Start Up Lingo

Curation

"We don't produce our own content."

Deck (aka Pitch Deck)

A 10-slide power point presentation that covers all aspects of your business in a concise and compelling way. There is a standard format and real artistry to making a good deck. Do your homework, get lots of feedback, and consider hiring a graphic designer to polish the final version.

Common Stock

A class of ownership that has lower claims on earnings and assets than preferred stock. It is riskier to own common stock because, in the event of liquidation, common stock shareholders are the last to claim rights to assets.

Buyout

A common exit strategy. The purchase of a company's shares that gives the purchaser controlling interest in the company.

Portfolio Company

A company that a specific Venture Capital firm has invested in is considered a "__________ ________" of that firm.

Recapitalization

A corporate reorganization of a company's capital structure, changing the mix of equity and debt. A company will usually _______________ to prepare for an exit, lower taxes, or defend against a takeover.

Proof of Concept (POC)

A designated time to learn and study a new concept to see it is viable.

Mezzanine Financing

A form of hybrid capital typically used to fund adolescent and mature cash flow positive companies. It is a form of debt financing, but it also includes embedded equity instruments or options. Companies at this level, which are no longer considered startups but have yet to go public, are typically referred to as "mezzanine level" companies.

Advisory Board

A group of external advisors to a portfolio company. Less formal than a Board of Directors.

Board of Directors

A group of influential individuals, elected by stockholders, chosen to oversee the affairs of a company. A board typically includes investors and mentors. Investors typically require a board seat in exchange for an investment in a company.

Board of Directors

A group of influential individuals, elected by stockholders, chosen to oversee the affairs of a company. Typically includes investors and mentors. Not all startups have one, but investors typically require a _____ seat in exchange for an investment in a company.

Growth Hacking

A marketing technique that focuses on quickly finding scalable growth through non-traditional and inexpensive tactics such as the use of social media.

Cottage Business (Cottage Industry)

A nice business but not something massively scalable. If you have one, you're not a good fit for VC.

Agile

A philosophy of software development that promotes incremental development and emphasizes adaptability and collaboration.

Agility

A philosophy of software development that promotes incremental development and emphasizes adaptability and collaboration.

Vaporware

A product you are selling but have not actually made (and may never make). It is a way to test market demand. Some people think it is sleazy, but it is very common.

Anti-Dilution Protection

A provision used to ensure that investors are not penalized when companies are undergoing additional financing. This protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. These may give investors preemptive rights to purchase new stock at the new offering price. Examples include broad-based Weighted Average Ratchet, Narrow-Based Weighted Average Ratchet, and Full Ratchet Anti-Dilution.

Ground Floor

A reference to the beginning of a venture, or the earliest point of a startup. Generally considered an advantage to invest at this level.

Accredited Investor

A rich individual potentially interested in investing in your company.

Entrepreneur in residence (EIR)

A seasoned entrepreneur who is employed by a Venture Capital Firm to help the firm vet potential investments and mentor the firm's portfolio companies.

Responsive Design

A site built for optimal viewing of a website across all devices. The other options are adaptive design and bad design.

Start Up

A startup company is a company in the early stages of operations. Startups are usually seeking to solve a problem of fill a need, but there is no hard-and-fast rule for what makes a startup. A company is considered a startup until they stop referring to themselves as a startup.

Preferred Stock

A stock that carries a fixed dividend that is to be paid out before dividends carried by common stock.

Capitalization Table

A table depicting the quantity of shares or unit ownership which is held by each investor in a corporation, typically including founders' equity, investor equity, and advisor/employee stock option pools.

Lead Investor

A venture capital firm or individual investor that organizes a specific round of funding for a company. This investor usually invests the most capital in that round. Also known as "leading the round."

Gamify

Adding a game layer to a website or product experience that encourages people to use it with rewards of various kinds. People love games.

Bridge Loan

Also known as a swing loan. Short-term loan to bridge the gap between major financing.

Pro Rata Rights

Also known as supra pro rata rights. Pro rata is from the Latin 'in proportion.' A VC with supra pro rata rights gives him or her the option of increasing his or her ownership of a company in subsequent rounds of funding.

Non-Disclosure Agreement

An agreement between two parties to protect sensitive or confidential information, such as trade secrets, from being shared with outside parties.

Due Dilligence

An analysis an investor makes of all the facts and figures of a potential investment. Can include an investigation of financial records and a measure of potential ROI.

Budget

An estimation of revenue and expenses over a specified future period of time that is compiled and re-evaluated on a periodic basis.

Bleeding Edge

An extremely pretentious way of saying on the vanguard (group of people leading a new project) since every person in start-ups thinks he or she is there.

