Whether you’re embarking on a new journey as an employee, entrepreneur, or investor, venturing into the world of startups for the first time can be overwhelming. There’s a vast amount of knowledge to acquire and numerous unfamiliar words to grasp. It’s often likened to learning a new language, given the multitude of terms and abbreviations used.
To help you master the right lingo, we’ve compiled a comprehensive list of vital startup terms and phrases. Invest the time to familiarise yourself with these fundamental concepts and ensure you develop a solid understanding of what they each mean.
The Most Common Startup Buzzwords
An organisation that offers startups a short-term programme for rapid growth. It usually consists of mentorship, resources, and funding. An example is Y Combinator, a well-known accelerator programme.
When a company acquires another primarily for the talent and skills of its employees rather than its products or services. Facebook’s acquisition of FriendFeed was an acqui-hire as it was mainly driven by the desire to bring onboard the talented engineers from FriendFeed.
Angel investor/Business angel
An individual who provides early-stage funding and mentorship to startups in exchange for equity. They believe in the startup’s mission and invest their money to help the business get on its feet.
This refers to when a company uses personal finances or revenue generated by the business to start and grow without external funding. More than 80% of startups start out bootstrapping!
A short-term loan used to bridge the gap between two transactions or financing rounds.
A startup may take a bridge loan to cover expenses until its next funding rounds are closed.
The rate at which a company spends its cash reserves to cover operating expenses. For example, if a company spends €100,000 per month and has €500,000 in the bank, its burn rate is €100,000 per month.
A term used to describe a startup that demonstrates resilience and the ability to survive and adapt to adverse conditions. If a company manages to push through multiple setbacks and challenges, they would be described as having cockroach-like resilience.
The removal of intermediaries or middlemen from a supply chain or distribution channel, often facilitated by technology. A lot of online marketplaces like Airbnb and Uber disintermediate i.e., remove traditional hospitality and transportation industries by connecting consumers directly with service providers.
A groundbreaking innovation that disrupts or displaces existing markets, products, or industries by introducing a new and often more efficient solution. A great example of this is Netflix. Its transition from a DVD rental service to a streaming platform disrupted the traditional video rental industry.
A company or technology that brings about significant change and disruption to an industry or market. Tesla, with its electric vehicles and renewable energy solutions, is considered a disruptor in the automotive and energy sectors.
When an investor or entrepreneur sells their ownership stake in a company, typically through an acquisition or initial public offering (IPO). For example, the founders of Instagram achieved an exit when Facebook acquired their company for €1 billion.
The process of raising capital by offering shares or equity in a company to a large number of individuals, typically through online platforms. Startups can use equity crowdfunding platforms like Kickstarter or Indiegogo to raise funds from a diverse pool of investors.
A strategy that focuses on rapid experimentation and unconventional marketing techniques to drive fast and scalable growth for a company. For example, referral programs which reward current users for referring new users can significantly increase customer acquisition levels.
The practice of fostering an entrepreneurial mindset within the company and encouraging employees to develop and implement innovative ideas. Google’s “20% time” policy is an example of intrapreneurship because it allows workers to spend a portion of their workweek pursuing their own entrepreneurial projects.
When products are built and tested as quickly and cheaply as possible. The aim is to build the product through trial and error rather than building a fully developed one that might not attract buyers.
The combination of two or more companies into a single entity, often with the goal of improving efficiency, expanding market share, or achieving strategic objectives. An example of a merger was when Disney and Pixar brought together their respective animation studios and intellectual properties in 2006.
A presentation that entrepreneurs use to pitch their startup or business idea to potential investors. A pitch deck typically includes slides explaining the product, target market, business model, and competitive advantage.
A strategic shift in a startup’s business model, product direction, or target audience based on market feedback or changing circumstances. For example, Slack was originally developed as a gaming company called Tiny Speck but pivoted and became a widely successful team collaboration platform.
The estimated value of a startup or company before any additional investments or funding rounds. If a company is valued at €6 million before receiving a new round of funding, its pre-money valuation is €6 million.
The estimated value of a startup or company after a new investment or funding round has been completed.
The stage at which a product or service aligns well with the needs and demands of its target audience, resulting in strong customer satisfaction and adoption.
This means operating a startup using an approach that focuses on efficiency, cost-effectiveness, and avoiding unnecessary expenses. Instead of hiring a large team, a company will look to outsource certain tasks and use automation tools to streamline operations.
The length of time a startup can operate before running out of its available funds. It is often expressed in terms of months. For example, if a startup has €500,000 in the bank and a monthly burn rate of €50,000, its runway is 10 months.
The ability of a business to handle increased demands, growth, or expansion without a significant decrease in performance or efficiency. An e-commerce platform that can handle a surge in traffic and transactions during peak shopping seasons without crashing would be described as scalable.
The initial investment provided to a startup in its early stages, typically used for product development, market research, and initial operations. Seed funding can come from angel investors, friends and family, or early-stage venture capital firms.
Series A, B, C rounds
These are stages of funding rounds in which startups raise increasingly larger amounts of capital as they progress and achieve milestones. Series A is typically the first significant round of financing after seed funding.
The state in which a startup operates in secrecy, keeping its product, technology, or business strategy hidden from competitors and the public until it is ready for launch. Many tech startups operate in stealth mode to protect their innovative ideas and gain a competitive advantage.
The contribution of time, effort, and expertise by founders, employees, or partners to a startup in lieu of financial compensation, usually in the form of equity ownership.
Co-founders who forego salaries in the early stages and invest their time and skills into building the company acquire sweat equity.
TAM (Total Addressable Market)
The total market demand or revenue potential available for a product or service if it were to achieve 100% market share. For example, If the global market for a specific software solution is estimated to be €1 billion, that would represent the TAM for that product.
A non-binding document that outlines the proposed terms and conditions of an investment or acquisition. It serves as the basis for further negotiation and usually includes details such as investment amount, valuation, equity ownership, and investor rights.
A startup that is valued at 1 billion dollars (currently about €909k) or above. Companies like Uber, Airbnb, and SpaceX have reached unicorn status due to their high valuations and success.
The process by which equity or ownership rights are gradually earned or acquired by an individual, typically subject to a predetermined schedule or performance milestones. For example, a startup might give its employees stock options with a 4-year vesting period, where the options become fully exercisable over time.
This refers to finance that is provided by venture capital firms or funds to startups and high-growth companies in exchange for equity ownership. Venture capitalists often take an active role in mentoring and guiding the companies they invest in. Sequoia Capital is a prominent venture capital firm that has invested in companies such as Google, Apple, and Airbnb.
A term coined for a startup that prioritises both profit and purpose. It will follow a sustainable business model which focuses on tackling social and environmental challenges while maintaining profitability.
By developing a good grasp of what these terms and expressions mean, you’ll enhance your understanding of the startup landscape. This will allow you to seamlessly integrate into the community and drop your new lingo like a pro!
To further enrich your startup knowledge, if you’re an aspiring entrepreneur embarking on your venture, check out our blog that offers insights into what qualities to look for in your first ten employees, or download our ultimate startup recruitment guide here. Alternatively, if you’re looking for employment within a startup, our tips on acing your next interview at a startup can provide invaluable guidance. Remember – the more you invest in learning now, the greater your chances of achieving success in the dynamic world of startups.
At GR4, we’ve plenty of opportunities within Europe’s thriving startup scene. You can search all our positions here, or get in touch with a member of our specialist team for a confidential discussion.