35 Commonly-Used Startup Terms You Need to Know
The number of must-know startup words is growing by the year, and it might get tough for entrepreneurs to keep up with the emerging terminology. So to make sure you're aware of the meaning of many popular terms used in the field, we've decided to put together a mini-dictionary. Below you'll find a list of commonly-used startup lingo with simple explanations.
Startup Terminology: 35 Must-Knows
To help you fill some term gaps as you're starting a startup, we've compiled popular startup jargon and placed it in alphabetical order.
Startup founders often turn to organizations that can support them in their growth. As such, there are incubators (help early-stage startups take their first steps) and accelerators (growth programs suitable for startups at the scaling stage). Although both options are aimed at aiding entrepreneurs, they differ in duration, provided assistance, application terms, etc.
In short, accelerator programs usually last several months. They give chosen startups the required boost to take the launched MVP to the next level, which they'd otherwise need several years for. This may include investment in exchange for equity, personalized guidance, and getting acquainted with potential investors. The competition for making it to accelerators is high: on average, only 3 out of 100 startups make the cut.
In a broad business sense, acquisition is the process of purchasing a business, which often results in a company merging. Let's bring up an example with two of the best payment gateways: PayPal purchased Braintree. The same process applies to startup acquisition, and, in many cases, such an exit is a major success for startup founders.
On the other hand, customer acquisition refers to the process of obtaining clients who buy your product or service.
An angel investor is an individual who provides financial support to a startup at a very early stage, for instance, gives seed capital. Essentially, it is their personal money. Typically, they get startup equity or some form of ownership mainly because the startup is at the beginning of its journey and poses a financial risk. Thanks to such contributions, startups can bring their ideas to life, take on employees, and launch products.
Bootstrapping refers to self-funded startups or companies. These companies use their own money to bring a product to life, such as personal savings or the money they get from family or friends. They barely use other outside funding sources. Interestingly, the majority of startups opt for bootstrapping at the earliest startup stages of development or at the beginning of their business establishment journey.
This rate shows how quickly a company is spending the money that forms its initial capital. It can also mean a company's negative cash flow and is usually calculated every month. Burn rate is a solid indicator of a startup's runway, or how much longer it will last on the money it has before it starts to get a stable income.
The classic cliff vesting definition revolves around the retirement-plan-related benefits of a company. For instance, it may give employees retirement pension account ownership after a certain number of years of service.
Yet, in a more narrow startup sense, cliff vesting often refers to such employee vesting that provides an opportunity for an employee to receive company equity or stocks after a specific period of time. A vesting schedule usually specifies such a period that lasts from 1 to 5 years on average. Ownership of such assets can be used as part of a benefit plan and a way to motivate people to stick around in the startup for longer.
Customer Acquisition Cost (CAC)
Customer acquisition cost is one of the most important key performance indicators for startups. This metric shows the sum of money the startup spends on winning a single client. In any event, customer acquisition cost can be a decent marker of crucial business activities and overall performance.
CAC is calculated for a given time period. It implies dividing all of your sales and marketing expenses by the number of acquired clients. If CAC is low, this is a good sign.
The project discovery phase, or scoping, is the stage that goes after idea initiation and before development works start. It includes research and proof of concept, defining the target audience and forming the product vision, choosing the tech stack, selecting the features, and planning the overall work ahead.
In short, this stage is devoted to ensuring that the product is worth building and planning how to do it most effectively. It provides you with the opportunity to reduce risks and follow a more precise development plan that'll allow for creating a better product in shorter time frames.
Early adopters are the pioneers who explore the product before it becomes popular, often your first customers. Customarily, these are the people who start using your services or product before you reach a broader audience (for example, those who you "win" after the minimum viable product launch).
Undoubtedly, early adopters are very important for products that are only shaping. Such "consumers" may present valuable feedback and can be the moving force in spreading the word about the solution.
