Common Startup Terms

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409a Valuation
A third-party assessment of the fair market value of your startup's common stock, crucial for setting stock option prices.

83(b) Election
A tax election that allows you to pay taxes on the value of restricted stock at the time of purchase, potentially reducing future tax liabilities.

A program providing mentorship, resources, and funding in exchange for equity, designed to fast-track your startup's growth.

Accredited Investor
An individual meeting specific financial criteria, eligible to invest in your startup.

An acquisition primarily for acquiring skilled talent rather than products or services.

The process of one company buying another, leading to a change in ownership.

An experienced individual offering guidance and expertise to help navigate startup challenges.

A flexible project management approach that encourages adaptability and collaboration.

The initial version of your product for internal testing and refinement.

Amazon Web Services (AWS)
A cloud computing platform by Amazon, commonly used for hosting startup services.

Angel Group
A collective of angel investors pooling resources to invest in startups.

Angel Investor
An individual providing personal funds to startups in exchange for equity.

Angel Round
The first funding round from individual investors.

Annual Recurring Revenue (ARR)
Predictable and recurring revenue from subscriptions or contracts annually.

Articles of Incorporation
Legal documents defining your startup's existence and structure.

Authorized Shares
The maximum number of shares your startup can issue, as outlined in corporate documents.

Business to Business - involving transactions between businesses.

A business model serving both business and consumer markets.

Business to Consumer - involving transactions between businesses and consumers.

Balance Sheet
A financial statement detailing your startup's assets, liabilities, and equity.

BAU (Business As Usual)
Refers to standard, everyday business operations.

A stage of product development following alpha testing, involving external user testing.

BHAG (Big Hairy Audacious Goal)
A challenging and inspiring long-term business goal.

Board of Directors
A group elected to oversee and represent shareholders, providing strategic guidance.

Building and growing your startup without external funding.

A short-term financing round supporting your startup until the next significant funding round.

An economic phenomenon where the value of assets, like startups, becomes inflated.

Burn Rate
The rate at which your startup uses up its available capital.

Business Plan Competition
A competition where startups present their business plans to win funding or support.

Buying the Logo
Acquiring a company primarily for its brand or intellectual property.

The acquisition of a company, often involving purchasing a majority of its shares.

CAC (Customer Acquisition Cost)
The cost incurred to acquire a new customer.

Cap Table (Capitalization Table)
A record of your startup's equity ownership and distribution among investors.

Cash Flow Positive
When your startup generates more cash than it spends.

Cash Flow Statement
A financial statement reflecting changes in cash and equivalents due to balance sheet account adjustments.

A startup blending technology and human elements.

The gap between early adopters and the mass market in product adoption.

Churn Rate
The percentage of customers who stop using a product within a specific period.

A point in time when vesting for equity options begins.

The process of introducing your product or service to the market.

Common Stock
The basic ownership form held by founders and employees.

Convertible Note
Short-term debt that converts into equity in a future financing round.

Convertible Preferred Stock
Preferred stock that can be converted into common stock.

Corporate Round
A funding round led by a corporate investor.

Corporate Venture Capital
Investments by established companies into startups.

Cottage Industry
A small-scale, decentralized business.

Raising funds from a large number of people through online platforms.

Investment model where many investors contribute small amounts of capital.

Outsourcing tasks to a large group of people or community.

Customer Development Model
A methodology for discovering and validating market opportunities.

Deal Flow
The rate at which investment opportunities come to a venture capitalist.

Deal Lead
The investor leading a funding round.

Deal Memo
A document summarizing the key terms of a deal.

Debt Financing
Raising capital by taking on debt, often through loans.

A startup with a valuation exceeding $10 billion.

A presentation, often a pitch deck, conveying key startup information.

Demo Day
An event where startups present their products to potential investors.

Diluted Founders
Founders whose ownership stake is reduced due to the issuance of new shares.

Reduction in ownership percentage due to the issuance of new shares.

