Commonly Used Terms in The Startup Ecosystem

MVP (Minimum Viable Product)

The idea of a Minimum Viable Product (MVP) is often used to test a business idea and get feedback from customers, without spending too much time and money on creating a full product.

Burn Rate

The term "burn rate" means how quickly a company uses its money. It's usually calculated every month. To find the burn rate, you add up how much the company spends in a specific time period and divide it by how many months that period is. Startups care a lot about their burn rate because it shows how fast they're using up their resources, like money they saved or investments they got. If the burn rate is high, people might worry that the company doesn't have enough money and is spending more than it's making. If the burn rate is low, people might think the company is being careful with its money and has more time before it needs more funding. It's important to remember that the burn rate can be different depending on how big the company is and what industry it's in.

Pivot

In simple terms, a pivot means making a big change in how a business operates or what it offers. Startups often do this when they need to adjust their plans because of changes in the market or their own difficulties. For example, they might change who they are trying to sell to, how they sell their product, or even what their product is.

There are many reasons why a startup might choose to pivot. One common reason is that their product or service isn't doing as well as they hoped it would. In that case, they might pivot to stay in business and grow. On the other hand, a startup might choose to pivot to take advantage of new opportunities or to better align their operations with their goals.

Pivoting is risky because it means changing a lot about how a company works. It can be expensive and take a lot of time. But if it's done well, a pivot can help a company succeed by making it more competitive and increasing its chances of success.

Unicorn

This term is used to describe a private startup company that is valued at one billion dollars or more. A venture capitalist named Aileen Lee popularized this term in 2013. She used it to categorize distinctive and valuable tech companies that had achieved the impressive status of a billion-dollar valuation

Exit

In business, "exit" means when a company or investor sells or gives up their ownership in a venture. There are different ways to exit:

1. Acquisition: When another company buys a business. The owners of the business being acquired get paid once for their part of ownership.
2. Initial Public Offering (IPO): When a private company sells shares on a stock exchange and becomes public. This allows the founders and early investors to sell their shares and exit.
3. Secondary Market Sale: When a company or investor sells their ownership in a private company to someone else without an IPO.
4. Liquidation: When a company sells its assets and divides the money among the shareholders. This is done when a company can't continue to operate.

Venture Capital

Venture capital is a type of private funding for businesses that are just starting out and have a high potential for growth. The investors who provide venture capital offer financial support, skills, and resources to these businesses in exchange for a share of ownership.

For startups, venture capital is an important source of funding, especially for those that can't get traditional financing like bank loans or public offerings. Venture capitalists usually invest in companies that are in the seed, early, or growth stages and have a good chance of giving a high return on investment.

Venture capitalists don't just give money and walk away. They play an active role in the companies they invest in, providing advice, guidance, and connections to help them grow and succeed. In return, they expect a share of the profits or a bigger ownership stake in the company.

Seed funding is the initial stage of investment in a startup. It's usually provided by angel investors or dedicated seed funds. Seed funding is used to help a startup develop its product, conduct market research, and build a team. It's also used to attract more investors and raise more money.

Angel Group

An angel group is a group of wealthy investors who pool their resources to invest in early-stage startups. They offer more than just money, providing industry insights, networking, and mentorship to help the companies they invest in succeed. For startups that are not yet ready for venture capital funding or need smaller amounts of capital, angel groups can be a great source of funding. Although the investments made by angel groups are smaller than those made by venture capital firms, they are often willing to take on higher risks for the potential of higher returns.

Seed Fund

A seed fund is a type of investment that provides financial support to startups in the early stages. In return, the fund gets a portion of the company's ownership. Usually, seed funds invest in businesses that are just starting out, often at the concept or prototype stage.

Seed funds are important for startups that need money to grow. They invest smaller amounts than venture capital firms and are willing to take on more risk in hopes of making more money.

Seed funds can take many forms. They can be standalone investment firms, part of accelerators or incubators, or a part of larger venture capital firms. Seed funds not only provide financial support but also offer industry knowledge, a network of contacts, and mentorship to the companies they invest in.

Series A Funding

In the startup ecosystem, Series A funding refers to the first round of institutional investment in a company. Series A funding typically follows an initial seed funding round and is used to fund the company's growth and development.

