- Accelerator: A program that provides mentorship, resources, and sometimes funding to startups in exchange for equity, usually over a fixed period, to help them grow rapidly.
- Alpha/Beta Testing: Early testing of your product with internal teams (Alpha) and real users (Beta). These phases are key for refining your offering based on feedback.
- Angel Investor: Wealthy individuals investing in startups, often early on. They can provide much-needed capital and guidance, helping you navigate the startup phase.
- Angel Investor Syndicate: A group of angel investors who pool their resources to invest collectively in startups, sharing the risks and rewards.
- Board of Directors: A group of individuals elected by shareholders to oversee the management of a company and make strategic decisions on behalf of the shareholders.
- Bootstrapping: Funding your startup through personal savings or operational revenues. It allows full control but may limit growth due to financial constraints.
- Burn Rate: How fast your startup spends its cash reserves before making a profit. Keeping an eye on your burn rate is essential for financial health and longevity.
- Cap/Target Valuation: The highest company valuation at which an investment converts into equity. It’s vital for ensuring early investors get a fair share of the company for their risk.
- Churn Rate: The rate at which customers stop using your service. It’s crucial for understanding customer satisfaction and long-term revenue sustainability.
- Common Stock: The basic form of ownership in your company, usually held by founders and employees. It comes with voting rights but less protection than preferred stock.
- Convertible Note: A flexible financing tool that starts as a loan but can convert into equity during future funding rounds. It’s a common choice for early-stage funding due to its simplicity and flexibility.
- Crowdfunding: Raising capital from many individuals, typically through online platforms, in exchange for rewards, equity, or debt.
- Customer Acquisition Cost (CAC): The cost associated with acquiring a new customer, including marketing and sales expenses. Understanding CAC helps assess the efficiency of customer acquisition strategies.
- Customer Lifetime Value (CLV or LTV): The total revenue a business expects to earn from a customer over their entire relationship with the company. CLV helps determine the long-term value of acquiring and retaining customers.
- Dilution: Happens when you issue new shares, reducing the ownership percentage of existing shareholders. It’s an important consideration when raising new capital.
- Discount: An incentive for early investors, allowing them to buy shares at a lower price in future rounds. It’s a way to reward those taking early risks.
- Drag-along Rights: Enable majority shareholders to force minority ones to sell their shares in the event of a company sale. This right ensures that a majority shareholder can sell the company without being blocked by minority holders, streamlining the sale process.
- Due Diligence: The investigation or research conducted by investors or acquirers to assess the potential risks and opportunities of a startup before making an investment or acquisition.
- Equity Incentive Plan: A pool of shares set aside for employees, directors, and consultants. It’s a tool for attracting and retaining talent by offering a piece of the company’s future success.
- Equity Round: When you sell company shares to raise capital. It’s a significant step in funding your company’s growth, bringing in investors as part-owners.
- Exit Strategy: A plan outlining how and when investors and founders will cash out their investments in a startup, often through acquisition, IPO, or buyback.
- Founder’s Agreement: A legal document outlining the rights, responsibilities, and ownership percentages of each founder in a startup, including provisions for equity distribution, decision-making, and dispute resolution.
- Fully Diluted Shares: The total number of shares, including all options, warrants, and convertible securities. It gives a complete picture of ownership and dilution potential.
- Incubator: Similar to accelerators but typically focused on providing resources and support to startups at an earlier stage, often without taking equity.
- Intellectual Property (IP): Legal rights that protect creations of the mind, such as inventions, designs, trademarks, and trade secrets, which are often crucial assets for startups.
- IPO (Initial Public Offering): Taking your company public. It’s a major leap that involves selling shares to the public, requiring preparation and adherence to regulatory standards.
- Lead Investor: The main investor in a funding round, setting terms and often joining your board. They play a key role in attracting other investors.
- Liquidation Preference: Preferred stock’s advantage, ensuring these investors get paid back before common stockholders if the company is sold or liquidated.
- Maturity Date: The deadline for repaying a loan or converting a convertible note into equity. It’s a critical financial timeline for your company.
- Market Validation: The process of confirming that there is demand for your product or service in the market through customer feedback, sales, or other indicators before scaling up operations.
- Non-Disclosure Agreement (NDA): A legal contract that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes but wish to restrict access to by third parties.
- Pivot: Changing your business strategy based on market feedback. It’s a flexible approach to finding the right market fit and path to growth.
- Pre-money Valuation: Your company’s worth before the latest round of investment. It’s crucial for determining how much of the company new investors will own.
- Preferred Stock: A type of stock offering advantages like dividends and priority in asset distribution over common stock. It’s attractive to investors for the protections it offers.
- Pro-rata Rights: The right for existing investors to maintain their ownership percentage by investing in future funding rounds. It helps investors avoid dilution.
- Product-Market Fit: The degree to which a product or service satisfies the needs and demands of a specific market segment. Achieving product-market fit is essential for sustainable growth and customer satisfaction.
- Proof of Concept: Demonstrating that your product or business idea is feasible. It’s an early step toward validating your business model and attracting investment.
- Runway: The amount of time your startup can operate until it needs more funds. Extending your runway is critical for surviving and thriving in the early stages.
- SAFE (Simple Agreement for Future Equity): A straightforward funding instrument that converts into equity in future rounds. It’s popular for its simplicity and efficiency.
- Sales Funnel: The process customers go through from learning about your product to making a purchase. Understanding it helps optimize marketing and sales strategies.
- Scalability: Your business’s ability to grow without being hampered by its structure or available resources. A scalable business can increase revenue with minimal incremental cost.
- Seed Funding: The initial capital raised by a startup from investors or founders to support the early stages of development, product validation, and market entry.
- Sweat Equity: The contribution of time, effort, or expertise by founders or team members to a startup in exchange for equity rather than monetary compensation.
- TAM (Total Available Market): The total revenue opportunity available for your product or service. It’s an indicator of your business’s scalability and market potential.
- Term Sheet: A document outlining the terms and conditions of a potential investment, typically prepared by investors and presented to startup founders.
- User Experience (UX) Design: The process of enhancing user satisfaction and usability of a product or service by improving its accessibility, usability, and overall experience through design principles and research.
- Venture Capitalist: Professional investors focusing on startups with high growth potential. They provide capital and, often, strategic advice to help your company scale.
- Venture Debt: Debt financing aimed at startups and growth companies. It can offer a strategic funding avenue without diluting equity significantly. It’s often used alongside equity investments as part of a broader financial strategy.
- Vesting Schedule: A timeline specifying when founders, employees, or other stakeholders are entitled to receive ownership of shares or options, usually over a period of time.
