Startup Terms That You Need To Learn

Basic Startup Terms That Every Startup Founder Should Know

A startup or start-up is started by individual founders or entrepreneurs to search for a repeatable and scalable business model. More specifically, a startup is a newly emerged business venture that aims to develop a viable business model to meet a marketplace need or problem.

Terms every startup founder should know:
Advertainment
Advertainment is a term used to reflect the intertwining relationships between advertising and entertainment. Typically it refers to media that combines various forms of entertainment (television, movies, songs, etc.) with elements of advertising to promote products or brands. An example would be product placement in a film.

Marketers’ approach to using entertainment content to promote their products dates back to the use of branded products in early motion pictures. It represented a cooperative venture between a filmmaker and a company in which on-screen exposure of a product, off-screen endorsement by an actor, or a combination of those were traded for paid advertising and unpaid promotions by the company. Often products were offered for use in films in return for publicity stills for use in companies’ advertising.

Acqui-hiring
Acqui-hiring or Acq-hiring (a portmanteau of “acquisition” and “hiring”) or talent acquisition, is the process of acquiring a company to recruit its employees, without necessarily showing an interest in its current products and services—or their continued operation.”Some technology blogs call it being ‘acquired.’ The companies doing the buying say it is a talent acquisition, and it typically comes with a price per head,” the New York Times reported in a page-one story describing the phenomenon on May 17, 2011. The process of a talent acquisition also provides a relatively favourable exit strategy for employees with the prestige of being bought by a larger company, combined with the typical process of hiring.

Angel Investor
Angel investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. The capital angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company through its difficult early stages.

Burn Rate
Burn rate is the rate at which a company is losing money.[1] It is typically expressed in monthly terms. E.g., “the company’s burn rate is currently $65,000 per month.” In this sense, the word “burn” is a synonymous term for negative cash flow. It is also measured for how fast a company will use up its shareholder capital. If the shareholder capital is exhausted, the company will either have to start making a profit, find additional funding, or close down.

Churn Rate
Churn rate (sometimes called attrition rate), in its broadest sense, is a measure of the number of individuals or items moving out of a collective group over a specific period. It is one of two primary factors that determine the steady-state level of customers a business will support.

The term is used in many contexts but is most widely applied in business with respect to a contractual customer base. For instance, it is an important factor for any business with a subscriber-based service model, including mobile telephone networks and pays TV operators. The term is also used to refer to participant turnover in peer-to-peer networks. Churn rate is an important input into customer lifetime value modelling and can be part of a simulator used to measure return on marketing investment using marketing mix modelling.

Cliff
Cliff vesting is the process by which employees earn the right to receive full benefits from their company’s qualified retirement plan account at a specified date, rather than becoming vested gradually over a period of time. The vesting process applies to both qualified retirement plans and pension plans offered to employees. Companies use vesting to reward employees for the years worked at a business and for helping the firm reach its financial goals.

Convertible Note
A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company.

The primary advantage of issuing convertible notes is that it does not force the issuer and investors to determine the value of the company when there really might not be much to base a valuation on – in some cases the company may just be an idea. That valuation will usually be determined during the Series A financing when there are more data points off which to base a valuation.

Incubator
A business incubator is a company that helps new and startup companies to develop by providing services such as management training or office space.

Pivot
A business pivot is a change in the direction of a company. This usually occurs when customer feedback causes a company to re-evaluate a product to meet a market need.

Seed Funding
Seed money, sometimes known as seed funding or seed capital, is a form of securities offering in which an investor invests capital on a startup company in exchange for an equity stake in the company.

Unit Economics
Unit economics is the fundamental bedrock of every business venture. This is what every business boils down to.

If a company can determine its unit economics, it can determine its contribution margins, break-even points and make realistic ROI calculations.

Deck
A pitch deck is a brief presentation, often created using PowerPoint, Keynote or Prezi, used to provide your audience with a quick overview of your business plan. You will usually use your pitch deck during face-to-face or online meetings with potential investors, customers, partners, and co-founders.

Growth Hacking
Growth hacking is a process of rapid experimentation across marketing funnel, product development, sales segments, and other areas of the business to identify the most efficient ways to grow a business. A growth hacking team is made up of marketers, developers, engineers and product managers that specifically focus on building and engaging the user base of a business.

Runway
Runway is how long your company can survive if your income and expenses stay constant. When companies raise money, they are literally trying to increase their runway (“We spend $100k/month and have $400k in the bank. If we raise an additional $1m, we’ll have fourteen months of runway in the bank instead of four.”)