Angel Investor

An individual who provides a small amount of capital to a startup for a stake in the company. Typically precedes a Seed Round and usually happens when the startup is in its infancy.

B2B

Business to Business. Your company sells things to other companies.

B2C

Business to Consumer. Your company sells stuff to the masses.

Pivot

Change directions as a company. This is usually used to describe going after a different market segment or using an established technology for an entirely new purpose

Iterate

Code for try something, do it wrong, and try it again in a slightly different way with the hopes of achieving a better result.

Churn Rate

Customers lost subsequent to acquisition in a subscription-based business model. Because of the _____ ____, your growth might not look like you think it will.

Capital

For start-ups, it is mainly monetary assets available for use. Entrepreneurs raise capital to start a company and continue raising capital to grow the company.

Burn Rate (aka Run Rate)

How fast you are blowing through your cash. It's not unusual for a start-up to lose large sums of money for several years before breaking even, or — please oh please — making a profit.

Runway

How long you have until the cash runs out and you must turn off the lights.

Market Penetration

How much of your potential market are you capturing and how quickly. VCs want to know. Do not say, "if we just capture 1% of the market we will..." - they want you getting a lot more than that.

Monetize

How you are making money — or more often, how you plan to make money.

Exit Strategy

How you will sell the company and make your investors lots of money. Who is going to buy you and why?

Angel Investor

Individual who provides a small amount of capital to a startup for a stake in the company.

Alpha Test

Internal testing, of a pre-production product, typically on a controlled basis, with the objective of identifying functional deficiencies and design flaws.

First Mover Advantage (FMA)

Not every start-up is the first to market, but if you are, you want to point that out to investors. Be aware that this can be both a pro and con, as you may have to educate your market as you go, so the sales you make will cost more than they would in a market with clearly established demand.

Accelerator

Not part of a car as one might assume, but a center where start-ups are "incubated" through mentorship, space and sometimes cash. AKA Incubator

Acqui-Hire

One company's acquisition of another for the primary purpose of hiring its employees, rather than for the intrinsic value of the business itself.

Advertainment (Advertorial)

Paid content that is meant to look and feel like a real story or blog post. More people are fooled than you'd think - or as the "tainment" part implies, readers are interested enough that they don't care that they are being pitched. As display ad pricing and effectiveness have decreased, more companies are turning to advertorials to capture ad revenue.

Ramen Profitable

Profitable enough to cover costs and basic living expenses for everyone working at a startup.

Traction

Proof that people are actually buying and using your stuff.

Cap

Refers to a "cap" placed on investor notes in a bridge loan. Entrepreneurs and investors agree to place a cap on the valuation of the company where notes turn to equity. This means that the valuation of the company during the time where the bridge converts to equity will not be higher than the agreed upon valuation (the "cap").

Series

Refers to the specific round of financing a company is raising. For example, company X is raising their ______ A round.

Loss Leader Pricing

Selling something at a loss as a form of marketing expense to bring in customers you expect repeat business from.

Sweat Equity

Shares of your company given in exchange for work done. This is a good recruiting tool to help you attract passionate talent you can't afford to pay at market rates.

Lean Start Up

Similar to Growth Hacking. The core mission of this is to prove the business concept as quickly and cheaply as possible.

Scaleable

Something that can grow to a huge size because the market and demand is big enough or because you will be able to move into different markets with your product via Pivoting or Iterating.

Disruptive Technology

Something that completely changes the way society does something (e.g. Uber/Lyft vs. Taxis or Amazon vs. in-store shopping).

Round

Startups raise capital from VC firms in individual rounds, depending on the stage of the company. The first round is usually a Seed round followed by Series A, B, and C rounds if necessary. In rare cases rounds can go as far as Series F, as was the case with Box.net.

Equity Financing

The act of raising capital by selling off shares of a company.

Capital Under Management

The amount of capital, or financial assets, that a venture capital firm is currently managing and investing.

Capital Under Management

The amount of capital, or financial assets, that a venture firm is currently managing and investing.

Post-money valuation

The amount plus the investment put in.

Minimum Viable Product (MVP)

The bare-bones version of a product required to achieve proof of concept. Often used in the creation of new software that will be Beta tested, and later upgraded with extra features.

Customer Acquisition Costs (CAC)

The cost associated with convincing a customer to buy a product/ service. This cost is incurred by the organization to convince a potential customer. This cost is inclusive of the product cost as well as the cost involved in research, marketing, and accessibility costs.

Term Sheet

The document that outlines what the Investors will get for what they put in — including % ownership and voting rights.

Low Hanging Fruit

The easiest thing your company can do to bring cash in the door. Often hard to identify, but crucial for start-up success.