During the Series A funding round, a company typically raises capital from venture capital firms or other institutional investors in exchange for equity in the company. The amount of capital raised in a Series A funding round can vary widely, but it is generally in the range of $2 million to $15 million.

The Series A funding round is a critical stage for startups, as it represents the transition from the early stages of development to a more mature phase of growth. Companies that are successful in raising Series A funding are typically able to demonstrate a clear vision and business plan, as well as traction in the market.Growth hacking

This is the use of creative, low-cost, and high-impact marketing strategies to rapidly grow a startup's customer base. Growth hacking often involves experimenting with different channels and tactics to find the most effective and efficient ways to acquire and retain customers.

Disruptive Technology

Disruptive technology is a new invention or idea that changes how a market or industry works. It can replace existing products or services and create new opportunities. Disruptive technologies can affect established industries and companies and change the competitive landscape.

In startups, disruptive technologies are often a focus because they can create a lot of value and make the company different from its competitors. Disruptive technologies are found in many industries, such as information technology, healthcare, energy, and transportation.

Examples of disruptive technologies include personal computers, the internet, mobile devices, and ride-sharing apps. These technologies have changed our lives and work and have had a big effect on the global economy.

Crowdfunding

Crowdfunding is a method for raising money for a project or business by asking for small donations from many people, usually on the internet. Websites like Kickstarter, Indiegogo, and GoFundMe help people and groups start fundraising campaigns and get contributions from ordinary people.

For startups, crowdfunding can be a helpful way to get money and see whether people want what they're selling. Lots of startups have used crowdfunding to pay for their ideas and launch new products or businesses.

There are different types of crowdfunding. Rewards-based crowdfunding lets people who give money get something in return, like a product or service. Equity-based crowdfunding gives people a share of the company in exchange for their donation.

Network Effects

Network effects are when a product or service is more valuable as more people use it. It can be good or bad, depending on the situation.

In the startup world, network effects are often important for a company's success or failure. Good network effects can help companies a lot, because they make a cycle where more users make the product or service more valuable, and then more users want to use it.

Examples of products or services with good network effects are social media, payment systems, and online marketplaces. These types of things get more useful and valuable as more people use them. For example, social media is more valuable as more people join and share things, because users can connect with more kinds of people. Online marketplaces are more valuable as more people join because they have more things to buy.

Bad network effects happen when a product or service is less valuable as more people use it. For example, a road is less valuable as more cars use it because it gets more traffic and takes longer to get anywhere.

Blue Ocean Strategy

Blue ocean strategy is a business strategy that involves creating new markets and finding untapped sources of demand, rather than competing in existing markets with established players. The concept of blue ocean strategy was developed by professors W. Chan Kim and Renée Mauborgne, and is based on the idea that companies can create "blue oceans" of untapped market space by identifying and targeting new or overlooked segments of the market.

In the startup ecosystem, blue ocean strategy can be an effective way for companies to differentiate themselves from competitors and achieve sustained growth. By focusing on creating new markets or disrupting existing ones, startups can potentially achieve higher profits and stronger market positions.

To implement a blue ocean strategy, a company must first identify and analyze the factors that drive demand in its industry, such as price, features, and convenience. The company can then create a new value proposition that addresses these factors in a unique and innovative way, in order to differentiate itself from competitors and create a new market space.

Lean Startup

The lean startup is a business method that emphasizes fast experimentation, constant learning, and customer feedback to quickly validate and improve business ideas. The approach was created by entrepreneur and author Eric Ries and suggests that startups can use agile and data-driven methods to test and refine their business models and avoid expensive mistakes.

In the startup world, the lean startup approach is often used by early-stage companies to quickly validate their assumptions about the market and their product or service offering. By using methods such as minimum viable product (MVP) development and customer development, startups can quickly gather feedback and data from customers and use this information to improve their product or service.

The lean startup approach suggests that startups should focus on learning and adapting quickly, rather than following a predetermined plan. This can help startups avoid expensive mistakes and allow them to change direction as needed in order to achieve success.

