Start-up jargon decoded. Educate yourself

As an entrepreneur, having a great pitch is not enough to convince investors; you also need to speak their language

The start-up ecosystem has transformed dramatically over time. A young entrepreneur eager to build the next billion-dollar business with the help of mentoring, marketing and venture capital funds, needs to upskill to adapt to these changes. To establish a firm, generate funding, and effectively scale-up, a founder needs to network with numerous stakeholders such as legal experts, developers, investors, and so on. Hence, every entrepreneur must understand the start-up jargon to properly traverse the system. Below are important start-up terminologies with their definitions, which can help you learn and improve.

Angel funding 

This form of investment is often made while a start-up is in its early stages. The investor, sometimes called a ‘business angel’, offers companies initial or expansion financing in exchange for an equity stake in the company. Jeff Bezos, CEO of Amazon, is one of the world’s most well-known angel investors, having invested in companies such as Google and Uber. 

Accelerator 

Is it related to speeding along the highway? Not when you are referring to a start-up. An accelerator is a company or program that provides small firms with guidance, coaching and resources to help them develop. 

Bootstrap 

Have you ever heard the expression ‘pulling oneself up by one’s bootstraps’? This word has emerged from it, and it means ‘self-funding’ by utilising personal resources such as friends and relatives to get the funding started.

Exit

Founders may plan their exit strategy before or during their entrepreneurial journey. An exit is a method of transferring control of your business to another firm while repaying your investors.

Bridge loan

A loan for a short period of time, usually between two weeks and three years, until long-term finance, can be secured. A swing loan is another term for a short-term loan. 

Burn rate 

Quite literally, how quickly you squander your money. Do not be shocked if you hear the word ‘run rate’ at business networking events.

MVP (Minimum viable product) 

A method of developing a basic version of a new product to test on early consumers. Only after considering the input from early consumers is the product expanded with new features. 

Incubator 

Unlike an accelerator, an incubator assists businesses in their early phases of development. It is essentially an organisation that assists new businesses in their early months or years, generally in exchange for stock. 

IPO (Initial Public Offering)

An IPO or Initial Public Offering is when a start-up’s stock is made publicly available for the first time. A private corporation becomes a public company at this stage. 

Lean start-up 

When launching a new firm or offering a new product, this strategy is used to validate a business proposition swiftly at a low cost.

Pivot 

In the start-up sector, ‘pivot’ happens when a firm suddenly switches course after previously targeting a different market niche, similar to its meaning when used to describe a mechanism revolving on a central point.

Scale-up

When your business has grown in size, geographic location, market, etc., you can say you have scaled up. A scale-up is a firm that has proved its product in a market and is financially sustainable. 

Seed funding 

Seed financing refers to the first round of small, early-stage investment from family members, friends, banks, or an investor. 

Pitch deck 

If you have ever had to sell an idea to your employer, you have probably done your best to be persuasive. Similarly, a pitch deck is a condensed form of a business plan that displays crucial data to potential investors in the hopes of swaying their decision. 

VC (Venture Capitalist/Venture Capital)

Firms lend venture money to small-scale, high-risk start-up enterprises with significant growth potential in exchange for stock. Venture capitalists (VCs) are investors who work for venture capital firms and choose to invest in certain start-ups. 

Letter of intent/term sheet 

It is a non-binding agreement between an investor and a start-up outlining the fundamental terms and conditions for financing. Once the parties involved achieve an agreement, a binding agreement based on the term sheet is drafted.

If you are an entrepreneur seeking institutional finance, having a fantastic pitch will not be enough to entice your investors; you must also speak their language. It is, therefore, a good idea to be familiar with the terminology used in the industry to become a successful entrepreneur.

Have a start-up idea? Show it to the world. UPES School of Business and Runway incubator have come together to organise a start-up idea competition called ‘Take Off’. Aspiring start-up founders are required to submit their original business pitches and ideas by May 16, 2022. The winning candidate will receive a cash prize of INR 2,50,000 while the runner-up will get a prize of INR 1,00,000.

For details, please refer https://www.runwayincubator.com/take-off