Values Prop

The feature(s) or elements that make your business or product uniquely attractive to consumers.

Initial Public Offering (IPO)

The first time shares of stock in a company are offered on a securities exchange or to the general public. At this point, a private company turns into a public company (and is no longer a startup).

Sector

The market that a startup companies product or service fits into. Examples include: consumer technology, cleantech, biotech, and enterprise technology. Venture Capitalists tend to have experience investing in specific related _______ and thus tend not to invest outside of their area of expertise.

Benchmark

The process by which a startup company measures its current success in relation to the industry standard. An investor measures a company's growth by determining whether or not it has met certain benchmarks.

Benchmark

The process by which a startup company measures their current success. An investor measures a company's growth by determining whether or not they have met certain _______________. For example, company A has met the benchmark of having X amount of recurring revenue after 2 years in the market.

Liquidation

The process of dissolving a company by selling off all of its assets (making them liquid).

Burn Rate

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

Annual Recurring Revenue (ARR)

The recurring subscription-based revenue which software as a service/platform as a service, (SaaS/PaaS) based companies receive annually; also known as the run rate.

Hockey Stick

The shape of the growth curve VCs want to see and believe! This means your start-up will have to double sales every year.

Stage

The stage of development a startup company is in. There is no explicit rule for what defines each stage of a company, but startups tend to be categorized as seed stage, early stage, mid-stage, and late stage. Most VCs firms only invest in companies in one or two stages. Some firms, however, manage multiple funds geared toward different stage companies.

Pre-money valuation

The value before you take investors' cash.

Venture Capitalist

They have cash, but you might not want it.

Intellectual Property (IP)

This can be a patent (costs $25k generally and takes time to obtain) or a secret sauce or formula like Coke. Not every start-up has one, but if your business depends on it, you better protect it!

Convertible Debt

This is when a company borrows money with the intent that the debt accrued will later be converted to equity in the company at a later valuation. This allows companies to delay valuation while raising funding in it's early stages. This is typically done in the early stages of a company's life, when a valuation is more difficult to complete and investing carries higher risk.

Debt Financing

This is when a company raises money by selling bond, bills, or notes to an investor with the promise that the debt will be repaid with interest. It is typically performed by late-stage companies.

Seed

This round is the first official round of financing for a startup. At this point a company is usually raising funds for proof of concept and/or to build out a prototype and is referred to as a "____ stage" company.

Launch (Activate)

To start a company or push a website live

Enterprise

Typically refers to a company or business (i.e. an __________ tech startup is a company that is building technology for businesses).

Leverage

Use something — technology, partnerships, etc. — to your advantage.

Boot Strapping

Using "friends and family" cash to get going.

Cliff

Usually applies to vesting schedules (shares given to employees over time). _______ are a way for the CEO to fire employees or let them leave without giving them stock within a limited period of time (usually 1 year). ______ are also used on CEOs by investors to make sure the CEO sticks around after getting the cash.

Return of Investment (ROI)

What the investor can expect to get for what they put in. It can also be used to describe the results of a particular marketing campaign's success. You want this to be positive.

Valuation

What your company is being valued at.

Convertible Note

When a company borrows money with the intent that the debt accrued will later be converted to equity in the company at a later valuation. This allows companies to delay setting the valuation while raising funds in their early stages. Most bridge loans will have a built-in discount and sometimes a cap. SAFE loans are a convertible debt with favorable terms for the founders.

Bootstrap

When a company is funded by an entrepreneur's personal resources or the company's own revenue. Evolved from the phrase "pulling oneself up by one's bootstraps."

Leveraged Buyout

When a company is purchased with a strategic combination of equity and borrowed money. The target company's assets or revenue is used as "leverage" to pay back the borrowed capital.

Secondary Public Offering

When a company offers up new stock for sale to the public after an IPO. Often occurs when founders step down or desire to move into a lesser role within the company.

Vesting

When an employee of a company gains rights to stock options and contributions provided by the employer. The rights typically gain value (vest) over time until they reach their full value after a pre-determined amount of time. For example, if an employee was offered 200 stock unites over 10 years, 20 units would vest each year. This gives employees an incentive to perform well and stay with the company for a longer period of time.

Acquisition

When one company buys a controlling stake in another company. Can be friendly (agreed upon) or hostile (no agreement).

Acquisiton

When one company buys controlling stake in another company. Can be friendly (agreed upon) or hostile (no agreement).

Freemium

You give the basic product away for free and then try to upsell features to your customers. This marketing ploy is often used in directory businesses.

Software As A Service (SaaS)

You sell subscriptions to use your software.