36 Commonly-Used Startup Terms Defined

If you’re exploring a career in the startup world, brace yourselves for startup jargon. Entrepreneurship is a broad concept with lots of components to define — and once you throw in things like MVP, IPO, and ARR, it can feel complex quickly.

I’ve now worked with several startups in my career and know what a huge learning curve it can feel like in the beginning. Sometimes, it even feels as if people are speaking another language.

That’s because for every stage of the startup journey — from finding investors to launching your company to taking the business public — there are hundreds of startup-specific terms to account for. Although I’ve had to pick up this expertise over the years, I’m here to help break down the key terms you should know and simplify concepts and phrases you’re likely to encounter.

If you’re hoping to take on the startup world or brush up on your startup knowledge, I’ve created this guide to the key startup terms every aspiring entrepreneur should know.

Table of Contents

• The Ultimate List of Startup Terms
• Learn Startup Terms to Bring Your Ideas to Life

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 startup lingo 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.

1. Accelerator

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 HubSpot Creators, an accelerator for business media creators.

In my experience working with startups, accelerators have been invaluable. A client of mine went through Y Combinator and came out with an improved business model and industry connections.

Example: "In exchange for their services, startup accelerator programs either earn cash or obtain equity in a new company they're supporting."

2. Acqui-hired

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.

Example: "When the tech giant acqui-hired the small AI startup, they shut down the startup's product but integrated its talented engineers into their own team."

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

Download for free Learn more

Download Free

All fields are required.

You're all set!

Click this link to access this resource at any time.

Download Now

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.

Example: "The angel investor provided $100,000 in seed funding to the startup in exchange for a 10% equity stake in the company."

4. Bootstrapping

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.

Example: "The founders were bootstrapping their startup, using their personal savings and maxing out credit cards to fund the initial product development."

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.

Example: "The startup secured a $500,000 bridge loan to cover operating expenses while they closed their Series A funding round."

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.

Example: "With a monthly burn rate of $50,000, the startup had enough runway to operate for another 18 months before needing additional funding."

7. Cliff

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.

Example: "The startup's stock option plan included a one-year cliff, meaning employees had to stay for at least a year before any of their options vested."

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.

I work in a co-working space from time to time and love the exposure and networking opportunities I get with it.

Example: "The early-stage startup rented desks in a co-working space, allowing them to have a professional work environment without the high costs of a private office."

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

Download for free Learn more

Download Free

All fields are required.

You're all set!

Click this link to access this resource at any time.

Download Now

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.

Example: "The handmade soap company started as a cottage business, with production taking place in the founder's kitchen."

10. Crowdfunding

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.

Kickstarter, for example, is a crowdfunding platform.

Example: "The hardware startup raised $1 million through crowdfunding by pre-selling their innovative smart home device to early adopters."

11. Dragon

A dragon is a rare startup that raises $1 billion in a single round of funding. Uber is an example of a dragon startup.

Example: "The ride-sharing app became a dragon when it raised $1.2 billion in a single funding round, setting a new record in the startup world."

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.

I've seen the power of early adopters in action. In fact, I was an early adopter of Jasper.ai back when it was Conversion.ai and followed the growth of AI writing tools very closely.

Example: "The startup's early adopters provided crucial feedback on the beta version of the app, helping to refine features before the public launch."

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.

Example: "The founders' exit strategy involved growing the company to $100 million in annual revenue and then seeking acquisition by a larger tech firm."

14. Freemium

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.

Here’s what their pricing page looks like:

Image Source

Example: "The project management software used a freemium model, offering basic features for free and charging for advanced functionality."

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 who buy the stocks will own portions of the company.

Example: "The ecommerce startup decided to go public, launching an IPO that valued the company at $10 billion."

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.

Example: "The social media app used growth hacking techniques, such as incentivized user invites, to rapidly expand its user base without a large marketing budget."

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.

Example: "The biotech startup joined a university-affiliated incubator, gaining access to lab space and mentorship from experienced scientists."

Image Source

18. Incubator

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.

I've written case studies for startups that have gone through incubators. One AI startup I worked with credited their time in a prominent tech incubator for refining their business model and securing their first major client.

Example: "The biotech startup joined a university-affiliated incubator, gaining access to lab space and mentorship from experienced scientists."

19. Launch

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.

