. Each note has an interest rate, a maturity date, and may come with the option to convert at a discount at a future round or time.

Lean Startup Methodology

a methodology for developing businesses and products, which aims to shorten product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning. Lean startup favors experimentation over elaborate planning, measurable customer feedback over intuition, and iterative design over traditional "big design up front" development. In short, the methodology proposes that all a founder has in a new venture is a series of untested hypothesis. Therefore, you need to get outside of your building and rapidly test all your assumptions. The odds are that one or more of your hypotheses will be wrong. When you you discovery your error, rather than firing executives and/or creating a crisis, you simply change the hypotheses.

debt financing

a person or a company borrows money in return for a promise to pay it back with interest; as opposed to equity financing, where money is raised from investors who, in return, receive equity in the company.

pitch deck

a presentation created by entrepreneurs that details the attributes of a startup opportunity in order to help the entrepreneurs communicate it with investors in their efforts to raise money to fund their venture. The presentation which typically includes approximately a dozen slides, helps investors determine if they have a continued interest in evaluating the company.

pitch

a presentation in which a startup founder attempts to persuade an investor of the viability of their company. The presentation spectrum varies based on the specific purpose. Formal pitches (as opposed to elevator pitches - see above) utilize powerpoint type slide decks (known as a pitch deck) and have the specific objective of seeking investment.

Customer Discovery

a process for discovering and validating the right market for an idea and building the right product features that solve customer problems. consists of transforming assumptions about who a customer is, the problem a company will solve for the customer, and how the customer will buy from the company into hypotheses, which are then tested via interviews with potential customers (aka getting out of the building)

due diligence

a process undertaken by potential investors to analyze and assess the desirability, value, and potential of an investment opportunity by examining, for example, the operations and management of a company and the verification of material facts

Dilution

a reduction in the percentage ownership of a given shareholder in a company caused by the issuance of new shares. The effect of giving someone else part of your company's stock is considered dilution...it means that you are diluting your equity stake to make room for someone else

small business

a term utilized to reference small traditional family lifestyle businesses such as local retail, service providers, restaurants, etc. These businesses are typically operated by family for the benefit of the family without the objective of a liquidation event such as the strategic sale or IPO of the company. As a result, these businesses are not typically funded by angel investment groups or VCs.

Hockey stick growth

a usually desirable pattern of business growth in which things like number of users, page views, or revenue starts growing at a normal linear pace, then once an inflection point is it, growth takes off at an exponential rate

assets

all financial resources that a corporation owns are known as its assets. Assets include material goods, equipment, intellectual property (such as patents or copyrights), investments, cash, etc. ● Balance sheet - a condensed financial statement showing the nature and amount of a company's assets, liabilities, and capital (equity) on a given date

a/b testing

also known as split testing, the goal of A/B testing is to compare two versions of a website, product, feature, etc; the goal of which is to evaluate which version performs more effectively

go-to-market strategy

an action plan that specifies how a company will reach customers and achieve competitive advantage. The purpose of a go-to-market strategy is to provide a blueprint for delivering a product or service to the end customer, taking into account such factors as pricing and distribution

Operating Agreement

an agreement between the members (shareholders) of a Limited Liability Company which governs the LLC's business including member powers, rights, duties and obligations, and outlining the decision making process related to operational, functional, and financial issues in a structured manner. The operating agreement of LLCs is similar to bylaws utilized by corporations.

founder

an entrepreneur substantially involved in the founding/creation of a new company

serial entrepreneur

an entrepreneur who has previously founded and run one or more ventures

exit strategy

an entrepreneur's strategic plan to obtain an exit (see above) that maximizes returns for all shareholders

shareholder

an individual or institution (including a corporation) that legally owns one or more shares of stock in a public or private corporation.

advisor

an individual providing business connections, guidance, advice, and support to entrepreneurs as they develop and grow their startup.

pivot

an intentional, substantive change or course correction to a company's business model based on validated learning and feedback from the market

incubator

an organization established to support the development of startup companies with access to workspace, coaching, and support services. Incubators differ from accelerators in that the latter typically focus on acceleration of growth in a shorter defined period, whereas the former is focused on the development of the company and its product over a longer time period.

Anti-dilution provisions

are contractual measures that allow investors to keep a constant share of a firm's equity in light of subsequent equity issues. These may give investors preemptive rights to purchase new stock at the offering price.

Business Model Canvas

based on nine building blocks, the business model canvas is an entrepreneurial tool that enables entrepreneurs to test hypotheses as they design, develop, articulate, challenge, invent, and pivot their strategic business model. The building blocks referenced above include customer segments, value proposition, channels, customer relations, revenue streams, key resources, key activities, key partnerships, and cost structure.

B2C

business to consumer

capital

can refer to the money exchanged between entrepreneurs and investors during a business deal. Entrepreneurs need to raise capital (money) for their startups while investors can provide them with the needed capital (funding). Capital can be used to launch an endeavor as well as sustain a company until positive profit can be generated.

intellectual property

defensible creations of the mind, encompassing patents, trademarks, copyrights and more. A large portion of competitive advantage and potential value to investors is the size and clarity of a company's intellectual property

articles of incorporation

document filed with the Secretary of State or Company Registrar which acts as a charter to document the establishment and existence of a corporation. The articles typically include the business name, address, a statement of business purpose, and details related to the types of stock the corporation is entitled to issue.

Articles of Organization

documentation filed with the Secretary of State which acts as a charter to document the establishment and existence of a limited liability company (LLC)

Series B, C, D, etc.

investment rounds from venture capital funds subsequent to the first Series A round

product/market fit

means being in a good market with a product that can satisfy that market." - Marc Andreesen.

rasing capital

obtaining capital from investors or venture capital sources

Intrapreneur

one who takes on entrepreneur-like ventures within a large corporate environment

institutional investors

organizations that professionally invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds.

Seed Stage

the stage of a scalable startup immediately following the concept stage. In this stage, the entrepreneurs typically validate their product or service to the marketplace, develop their MVP, commence market initial testing and development, and begin development of their business model/go to market strategy. The first formal round of investment beyond friends and family typically occurs in this round with investment from angels

Early-stage startup

the state of a company that has typically completed its seed stage and has a founding or core senior management team, has proven its concept, has minimal revenue, and no or minimal positive earnings or cash flow. As opposed to later-stage company.

pre-money valuation

the valuation of a company prior to a round of funding

post-money valuation

the value of a company AFTER an investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity or alternatively calculated by taking the product from multiplying the startup's total number of shares or units outstanding by the share or unit price of the latest financing round.

common stock

there are many "classes" of stock that can be issued in a company. Each class has its own rights and preferences. Investors typically get preferred stock (see definition below) which may give them preferences such as the ability to get their investment back first, before the rest of the common stock holders get their proceeds. Founders and employees are usually left with common stock, a class of stock ownership that has lower claims on earnings and assets than preferred stock (which typically means you're the last person to get paid).