Scalability

Scalability means a company can grow and expand its operations without needing more money to do so. This is important for startups because it lets them grow and make money without spending too much.

There are a few ways a company can be scalable. For instance, a company can use technology or automation to make its operations more efficient, so it can handle more business without hiring more people. Or, a company can create a business model that's scalable, like a subscription service or an online platform that lets it grow without spending more money.

Investors care about scalability because it shows how much a company can grow and make money over a long time. Companies that can scale are more likely to do well even if the economy is bad or the market changes.

Viral Marketing

Viral marketing is a way of promoting a product or brand by creating and sharing content that people want to share with others online. The goal is to create a cycle of sharing that generates a lot of exposure and makes people more aware of the company.

In the startup world, viral marketing can be a good way to reach a big audience without spending a lot of money. If a startup makes content that's interesting enough to share, people will share it with their friends and followers on social media. This can bring more people to the company's website and increase sales.

A viral marketing campaign needs certain things to be successful. The message has to be clear and interesting, and it needs to be easy to share with others. It should also appeal to a broad audience.

Accelerator

An accelerator is a program that helps new companies grow by giving them resources, mentorship, and sometimes a small amount of money in exchange for a small part of the company. Accelerators can be very helpful for new companies because they provide access to a network of investors, mentors, and experts who can help them grow.

In the world of startups, accelerators are important because they provide many resources for new companies. Some accelerators focus on a particular industry or technology, so they can provide specialized help and resources.

Accelerator programs usually last for a fixed amount of time, often three to six months. At the end of the program, there is a demo day where the new companies show their progress to investors and experts. If a company does well in an accelerator program, they might be able to get more funding from investors or move on to the next stage of development.

Incubator

An incubator is a program or organization that helps early-stage companies by providing them with resources, mentorship, and sometimes a small amount of funding in exchange for a small equity stake in the company. Incubators are focused on helping companies get started and achieve early success by providing access to mentors, investors, and experts in the industry.

Incubators are important for early-stage companies because they provide support and resources. They often focus on a specific industry or technology, and give companies access to specialized expertise and resources.

Incubator programs usually last for a fixed period of time, usually between six and twelve months. Participating companies get workspace, mentorship, and other resources. If a company completes an incubator program successfully, they may be able to get more funding from investors or move on to the next stage of development.

The main difference between incubators and accelerators is the stage of development they focus on. Incubators are focused on helping companies get started and achieve early success, while accelerators help companies grow and develop faster. Incubators are more focused on helping companies in the earliest stages of development, while accelerators are for companies that have made some progress already.

The length of the program is another difference. Incubators usually last longer, between six and twelve months, while accelerators are shorter, usually between three and six months.

Convertible Note

A convertible note is a type of loan that's often used to fund early-stage startups. It's a short-term loan that can be converted into equity in the company later on. This usually happens when the company raises more money or reaches certain goals.

Startups use convertible notes when they need money, but aren't ready to do a full round of fundraising yet. With convertible notes, they can raise money without having to figure out how much their company is worth. This is especially helpful in the early stages when the company's value is uncertain.

Convertible notes usually have a set date when they become due, and may also earn interest. When the note is converted into equity, the interest is added to the amount that's converted. The terms of the conversion, like how much the company is worth when the note is converted, are agreed upon ahead of time and written down in a conversion agreement.

Bootstrapping

Bootstrapping means starting and growing a business with very little external funding or support. It's often used by entrepreneurs to get their business started without relying on external funding, like venture capital or loans.

There are many strategies for bootstrapping, like starting the business while still working full-time, using personal savings or credit, and reducing expenses to save money. Bootstrapping can also mean making money from selling products or services to grow the business.

Bootstrapping is a challenging way to start a business, but it can be rewarding because it lets entrepreneurs keep control and ownership of their business without taking on debt or giving up equity. However, it's also risky because entrepreneurs must fund the business's growth on their own, which can be really difficult.

Freemium

Freemium is a business model where a basic version of a product or service is offered for free, while extra features or premium content are charged for. Startups often use the freemium model for online products or services, such as software, apps, or content.

By offering a basic version for free, companies can get a lot of people interested in their product. When users like the product and depend on it, they might pay for extra features or content.