I‘ve been part of several product launches, and they’re always exciting. One client's app launch event I attended turned into an impromptu celebration when they hit it big on Product Hunt.

Example: "The startup's product launch event attracted media attention and resulted in a surge of new user sign-ups."

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

Download for free Learn more

Download Free

All fields are required.

You're all set!

Click this link to access this resource at any time.

Download Now

20. Lean

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.

Example: "Following lean startup principles, the team developed a minimum viable product and iterated based on user feedback."

21. MVP

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.

Example: "The startup's MVP was a simple landing page that gauged interest in their proposed service before they built any actual functionality."

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.

Example: "The founder's pitch deck included 12 slides covering the problem, solution, market size, and financial projections."

23. Pivot

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.

A startup I collaborated with occasionally completely pivoted its model from a freelancing platform to a learning platform for freelancers.

Example: "When their initial B2C strategy failed to gain traction, the startup executed a pivot to focus on B2B customers instead."

24. Scalability

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.

I've written about scalability challenges for many startups. One e-commerce client I worked with had to completely overhaul their infrastructure after a viral marketing campaign crashed their site.

Example: "The startup's cloud-based architecture ensured scalability, allowing them to handle a 10x increase in users without significant infrastructure changes."

25. Scrum

“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.

Example: "The development team used scrum methodology, with daily stand-ups and two-week sprint cycles to manage their workflow."

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).

Example: "The startup raised a $2 million seed round from a mix of angel investors and early-stage venture capital firms."

27. Solopreneur

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.

I’m a solopreneur myself and am slowly getting comfortable with the idea of outsourcing some tasks, so I have more time to myself.

Example: "As a solopreneur, she single-handedly developed the app, handled marketing, and managed customer support."

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 who risk putting in the work for a startup can still receive equity — something that could pay off big time should the company receive funding.

Example: "The startup's first employees received sweat equity in lieu of high salaries, betting on the company's future success."

29. Unicorn

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.

Example: "The fintech startup achieved unicorn status after a funding round that valued the company at $1.2 billion."

30. Valuation

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.

Example: "The startup's pre-money valuation was $5 million, but after raising $1 million in funding, its post-money valuation increased to $6 million."

31. Churn Rate

Churn rate is the percentage of customers who stop using a product or service. It's calculated by dividing the number of customers lost during a period by the total number at the start. You want a low churn rate since this means you’re retaining customers.

Example: "A SaaS startup might have a monthly churn rate of 5%, meaning they lose 5% of their existing customers each month."

32. Product-Market Fit

Product-market fit is achieved when a product or service successfully meets the demands of its target market. It means that customers not only buy the product but also actively use and recommend it to others.

Image Source

My experience with product-market fit has taught me that it's not always easy to achieve. I once collaborated with a startup that pivoted three times before finally finding its niche. When they did, though, their growth exploded.

Example: "The social media app achieved product-market fit when it saw exponential user growth and high engagement rates within its target demographic."

33. Customer Acquisition Cost (CAC)

CAC is the total cost of acquiring a new customer, including marketing and sales expenses.

I've seen firsthand how critical understanding CAC is for startups. One of my clients was spending way too much on paid advertising, resulting in a CAC that was unsustainable. We worked together to optimize their content marketing strategy, which ultimately brought their CAC down by 40%.

Example: "The e-commerce startup reduced its CAC from $50 to $30 by optimizing its Facebook ad campaigns and improving its website conversion rate."

34. Lifetime Value (LTV)

LTV represents the total revenue a business can expect from a single customer account throughout their relationship.

Example: "By improving customer retention and introducing premium features, the SaaS company increased its average LTV from $500 to $750 per customer."

35. Traction

Traction in startups is the tangible evidence of progress and growth, demonstrating that a product or service is gaining market acceptance. You can measure it through metrics like user engagement, revenue growth, or customer acquisition. Investors use traction to validate a startup's potential for success and attract more funding.

Example: "The food delivery app demonstrated strong traction by growing its user base from 10,000 to 100,000 in just three months."

36. Runway

Runway refers to the amount of time a startup has before it runs out of money, based on its current burn rate and cash on hand.

Example: “With $500,000 in the bank and a monthly burn rate of $50,000, the startup had a runway of 10 months to either become profitable or secure additional funding.”

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.

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

Download for free Learn more

Download Free

All fields are required.

You're all set!

Click this link to access this resource at any time.

Download Now