Entrepreneurship is a broad concept with plenty of components that need to be defined, making the range startup terminology both ecletic and extensive. From finding investors to launching your company to taking the business public, there are hundreds of startup-specific terms to account for.
You might need to discuss a marketing plan, plan an app, design a website, or figure out your audience. Entrepreneurs also need to know the ins and outs of finding funding, regardless of whether they rely solely on private funding or turn to an IPO after an impressive valuation — and there are concepts and phrases that cover virtually every aspect of those processes.
If none of this makes sense to you but you’re hoping to get a business off the ground, take a look at our list of some key startup terms every aspiring entrepreneur should know.
The Ultimate List of Startup Terms
Every well-established company had to start somewhere, and the most successful businesses founded in recent years fit the "typical start-up" bill at some point.
Almost all of them had to deal with at least some of the concepts listed below. So if you're looking to put your big idea in motion — regardless of your business model or industry — it serves you to have a grip on the terms on this list.
An accelerator is an organization that offers a short-term program with mentorship, resources, and even funding opportunities to help a business grow quickly. An example is Elevate, a growth accelerator by HubSpot.
This startup term means that a small (and likely failing) business is purchased for its workforce. A larger company might buy out another company and do away with the product — simply buying the organization to poach its talented employees.
3. Angel Investor
An angel investor is someone who gives the first funding to a startup. This person believes in the startup’s idea or solution and provides the entrepreneurs behind it with the money to get started.
When a startup is bootstrapping, it's self-funded. Especially for brand new startups, entrepreneurs will use their own savings as well as money from friends and family to get the business started. More than 80% of startups start out through bootstrapping.
5. Bridge Loan
A bridge loan is a short-term loan — usually covering two weeks to three years — that helps a startup access money in between rounds of funding.
6. Burn Rate
Most investors will want to know your burn rate — how quickly you are spending money compared to your capital during a determined amount of time — before doling out funding.
The cliff for vesting is a period of time required before employees can claim percentages of their shares. The cliff is typically one year, and it's meant to keep employees — particularly CEOs — around through the early stages rather than taking the benefits and leaving.
8. Co-Working Space
A co-working space is an office that is shared by employees from different companies. This model works particularly well for startups because they can pay a smaller fee to use the shared facilities compared to renting or buying a full office space for a small number of employees.
9. Cottage Business
Cottage businesses are startups that work best if they remain at a small scale. The term stems from the notion that these kinds of businesses would work well if they operated within a home rather than a conventional office space.
Crowdfunding is an alternative, accessible, more democratic form of funding where a company sources capital from a wide range of investors and clients who put up money for a business — purely because of their immediate, individual interest in its offering. Many startups will offer pre-orders of their products or services at discounted rates to raise money via crowdfunding.
A dragon is a rare startup that raises $1 billion in a single round of funding. Uber is an example of a dragon startup.
12. Early Adopters
An early adopter is an influential client who uses your product or service long before the general public does. Typically, these users can offer you insightful and honest feedback to help you improve the product or service before taking it to the larger target audience.
13. Exit Strategy
Entrepreneurs often set up an exit strategy, which is how they plan to sell their company via mergers, acquisitions, or IPOs. Doing so will allow the founder to transfer ownership and make money to pay back investors.
A freemium model is a popular choice for startups. It refers to offering customers a restricted version of a product or service for free with more advanced options available at extra cost.
For example, you might be able to sign up for Canva — a popular design platform — for free, but you can’t access premium stock photos, more storage, or some templates unless you pay for a Pro subscription.
15. Go Public/IPO
Going public is when a company puts its stock on the public market through an IPO (initial public offering) for broader, public investment. This is another form of investing, but those that buy the stocks will own portions of the company.
16. Growth Hacking
This is a marketing startup term that refers to a focused strategy using low-cost methods to quickly grow a company. Many companies these days turn to social media for growth hacking — hoping to go viral with their products or services without burning too much capital on marketing.
17. Hockey Stick
Investors want a startup's growth curve to look like a hockey stick, potentially doubling metrics like sales or number of active users each year.
An incubator offers businesses resources and mentorship to get through some of the initial growing pains of startup life. This is a long-term program, unlike an accelerator, typically offering startups these resources and connections in exchange for equity.
A startup's launch is when it finally brings its product or service to market. This can also include a soft launch, which is more of a test launch with minimal press exposure and beta products and services to help entrepreneurs gauge interest in their companies from potential clients.
The goal of a "lean" startup is to build and test products as quickly and inexpensively as possible to improve the product through trial and error rather than building out a fully developed product that might not attract buyers.
MVP for startups stands for minimum viable product — a bare-bones model of a startup's product that will show its key features and selling points without costing a fortune to make a full-fledged product before it has funding.
22. Pitch Deck
If you want to attract investors, you need a strong pitch deck — a presentation on key aspects of your business, including your product, target market, and business plan.
The goal is for the presentation to be short, informative, and enticing to show investors you have a great, sustainable idea that will give them a great return on their investments.
A pivot occurs when a startup makes a quick, radical shift to its business model. This could be in the product or service or even the target audience. A smaller change is called an iteration.
This startup term refers to the sustainability and potential growth of a business. The goal of most businesses is to grow and provide goods or services to an increasing amount of users through a repeatable, viable business model.
"Scrum" refers to an agile project management method that was originally designed for making decisions within development teams — but it can be applied to other areas of a business.
The scrum framework focuses on education, creativity, and collaboration among three entities: the product owner, the scrum master, and the scrum team.
Product owner: A single person with extensive knowledge of the user who manages and prioritizes products.
Scrum master: The scrum master helps remove roadblocks to help the entire scrum team complete their work.
Developers: As the main component of the scrum team, developers collaborate and decide on how to get their work done and what tools and techniques the startup should use.
26. Seed Round
The seed round refers to the very first stage of venture capital funding, where a business owner finds early-stage investors. This funding round comes after finding angel investors and is followed by rounds of funding named by “series” (Series A, Series B, Series C, and so on).
An entrepreneur typically has plans to start and grow a business. A solopreneur, on the other hand, starts and potentially even grows a business alone. This model is becoming more prevalent with the rise of freelance writers, designers, and developers.
28. Sweat Equity
Sweat equity is essentially human capital. When you’re just starting out, you might not even have enough funding yet to pay for employee services. Employees that risk putting in the work for a startup can still receive equity — something that could pay off big time should the company receive funding.
A unicorn startup is a company that is valued at $1 billion. While these businesses are rare, they're not quite as scarce as dragons, startups that raise $1 billion in a single round of funding.
Valuation refers to how much your company is worth, but this is determined in two ways: pre- and post-money valuation.
Pre-money valuation: This is an estimate of how valuable your company is before you receive any funding. It can help investors determine if your company is worth investing in.
Post-money valuation: This is how much your company is worth after a round of funding plus the pre-money valuation.
Learn Startup Terms to Bring Your Ideas to Life
Now that you know some of the most frequently used startup terms, you can feel a little more prepared to start down the path of entrepreneurship. It’s always going to be scary to take the leap, but knowing the lingo can give you some confidence as you start bootstrapping and searching for angel investors.
Originally published Sep 27, 2021 8:00:00 AM, updated September 27 2021