Discounted Convertible Note
A convertible note issued at a discount to the next funding round's valuation.

A process where a new entrant transforms an industry.

Disruptive Technology
Innovations significantly altering markets and industries.

The practice of a company using its own products or services.

Down Round
A funding round with a valuation lower than the previous round.

Drag-Along Rights
Rights allowing majority shareholders to force minority shareholders to join in the sale of a company.

An investor with a substantial positive impact on a startup.

Due Diligence
The investigation or research conducted before entering into an agreement or investment.

Early Adopters
The initial customers adopting a new product or technology.

Eat Their Lunch
To outperform or surpass a competitor.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
A measure of a company's operating performance.

The network of organizations, individuals, and resources surrounding a startup.

EIR (Entrepreneur in Residence)
An entrepreneur temporarily working with a venture capital firm or incubator.

Elevator Pitch
A concise and compelling description of your startup, short enough for an elevator ride.

Ownership interest in a company, often represented by shares of stock.

Someone passionately promoting a product or cause.

The event where an investor or entrepreneur sells their stake in a company.

Exit Strategy
A plan outlining how investors will exit their investment.

Family Office
A private wealth management advisory firm serving high-net-worth individuals and families.

First Mover Advantage
The competitive advantage gained by being the first to enter a market.

Flat Round
A funding round with the same valuation as the previous round.

Follow-On Funding
Subsequent funding rounds after the initial investment.

Founders Shares
Shares held by your startup's founders.

A business model offering basic services for free with premium features for a fee.

Friends and Family Round
An early funding round involving contributions from close associates.

Friends, Family, and Fools
Refers to early-stage funding sources, often personal connections.

Funding Round
A specific stage in the process of raising capital for your startup.

To incorporate game elements into non-game contexts to increase user engagement.

General Partner
A partner in a venture capital firm with management responsibilities.

Funds provided to your startup without repayment, often for specific purposes.

Growth Hacking
Strategies focused on rapid and unconventional business growth.

Events where individuals collaborate intensively on software projects.

Individuals with technical skills who engage in programming and problem-solving.

A startup with a valuation exceeding $100 billion.

Hockey Stick
A graph displaying rapid and exponential growth.

In-Kind Support
Non-monetary resources or services provided to support your startup.

A program providing support, resources, and mentorship to startups.

Initial Coin Offering (ICO)
A fundraising method involving the creation and sale of cryptocurrency tokens.

An employee within a company who acts as an entrepreneur.

IPO (Initial Public Offering)
The first sale of a company's stock to the public.

Issued Shares
The total number of shares your startup has allocated and sold.

Repeating a process to improve and refine your startup's product or strategy.

KPIs (Key Performance Indicators)
Quantifiable metrics used to evaluate your startup's performance.

The introduction of your product or service to the market.

Lead Investor
The primary investor who leads and often initiates a funding round.

A methodology emphasizing efficiency and the elimination of waste in your startup's processes.

Limited Partner
An investor in a venture capital fund with limited liability.

Liquidation Preference
A provision giving certain investors priority in receiving proceeds during a liquidity event.

Liquidation Waterfall
The order in which investors and stakeholders receive proceeds during a liquidity event.

Liquidity Event
An event resulting in a significant change in your startup's ownership or structure.

A period during which certain shareholders are restricted from selling their shares.

Loss Leader Pricing
Setting the price of one product low to stimulate sales of other, higher-margin products.

LTV (Lifetime Value)
The predicted revenue a customer will generate over their entire relationship with your startup.

Major Investor
An investor contributing a significant amount of capital to a funding round.

Market Penetration
The degree to which your product is adopted by customers in a specific market.

The combination of two companies to form a new entity.

Quantifiable measures used to track and assess your startup's performance.

A venture capital fund with a smaller pool of capital.

A competitive advantage that protects your startup from competition.

Generating revenue from your startup's products or services.

Monthly Recurring Revenue (MRR)
The predictable and recurring revenue generated each month.

An ambitious and groundbreaking project or goal.