The freemium model helps startups attract and keep users because users can try the product for free. But it can be hard to make money with the freemium model because many users need to pay for extra features in order to make a profit.

Pitch Deck

A pitch deck is a presentation that is used by startups to communicate the key elements of their business plan to potential investors. Pitch decks are typically used during pitch meetings or presentations, during which a startup presents its business idea and seeks funding from investors.

In the startup ecosystem, pitch decks are a common tool used by entrepreneurs to communicate their vision and value proposition to potential investors. A pitch deck typically includes a high-level overview of the company, including its mission, product or service offering, target market, competitive landscape, and financial projections.

Pitch decks can vary in length and format, but typically include a series of slides that outline the key elements of the company's business plan. The content of a pitch deck may include information on the company's business model, target market, competitive advantage, financial projections, and team.

Pipe

In the startup ecosystem, the term "pipe" refers to the pipeline of potential customers or opportunities that a company is pursuing. A company's pipe can include a variety of potential sources of revenue or growth, such as leads, sales, partnerships, or investments.

In general, the size and quality of a company's pipe is seen as an indicator of its potential for growth and success. Companies with a strong pipe are typically seen as having a strong foundation for future growth, while those with a weak pipe may face challenges in achieving sustainable growth.

To build and maintain a strong pipe, startups often rely on a variety of strategies, such as lead generation, customer acquisition, and business development. By actively building and nurturing its pipe, a company can position itself to take advantage of new opportunities and drive growth.

Lead Generation

Lead generation is the process of finding and developing potential customers or clients for a business. It's an important part of business growth for startups, as it helps them find and connect with potential customers or clients and build a list of potential revenue.

Lead generation can involve many different methods, like targeted marketing, content creation, social media, event sponsorship, and online ads. The goal of lead generation is to create and grow relationships with possible customers or clients and turn them into paying customers.

Lead generation is a continuous process that requires ongoing effort and investment. For startups to succeed, they have to be proactive in finding and following up with leads and have systems and processes in place to manage and grow those relationships over time.

Runway

In the world of startups, "runway" means the amount of time a company can operate before it runs out of money. Runway is important to startups because it shows how long they can keep going and growing without more money.

The length of a company's runway depends on two things: its burn rate, which is how much money it spends each month, and its cash balance. If a company spends a lot of money each month and has very little cash, it will have a short runway. If a company spends less money each month and has more cash, it will have a longer runway.

Startups want to have a long runway so they can reach important goals, like making money or getting more investment. Startups with a long runway can handle hard times better and change with the market more easily.

Sweat Equity

Sweat equity means that people add value to a company by working hard, instead of investing money. In startups, sweat equity is a way for founders and early employees to help the company grow, in exchange for getting a share of the company. This is especially useful when the company doesn't have money to pay people. Sweat equity can help to build and grow the company, without paying people in cash.

Traction

Traction means the progress and momentum that a company has made in terms of acquiring customers, increasing revenue, or other key indicators of success. Traction is important for startups because it shows how well the company has entered the market and grown in a steady way.

Traction can be measured in many ways, depending on the specific goals and metrics that the company decides to use. Common ways to measure traction include the number of users or customers, the speed of customer acquisition, revenue growth, and other indicators of market demand or adoption.

Startups that achieve traction are seen as having a stronger foundation for growth and are more likely to attract investment and become profitable. However, achieving traction is hard and competitive, and startups must work hard to stand out and build a strong customer base.

Ideation

Ideation means creating and developing new ideas for products or businesses. It is an important part of starting a business, as it helps to come up with new and creative ideas that can be turned into successful products or services.

Ideation can be done in many ways, for example brainstorming, problem-solving, customer research, and market analysis. The goal of ideation is to find opportunities for innovation and to create ideas that can be developed into successful products or services that meet the needs of a specific market or customer base.

Zero-Sum Game

A zero-sum game is when one person's gain is exactly balanced by another person's loss, resulting in a total gain and loss of zero.

In business, zero-sum games can happen when one company's gains come at the expense of another company, like in a price war or competition for market share. This can lead to a zero-sum outcome, where one company's gain is balanced by the other company's loss.

Author: Sadman Kabir Soumik