Startup Glossary

In the land of startups, scale-ups and Venture Capitalism, jargon and abbreviations are absolutely everywhere. Use this startup glossary of terms to search 101 definitions every startup founder should know.

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There are currently 101 definitions in this directory
A

Accelerator

Typically, the a programme that offers mentorship, brand/marketing crash course and some capital for startups in exchange for equity. Offering varies by accelerator but is usually suited to early stage startups with inexperienced founding teams.

Acquihire

The act of acquiring a company for the purpose of hiring the team behind it. Key employees may be tied in for a specified period of time.

Acquisition (business)

An acquisition is when one company or investment group buys another company. This is a common mechanism for exit.

Acquisition (customer)

The act of winning a new customer.

Allocation

The size of the round that is set aside for a specific investor (or fund, group of investors etc), usually communicated in a £ value.

Analytics (Web)

Web analytics is the measurement, collection, analysis, and reporting of web data to understand and optimise web usage. Put simply, tools such as Google Analytics provide and overview of how users interact with your website.

Angel Investor

An angel investor is someone who invests their own capital into the growth of a small business at an early stage (an alternative to VC as a source of equity capital, often associated with earlier stager businesses).

Annual Recurring Revenue (ARR)

Annual recurring revenue is predictable income that a business receives each year. Annualised version of MRR.

Anti-dilution Clause

A contractual clause that protects an investor from having their investment (as a percentage of ownership) significantly reduced in subsequent fundraising rounds.

Attribution (Modelling)

An attribution model is the rule, or set of rules, that determines how credit for conversions (sales) is assigned to user touchpoints. For example, if a user reads an email then searches for a brand online before purchasing, is the email responsible for the sale or the website? Attribution modelling answers these questions.

Attrition

The number of customers lost within a given period of time expressed as a percentage. See also churn / retention rate.

B

BHAG

Big Hairy Audacious Goal. Am extremely ambitious target to motivate progress.

Bootstrapping

A startup which is able to self-finance, often eliminating the need for seed or angel investment rounds. This can be achieved through early revenue generation, lean operations (typically in bootstrapped startups the founders take a low or no salary).

Bubble

A bubble describes a timeframe in an economic ecosystem where an industry does not realise that it might be overvalued and over-inflated.

Burn Rate

Rate at which a company spends cash reserves to cover expenses, expressed monthly or weekly. Usually applied to a company with little or no revenues.

C

Cap Table

An official document that described the capital structure of a startup, generally used to view the percentage ownership that each investor or employee owns of the company.

Capital

Capital is a term for financial assets, such as funds held in deposit accounts and/or funds obtained from special financing sources such as investment or loans.

Carried Interest ('The Carry')

The share of generated profits that an investment manager is entitled to keep as compensation. Can also be referred to as an “Incentive Fee” or a “Performance Fee.”, ranging from 15%-30%.

Churn Rate (Retention)

Also known as retention rate, the churn rate is the annual percentage rate at which customers stop subscribing to a product or service. In this context, it reflects how many customers leave a startup annually, as a %.

Cliff

Usually applying to vesting schedules, Cliff vesting is when an employee or investor becomes fully vested on a specified date rather than becoming partially vested in increasing amounts over an extended period.

CMO (Chief Marketing Officer)

A chief marketing officer (CMO) is the executive in charge of an organisation's strategic marketing initiatives. They steer the overarching direction of a brand's marketing communications.

Content Marketing

A form of marketing which involves the creation and distribution of content (in any medium) that does not explicitly promote a brand but is intended to generate interest in products or services.

Conversion Rate Optimisation (CRO)

Conversion rate optimisation (CRO) is the methodical process of making iterative changes to a website or app to increase the percentage of users who take a desired action (usually sign up, purchase, register etc).

Convertible Note

Put simply, a Convertible Note (CN) is debt finance, a type of convertible security that converts into equity.

In terms of using a convertible note for seed funding, the debt automatically converts into shares when Series A closes. Rather than a loan from a creditor accumulating interest, a convertible note from an investor converts into equity based on pre-agreed terms. Read more.