MVP (Minimum Viable Product)
The most basic version of your product that satisfies early adopters.

Non-Equity Assistance
Support provided to your startup without the exchange of equity.

Non-Technical Founders
Startup founders without a technical background.

OKRs (Objectives and Key Results)
A goal-setting framework used to define and track objectives and their outcomes.

Option Pool
A reserve of company shares set aside for future employee stock options.

Contracts giving the holder the right to buy or sell shares at a predetermined price.

PaaS (Platform as a Service)
A cloud computing service providing a platform for developing, running, and managing applications.

Party Round
A funding round with multiple investors participating without a lead.

Pay to Play
A provision requiring existing investors to participate in future funding rounds to maintain their ownership.

Peer-to-Peer Lending
A lending model where individuals borrow and lend directly without an intermediary.

Phantom Stock
A form of equity compensation without actual ownership of company shares.

A presentation pitching your startup to potential investors or partners.

Pitch Competition
An event where startups present their business ideas to compete for funding.

Pitch Deck
A presentation summarizing your startup's business plan and potential.

A strategic shift in your startup's business model or product.

A secondary offering of shares by existing investors.

Portfolio Company
A company in which a venture capital firm has made an investment.

Post-IPO Debt
Debt incurred by a company after going public.

Post-IPO Equity
Ownership in a company after it has gone public.

Post-IPO Secondary
The sale of existing shares after a company has gone public.

Post-Money Valuation
The valuation of your startup after a funding round is completed.

Pre-Money Valuation
The valuation of your startup before a funding round.

Pre-Seed Funding
The initial funding round to support your startup's concept and early development.

Preferred Stock
Stock with preferential rights and privileges.

Priced Round
A funding round where the valuation is established before investment.

Private Equity
Investment in companies that are not publicly traded.

Pro-Rata Rights
The right of existing investors to participate in future funding rounds to maintain their ownership percentage.

Problem-Founder Fit
Alignment between the founder's skills and the challenges your startup aims to solve.

Product-Market Fit
The stage where your product satisfies the market demand.

Demonstrating the feasibility of your startup's concept or technology.

A preliminary model of your product to test functionality and design.

R&D (Research and Development)
The process of investigating and developing new products and technologies.

Ramen Profitable
Achieving profitability with just enough revenue to cover basic living expenses.

A regulation allowing companies to offer and sell securities to the public.

A regulation allowing small companies to raise funds from the public.

A regulation providing exemptions from federal securities registration requirements.

Representations and Warranties
Statements about your startup's condition and performance made during a deal.

The ability to retain and keep customers using your product or service.

Return on Investment (ROI)
A measure of the profitability of an investment.

The total income generated by your startup.

Revenue-Based Financing
A financing model where repayment is based on a percentage of your startup's revenue.

Right of First Refusal
A contractual right to match an offer before the seller can proceed with a third party.

Run Rate
An estimate of your startup's future financial performance based on current performance.

The time your startup can operate with its current funding.

SaaS (Software as a Service)
A software distribution model providing access to software over the internet.

A Simple Agreement for Future Equity, a type of convertible security.

The ability of your startup to grow without proportional increases in resources.

The process of expanding your startup's operations.

An individual who identifies and refers potential investment opportunities to a venture capital firm.

A framework for Agile project management emphasizing iterative and incremental development.

SEC (Securities and Exchange Commission)
The U.S. government agency overseeing securities and financial markets.

Secondary Market
A marketplace for buying and selling existing shares of privately held companies.

Seed Funding
The initial capital raised to support your startup in the early stages.

Serial Entrepreneur
An individual who starts and leads multiple successful startup ventures.

Series A
The first significant round of funding for your startup.

Series A Crunch
A potential bottleneck faced by startups seeking Series A funding, where the supply of early-stage capital falls short of the demand from companies transitioning from seed funding to more substantial investments.

Series B
The second round of funding for startups, typically aimed at scaling operations and expanding market presence after proving the viability of their business model in the Series A stage.