The shares that a company or startup issues are referred to as equity. Such ownership is usually split into percentages or stocks, distributing the profit.
Startups commonly give equity to investors. Plus, some startups offer their employees equity shares to gear their interest in promoting and improving the product. As startups usually don't have extensive benefit packages to offer the team, vesting can serve as influential motivation.
These are the ambassadors of a product who, for the most part, are in the company's ecosystem. Who can be an evangelist? The startup founder, members of the board, employees, team members, etc. Basically, anyone who is capable of getting you more supporters and convincing people that the product is valuable and should be "adopted". On rare occasions, people who aren't part of the company are considered evangelists.
There are multiple ways evangelists can promote the product or startup, including:
- product awareness activities;
- educating people;
- attending conferences;
- presenting the company at meetings;
- among others.
When a startup founder leaves the company by selling his share or passes ownership due to a sale, an exit happens. Numerous startups actually build startups for the purpose of making a successful exit in due time, meaning they want to sell it for a very good profit. If this is the case, there's a startup exit plan for the startup to get acquired or an exit strategy to sell a stake. Usually, the product goes through a thorough technical due diligence audit, where its quality is assessed.
A freemium is a pricing strategy that offers a part of the product at no cost. As a rule, this customer acquisition model can provide users partial access to only basic functionality, whereas the more intricate solutions, add-ons, features, or services come at an extra charge when opting for the paid plan.
Similar to free trials (that provide access for a limited period of time), freemiums are commonly used as part of the product-led growth strategy. This is when the business focuses on the product and the value it brings to users more than on marketing, sales, or other promotion tactics. This way, the product itself becomes a self-selling asset as users get to test and "feel" it, discovering its benefits on their own.
Go to Market (GTM)
A go-to-market strategy is a company's plan that indicates how they'll win their target customers and promote the created product after release. It may include various points like the promotion tactics, the utilized channels, the pricing model that'll be adopted, and other campaigns. This layout can help the team stay focused, prioritize activities, and handle things in due time.
Growth hacking refers to a combination of startup growth strategies aimed at driving quick and effective business and product growth. The main goal is to get the maximum number of customers while spending as little as possible. The strategy includes:
- utilizing the best available tech and startup tools;
- trying new channels;
- keeping an eye on emerging global trends in business;
- choosing various marketing techniques;
- using analytics and data for decision-making;
- holding experiments, testing, and validating hypotheses.
As shortly mentioned above in the accelerator definition section, an incubator is a program for early-stage startups that assists founders as they take their first steps. The application process is rather simple, and the duration of "stay" is unlimited. That is, a startup can stay in the incubator for as long as it's necessary.
What can startups get from incubators? Workspace, advice for building the business, guidance, and opportunities for networking. Nonetheless, funding is practically never available in incubators.
Key Performance Indicator (KPI)
Key performance indicators are evaluation criteria chosen by a company to measure its progress toward achieving set goals. The set of KPIs differs from company to company based on its aims, priorities, and business initiatives. They focus on long-term goals and may change over time. For example, a startup can have "increasing engagement by 10%" as a KPI, so it may track various metrics like average session duration, daily active users, pages per visit, etc.
For a more detailed explanation of how metrics and key performance indicators differ, as well as to get a list of the most commonly used ones and how to calculate them, check out this article:
A lean startup focuses on delivering a product as quickly as possible with minimal investment. This "trial and error" approach implies testing the ideas and experimenting with the product by making corresponding adjustments and iterations "on the go" as a way to discover its flaws and ways to improve it.
Although such products are created quickly, the decisions are based on data and feedback. It could be a build in public method aimed at making the development cycle shorter, cutting costs and required input, and delivering the product to the market and end-user faster. Hence, it's the opposite of investing in building a full-scale solution fitted with many intricate features.