Cottage Business / Lifestyle Business

A cottage business is one that is unlikely to scale dramatically and therefore does not present a viable investment for a VC or Angel, but could lifestyle business for a founder.

CPO (Chief Product Officer)

A chief product officer (CPO) is the executive in charge of an organisation's strategic product initiatives. They steer the overarching direction of a brand's product, including features and how to articulate them.

Crowdfunding

Crowdfunding (not to be confused with crowdsourcing) refers to generating capital from brand advocates or early adopters in place of giving away equity, usually via a third party platform. In simple terms, asking a large number of people for a small amount of money each. See also equity crowdfunding.

Crowdsourcing

Crowdsourcing (not to be confused with crowdfunding) refers to obtaining input into a task or project by enlisting a large number of people, generally for free. For example, asking a Reddit sub for an opinion on a rapid prototype rather than paying for a focus group.

CTO (Chief Technology Officer)

A chief technology officer (CTO) is the executive in charge of an organisation's technological needs and strategic decision making in terms of tech. Often in technology start-ups the CTO is a co-founder and/or shareholder.

Customer Acquisition Cost (CAC)

An important metric in unit economics, the CAC allows a company to keep track of how much it costs to acquire a new customer. Calculated as direct acquisition costs (generally marketing and sales expenses) divided by the number of new customers, the CAC allows a startup to understand which channels deliver the best ROI for marketing spend.

Customer Relationship Management (CRM)

CRM refers to the process (but is generally synonymous with software enabling the process) of keeping track of and managing customer relationships. For example, automated email updates to customers may be part of a CRM strategy.

D

Data room

A data room (also known as a virtual data room) is an online repository of information that is used for the storing and distribution of documents. Generally used to house documents relating to due diligence in funding rounds.

Debt Capital

Debt capital is the capital/finance that a business raises by taking out a loan or other financial security (in this context, debt capital can be an alternative to equity capital).

Dilution

Dilution occurs when a startup issues new shares that result in a decrease in existing shareholders' ownership percentage of that company. When the number of shares outstanding increases, such as during a funding round, each existing shareholder owns a smaller, or diluted, percentage of the company, making each share less valuable.

Down Round

A fundraising round in which the startup is valued at a lower value per share than previous rounds (i.e. the valuation has gone down)

Drag-Along Rights / Drag-Along Clause

The right of the owners of a specified percentage of the shares of the startup to require other shareholders to sell their shares or to approve sale of the company. This prevents one group of shareholders from blocking sale of the company.

Due Dilligence

The process performed by investors to assess the viability of an investment target, and to ensure that the information provided by the startup is accurate.

E

Elevator pitch

A brief statement providing an overview of your business. Can you convey your startup's value proposition in the time it takes the lift/elevator to reach the next floor?

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) is a UK government scheme that helps younger, higher-risk businesses raise finance by offering generous tax reliefs to investors. Read more here.

Equity

The value of shares issued by a startup (or other company). e.g. she owns 63% of the startup's equity.

Equity Capital

Equity capital is the capital/finance that a business raises from investors in exchange for equity or stock (in this context, equity capital can be an alternative to debt capital).

Equity Crowdfunding

Equity crowdfunding refers to generating capital by asking a large number of people for a small investment in exchange for a small amount of equity, usually via a third party platform.

Exit Strategy

An exit strategy is a Founder's plan to sell their ownership in a company to investors/another company. An exit strategy gives a business owner a way to reduce or liquidate their stake in a business (generally for a profit).

F

Founder

A [startup] founder is, put simply, the person who launches the business, often with co-founders. A grander definition may be "a person or enterprise attempting to find innovative ways to solve an existing problem or fill a gap in the goods or services market" via Medium.

Fundraising

Generally a term used to represent the process of generating capital via exchanging equity for external investment (can also include alternative means of generating capital such as crowdfunding or debt finance).

G

Gamification

Through gamification, a startup can add a game-layer to a product or service that encourages users (via Motivation Theory) to take a specific action in exchange for a reward.