Series C
The third round of funding, often directed towards achieving market dominance, global expansion, or preparing for an initial public offering (IPO).

Shareholders' Agreement
A legally binding contract defining the rights and obligations of shareholders, addressing issues such as decision-making, ownership percentages, and exit strategies.

Smart Money
Investors who not only provide capital but also bring strategic value, industry expertise, and connections to help the startup grow.

Social Proof
Endorsements or support from reputable individuals or organizations, validating the credibility and potential of a startup to attract further investment.

Social Venture
A startup with a primary goal of creating positive social or environmental impact alongside financial profitability.

Soft Landing
A controlled and strategic exit for a startup that allows for minimal negative consequences, often involving acquisition or merging with another company.

An entrepreneur who operates independently, handling all aspects of a business alone.

SPAC (Special Purpose Acquisition Company)
A publicly traded company created for the purpose of acquiring or merging with another company, offering an alternative path to going public.

The combination of technologies, tools, and programming languages used in a startup's product development.

Stealth Mode
A state in which a startup operates in secrecy to protect its intellectual property and gain a competitive advantage before launching publicly.

Success Fee
A performance-based fee paid to service providers, often consultants or advisors, contingent upon achieving predefined success milestones.

Sweat Equity
Ownership stake in a company earned through the contribution of time, effort, or expertise instead of monetary investment.

Target Market
The specific group of customers a startup aims to reach and serve with its products or services.

Technical Founder
The individual responsible for the technical aspects of a startup, typically possessing strong programming or engineering skills.

Term Sheet
A non-binding agreement outlining the key terms and conditions of an investment, serving as a basis for negotiation before drafting the final legal documents.

The X of Y
A format often used to describe a startup by highlighting its unique combination of attributes or characteristics.

Thought Leader
An individual or company recognized as an authority and influential in a particular industry or field.

Evidence of a startup's market success and growth, often measured by user adoption, revenue, or other key performance indicators.

Trough of Sorrow
A challenging phase in a startup's journey characterized by struggles, setbacks, and uncertainty.

Two Pizza Rule
A management principle stating that teams should be small enough that they can be fed with only two pizzas, emphasizing efficiency and effective communication.

UI (User Interface)
The visual elements and design of a software or product that users interact with.

A startup valued at over a billion dollars, reflecting its rarity and exceptional success.

USP (Unique Selling Proposition)
A distinctive feature or benefit that sets a product or service apart from competitors.

UX (User Experience)
The overall experience a user has when interacting with a product, encompassing usability, design, and satisfaction.

The process of confirming the feasibility and potential success of a business idea or product through market testing or user feedback.

Valley of Death
A critical stage in a startup's development where it faces a high risk of failure due to insufficient funding or challenges in scaling.

The estimated monetary worth of a startup, determined through various methods such as market analysis, financial metrics, and comparable company valuations.

Value Proposition
The unique value a product or service offers to customers, addressing their needs and differentiating it from competitors.

Venture Capital (VC)
Investment funds provided to startups and small businesses with high growth potential in exchange for equity.

The process by which founders and employees earn ownership of their shares over time, often to incentivize long-term commitment.

A founder with a clear and ambitious long-term vision for the company, driving innovation and strategic direction.

Vulture Capitalist
An investor who seeks distressed or struggling companies to invest in, aiming for high returns through restructuring or liquidation.

Financial instruments granting the holder the right to buy a company's stock at a predetermined price within a specified time frame.

A financial model illustrating the distribution of proceeds from a liquidity event, such as an exit or IPO, among stakeholders.

YC (Y Combinator)
A renowned startup accelerator that provides funding, mentorship, and resources to early-stage companies.

A startup focused on creating a sustainable and profitable business, in contrast to the "unicorn" pursuit of rapid and massive valuation.

A startup that is still operational but not achieving significant growth or success.

Zombie Unicorn
A startup with a high valuation but lacking the expected growth or success, resembling a stagnant or struggling business despite its initial hype.