ENTR 5500 Terms and Concepts Quiz
Board of Directors
A group of people elected by the stockholders of a corporation to set the policies for the corporation.
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.
B2C
Business to consumer
angel investors
Independently wealthy individuals who back emerging entrepreneurial ventures, usually as seed capital or as a bridge to get from the self-funded stage to the level of business that would both need and attract venture capital. Funding level is broad, but generally ranges between $50,000 to $2M. Note: _______________ write checks with their own money, while VC's (venture capitalists) write checks with other people's money.
accelerator
Startups are admitted to an ______________ in cohorts and generally given a deadline to complete intensive training and iteration (typically 1 week to 6 months). Startups end an _________________ 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.
cash flow
The difference between the available cash at the beginning of an accounting period and that at the end of the period
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.
preferred stock
a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock
Common Stock
a class of stock ownership that has lower claims on earnings and assets
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).
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 against competitors
capitalization table
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%.
business plan
a document that entrepreneurs use in detailing their business concept as well as their company's overall strategic and financial objectives
profit
a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something
income statement
a financial statement that shows a company's financial performance over a specific period of time.
lifetime 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?
debt financing
a form of financing in which a person or a company borrows money in return for a promise to pay it back with interest
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.
merger
a joining of two previously separate corporations; 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. proposes that all a founder has in a new venture is a series of untested hypothesis
director
a person elected by shareholders; generally appoint the president, vice president, and all other operating officers, and decide when dividends should be paid (among other matters).
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.
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)
acquisition
a process under which a company acquires the controlling interest of another company; taking the majority of ownership of another business; commonly used in conjunction with the word "merger"
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
patent
a property right granted to an inventor to exclude others from making, using, offering for sale, or selling the invention for a limited time in exchange for public disclosure of the invention when granted
dilution
a reduction in the percentage ownership of a given shareholder in a company caused by the issuance of new shares.
Bridge Round
a round of funding that comes between your seed round and your full-blown Series A round. This can be used to extend your financial runway 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.
portfolio
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 stock to raise money.
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
A/B Testing
aka "split testing" goal is to compare 2 versions of a website, product, feature, etc to evaluate which version performs more efficiently
assets
all financial resources that a corporation owns
go-to-market strategy
an action plan that specifies how a company will reach customers and achieve competitive advantage. The purpose 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. similar to bylaws in a corporation
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 that maximizes returns for all shareholders
Business Model Canvas
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.
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
friends and 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 personal 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.
incubator
an organization established to support the development of startup companies with access to workspace, coaching, and support services. differ from accelerators in that accelerators typically focus on acceleration of growth in a shorter defined period, whereas the ____________ is focused on the development of the company and its product over a longer time period.
balance sheet
condensed statement showing assets, liabilities, and equity on a given date
Anti-dilution provision
contractual measures that allow investors to keep a constant share of a firm's equity in light of subsequent equity issues; may give investors preemptive rights to purchase new stock at the offering price
intellectual property (IP)
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...
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 LLC
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"
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
raising capital
refers to obtaining capital from investors or venture capital sources
funding
refers to the amount of money that is needed for a business endeavor.
capital
refers to the money exchanged between entrepreneurs and investors during a business deal
option pool
shares of stock set aside for future issuance to employees or advisors of a company. a way of attracting talented employees to a cash-strapped startup company. 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 population (MVP)
that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
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
revenue
the amount of money that is brought into a company by its regular business activities. Also known as sales.
Return on Investment (ROI)
the amount of money that is gained in a past or existing investment. For example, angel investors tend to invest in startups and early stage companies.
Customer Acquisition 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
seed round
the first investments made into a company by someone other than the founder or the founder's family and friends.
Series A financing
the first major round of business financing by private equity investors or venture capitalists (though angels often participate). An 'A' round 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.
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.
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. dictate who gets what financially and who gets to do what legally 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 small
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.
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.
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 or 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
CEO
the senior executive officer responsible for the overall management of a corporation/company
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.
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.
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".
product/market fit
being in a good market with a product that can satisfy that market
B2B
business to business