Go-to-market Strategy (GTM)

A go-to-market (GTM) strategy is a step-by-step plan designed to successfully launch a product or service to market.

Growth Hacking

Growth hacking is a catch-all term for strategies focused solely on growth (revenue or users). It is generally used in relation to startups who require substantial growth in a short period of time on relatively small budgets. Read more.

H

Hockey Stick

A term use to represent a growth chart/graph showing sudden and exponential growth.

I

Incubator

Similar to an accelerator but focussed primarily on innovation, "incubating" an idea into a viable business model. As with an accelerator programme, also offers mentorship and capital in exchange for equity.

Investment Syndicate

A group of investors that agree to participate in an investment round of funding for a startup.

L

Landing Page

In marketing, a landing page is traditionally a standalone web page created for a specific advertising campaign. The term is now used more broadly to include any transactional or marketing-focussed web pages.

Lead Investor

The investor who takes a primary role in negotiating the investment terms and completing due diligence.

Lean Startup

A method used to validate a business concept quickly and cheaply when founding a new company or introducing a new product.

Lifetime Value (LTV)

The total amount a single customer is worth to a startup during the lifetime of the relationship. e.g. For a £1 per month subscription, if an average customer subscribes for 18 months, the LTV is £18. Important when calculating unit economics.

M

Market Penetration (Market Share)

The percentage of a total market that your startup will win as customers, within a given timefame.

Marketing Automation

Marketing automation is the process of using software to automate marketing activities. Most commonly used for email, automation put simply is using triggers to begin specific actions. For example, when a user signs up for a newsletter they receive at automated welcome email.

Marketing Dashboard / Marketing Intelligence Dashboard

A marketing dashboard provides a single view on all of the most important marketing KPIs, allowing startups to make informed marketing decisions without the need for manual reporting.

Media Spend

Money which is spent directly on advertising (paid search, paid social, display advertising etc) as opposed to fees charged my marketing agencies or other associated costs.

Minimum Viable Product (MVP)

A minimum viable product (MVP) is a version of a product with enough features to be usable by early customers, used to validate a business or product idea. These customers then provide feedback for future product development.

Moat (Economic Moat)

A moat or economic moat is any competitive advantage that a startup has over competitors that makes the business model “defensible”. Represents a considerable barrier to entry for potential competitors in the future and prevents existing competitors from replicating your business model.

Monthly Recurring Revenue (MRR)

Monthly recurring revenue is predictable income that a business receives each month. Often a key metric in SaaS or subscription based models.

P

Pay-per-click (PPC)

PPC (a facet of the wider Paid Search landscape) affords businesses the opportunity to advertise within the sponsored listings of a search engine or a partner site by paying either each time their ad is clicked.

Pitch Deck

A pitch deck is a presentation that covers all aspects of your business and it's revenue model, targeted at generating investment from Angels, VCs etcetera.

Pivot

The act of using experience and existing resources to transform a failed product or service into a successful one.

Portfolio Company

A company that has received an investment from a VC fund or Angel becomes a portfolio company of that fund/person.

Post-money Valuation

Calculated by adding the £ amount invested in the transaction to the Pre-Money Valuation. How much the company is worth after it receives investments into it.

Pre-money Valuation

Pre-money valuation refers to the value of a startup not including external funding/investment. How much a startup is worth before it begins to receive any investments.

Pre-Seed Round

This stage typically refers to the period in which a company's founders are first getting their operations off the ground, and is often funded by the founders themselves (or friends and family) to cover the costs of launching operations or developing an minimum viable product (MVP).

Private Equity (PE)

Private equity is composed of funds - capital that is not listed on a public exchange - that is directly invested in private companies. Investors utilise private equity (PE) funds to earn returns that are better than what can be achieved in public equity markets or standard savings mechanisms.

Product Manager

A product manager is the person who identifies the customer need and the larger business objectives that a product or feature will fulfill, articulates the product vision and often manages the team building the product.

Product Marketing

A specialism within marketing, product marketing is the process of bringing a product to market. This includes deciding the product's positioning and messaging, launch strategy, and ensuring potential users understand the value of the product feature set, with a view to increasing demand.

