If you are an aspiring or budding startup founder (Not Necessarily Tech Startup) you might have heard some wierd terms which are roaming in all your social media feeds for which you really don’t know the exact meaning of it and feeling bad for not knowing many things as a business owner.
Firstly, I would like to tell you that these are the things which you already know in a different perspective or a word which has now been coined as a cool term by the new age entrepreneur ecosystem. Just relax and observe things happening around you also in the market and always be ready to embrace the changes and adapt yourself to it.
In this Blog I’m going to explore those terms with simple words for you to get a better clarity. I’m taking the top 20 terms which are commonly used by every startup irrespective of their Industry or Business they do. Let’s Get Started!
Bootstrapping – Your Money ! Your Rules 🙂
As a new startup you may not have enough customer base or cash flow due to which institutional investors will not show interest towards your company. It means that you will not raise any funds from outside. You will run your startup with your own money, profits, or reserves. It may include the contribution from Friends and Family but not from the investors.
All our traditional business owners (Parents who do small business, Relatives who are running manufacturing units etc) have been doing this for so many years.
Incubator – Getting Gurus for your startup
It is a place where your startup incubates or nurtures in a way. They help you in many ways such as ideation, mentoring, technology, coaching, even help for funding. Incubators are also called accelerators which helps to accelerate your startup. This is a great way to start your startup with the great expertise of people who already have done that.
Matha, Pitha, Guru, Deivam ; We as Indians respect our Gurus above all. We are already doing so many Business Networking activities in our traditional business just to take suggestions and help from our fellow entrepreneurs and experienced professionals.
Pitch Deck – Fancy term for a PowerPoint presentation 🙂
You will send this presentation to investors, which includes several sections and becomes your pitch deck for fundraising.
Usually it includes which market they are working in? What is the biggest problem of that market? How does your business solve that problem? Which team is making this startup, this product?
From School days we have been used to this. It’s a very simple PPT presentation we all would have done at least once in our school or college. DIY for twice I’m sure you will become a Pro. No need to spend Thousands of money in creating a Pitch Deck by giving to any Consultants.
Angel Investors – Ideaaaaaaaaaaa!
Investors who invest in the startups who are at the initial stage. They are called Angels because they are like a God who gave a chance by investing in a newly born startup without seeing revenue. If the Idea is impressive, they are happy to invest their money in your Startup.
Seed Fund – Sow Seed & Water it Consistently
Seed fund comes after angel investing means you have launched a product from some money through angel investing, now a seed is being sowed for that to grow even further and this is the first step which you get from institutional investing or organized investing.
Click here to know Govt Schemes to get Seed Funds
Venture Capital – Time to Raise More Money
Venture Capital is basically all the institutional capital that your startup gets. There are many VC firms like Sequoia, Matrix, Lightspeed, Accel Partners. All the Venture Capitalists invest their money into startups and help them grow.
Term Sheet – Others Money ! Not your Rules anymore !
Term Sheet is a document which investors give you, which clearly mentions all the terms of their investments. This is the most important document before investing because the investing on its term sheet basis.
Valuation – Whats your Worth?
Valuation basically means what is the value of your startup on the basis of investment that you raised or the stocks it has had. Just like the market capitalization used in the Public Companies listed in Share Market.
Customer Segment – Who is your Target?
This refers to doing the research to know your Target Audience. It can be done as per the locations, Gender, age, income.
Equity – What’s you stake?
Equity means stocks. It is a small part of ownership of the startup. If you buy the Equity of the startup, it means you will get the ownership of the Startup as the proportion you will buy.
ESOPs – Empower your employees too
ESOPs refers to Employee Stock Options. These are those options that every startup employee gets, which gave them the right to purchase the startup stocks whenever they want to.
It means they are stock options, not the stocks. These both are different.
Freemium – Offer Free ! Attract More !
Freemium means that your product adopts a pricing strategy in which some features are completely free for everybody but to get more and better features users have to buy the premium subscription.
It is the combination of the free and premium
MVP (Minimum Viable Product) – Proof of Concept
This is that version of your product which doesn’t have many features but the work that users need to do, is done perfectly and that’s where it stops. It is the quickest fastest way for you to get a product into the market without making it into a really big feature rich product.
Customer Retention –
Retention means at what speed or what percentage of your original users come back to you for purchase. The Higher the retention rate, the more the startup will run because you don’t have to spend energy in getting the customer back as much as you have to spend energy in getting a new customer.
Run Rate – How much you are really earning?
Run rate means whatever is your current situation of revenue, you analyze how much it will be able to do in a year. Revenue run rate gives a sense that based on the present state, how big can you generate revenue in a year.
CAC (Customer Acquisition Cost) – Everything comes with a Price Tag
This is a very important term everyone should know. It is the value in which you acquire a single potential customer to buy your goods or services. It includes all the costs that are directly attributable to you getting that customer onboard.
Acquisition – Sell it!
Any other startup will acquire your startup, they will do that in the form of cash or stock or a combination.
Unicorn – You are a Big Boy now
In the venture capital industry, a unicorn is a startup that has a valuation of $1 billion or more. Unicorn term was initially said by Aileen Lee (Founder of Cowboy Ventures). She referred 39 startups with a valuation of $1 Billion as unicorns
IPO (Initial Public Offering) – You are not Pvt anymore
IPO refers to Initial Public Offering which means Startup/Business will go public to raise money and offer their stock through Share Market for the first time. One of the exit possibilities for a Startup is to do an IPO.
Exit – Money ! Money ! Money!
Exit means that an investor invested in your Startup, at some point of time which is usually between 7-10 year, they will want a return on their money through an exit.
Exit could be a sale or acquisition or merger or IPO (Initial Public Offering) but this usually the time period that the investors wait for before they want their money back