Product Roadmap

A product roadmap is a high-level visual summary that maps out the vision and direction of your product offering, generally focusing on features and the benefits to users. Some companies choose to make the roadmap public.

Proof of concept

A prototype or sample of a product/service to prove that it works. See also MVP.

R

Referral Marketing

Referral marketing is a marketing tactic that makes use of recommendations and word of mouth to grow a business's customer base through the networks of its existing customers.

Run Rate

How the financial performance of a company, in terms of revenue, would look if the current results are extrapolated over a longer period of time.

Runway

Rate at which a company spends cash reserves to cover expenses, expressed monthly or weekly. (See also Burn Rate)

S

Scalable

How big can a startup grow and what are the barriers to growth? A less scalable business may fall into the category of lifestyle business (see Cottage Business).

Scale-up

Once a startup reaches the growth phase, it is generally referred to as a scale-up. "A company who has an average annualized return of at least 20% in the past 3 years with at least 10 employees in the beginning of the period (OECD, 2007)"

Search Engine Optimisation (SEO)

The process of improving a website to increase its visibility in search engines for relevant search queries, usually with a focus on user experience, crawlability, indexability and content relevance.

Seed Enterprise Investment Scheme (SEIS)

SEIS is a tax relief scheme created by the UK Government to encourage investment in seed-stage startups and businesses. Read more here.

Seed Funding

Seed funding is the first official equity funding stage. It typically represents the first institutional money that a startup raises. Some VCs or Angels specialise in Seed funding, usually expecting a higher equity stake to account for the increased risk or early stage businesses.

Series A

Series A funding is that which can be used to further enhance or develop or product / service, once the startup has an established track record (as demonstrated by KPIs such as Monthly Recurring Revenue, User numbers, sales etc).

Shareholders' Agreement

A shareholders' agreement is an agreement entered into between all or some of the shareholders in a startup. It regulates the relationship between the shareholders, the management of the company, ownership of the shares and the protection of the shareholders.

Software-as-a-Service (SaaS)

SaaS is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted, usually cloud-based.

Stack (Tech or Marketing)

An expression originally used to describe all the technology services used to build and run one single application, now used more generically as a collection of technologies and tools used by a business to fulfil a certain function.

Startup

The term startup is generally used to refer to new companies in the initial stages of operations, usually characterised by high costs and limited revenue (funded either by the founders themselves are external investment).

Stealth mode

A startup operating under the radar, keeping their value proposition / product a secret before an official launch so as not to alert competitors prematurely.

Sweat Equity

Awarding shares/equity in a startup to early employees or contractors in place of some (or all) of their salary.

Syndicate

A syndicate is a fund combining investment from multiple VCs or Angels. They are generally led by specialist investors and are financed by institutional investors or sophisticated angels. Syndicates are generally private.

T

Target Company

A startup which is being considered for investment by a VC or Angel (the startup becomes a target of that particular VC or Angel).

Term Sheet

A Term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents.

Total Addressable Market (TAM)

Total addressable market, also called total available market, is a term that is typically used to reference the revenue opportunity available for a product or service.

Traction

Evidence that users are willing to pay for your product or service. Traction represents progress or initial growth.

U

Unicorn

A company (often in the tech or software sector) with a valuation of over US$1 billion.

Unit Economics

Important when calculating the profitability of a product or service. Loosely calculated as Lifetime Value (LTV) of a customer divided by Customer Acquisition Costs (CAC).

V

Valuation

The calculation of what the startup is worth.

Value Proposition

A startup's value proposition (also expressed as Unique Selling Point/USP) is what makes the business uniquely attractive to customers and investors.

VC (Venture Capitalist)

A venture capitalist (VC) is a private equity investor that provides capital to companies exhibiting high growth potential in exchange for an equity stake.

Vesting (Schedule)

The schedule under which founders and employees must remain in the company before receiving their full share of the equity.

W

Wireframe

A wireframe is a basic, two-dimensional visual representation of a web page, app interface, or product layout. Usually one of the first steps in rapid prototyping.

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