Minimum Viable Product (MVP)
Giving a simple minimum viable product definition, it's a simple yet functioning pilot version of the product. Unlike a demo or prototype, an MVP is a solution that works and can be used by clients. Nonetheless, it's a shrunken version of the product that is yet to become full-fledged and feature-rich.
MVP development requires thorough planning as it has to be the embodiment of the future extended version of the product. In other words, the MVP's minimal feature set should immediately show users value and stand out from competing or existing solutions on the market, so feature prioritization is key.
Likewise, thorough QA testing is also vital as the product must be free of glitches when it's released.
Put simply, outsourcing means obtaining a service or passing work to a third party on a contract basis. For instance, not all tech startups can afford to employ a qualified team of developers to build their product or a specific feature. They can lack certain talent or an entire development department. So they choose to team up with an outsourcing provider or hire a dedicated software development team that'll work as though it's a part of the company.
Why do many startups go for outsourcing? It's a way to get a hold of an experienced, well-versed team of professionals and save a lot of time on recruitment hassle and resources on sick leaves, vacations, purchasing hardware, and so on.
This is vital startup vocabulary every founder should know. A pitch deck (also referred to just as "deck") is a presentation of the startup. It is used when a startup is in search of funding or financial support. Pitch decks can, for instance, be serve as supportive material during an investment pitch to potential investors on demo days.
Pitch decks often take the form of a short and well-structured startup presentation that presenters use as a visual backup while they tell investors about the product and why it's worth investing in.
It is crucial to create a pitch deck that'll stand out and highlight the beneficial sides of the product. As a rule, the slides include only the major takeaways with visuals and information on the product and team, the problem and solution, the market and competition, as well as various statistics, analytics, financial forecasts, and other proof that the product is a catch.
Product-Market Fit (PMF)
Even the best ideas might not receive the expected acceptance. Lack of market need is one of the top reasons explaining the high startup failure rate. Therefore, it is crucial to do your research and find product-market fit. It's a continuous process, and it surely isn't limited to pre-product-launch research.
Having PMF means that the product is of decent quality and the audience is buying and making use of it. Such a product brings value, has a steady sales stream, many returning buyers, good feedback, and a growing client base. This also often means that the customers are recommending the product to others, aiding its further adoption thanks to word-of-mouth promotion.
Successful software development projects are ones that are well-planned and organized. Therefore, creating a roadmap implies crafting a document that describes the product-to-be so that everyone stays on track.
Generally, a product roadmap provides the big picture and includes a summary of the major aspects such as the:
- product vision;
- goals to be accomplished;
- key features of the product;
- needed resources;
- planned activities;
- stages and timeline;
- who is responsible for what;
- among other vitals.
This product development phase follows idea initiation. Proof-of-concept (POC) involves market and user research to find out whether the product is worth creating. This idea validation stage is used to prove the feasibility of a product idea or feature creation, as well as the project's viability. POC is also needed to confirm that the product can be brought to life, at least in the way you think.
Typically, proof-of-concept should be carried out during the discovery phase before prototyping or building an MVP, as it's a way to mitigate risks and avoid investing in something no one needs.
Return on Investment (ROI)
Return on investment (short for ROI) is the ratio of a company's net income to investment with subtracted expenses. It's a financial metric that's calculated to see the yearly return, and it gives insights into such vitals as the gained profit, how well the budget was distributed, and how the money was invested.
In short, ROI shows how much money the company lost or earned and can be used for predicting the potential and justifiability of future investments. If ROI is high, this is a positive signal. Here you can see a small and brief explanation about how to calculate ROI and how it would be to put this into practice.
Scalability is all about a company's potential for growth and expansion. It also means that it's sustainable and has a good chance of evolving into something bigger.
Importantly, startup scaling differs from the classic growth scenario as growth usually happens according to the invested resources (for instance, money spent on additional hires when scaling the team or getting technological upgrades). Scaling, on the other hand, doesn't rely on large investment, instead expansion takes place thanks to business process optimization or automation.
Seed funding is one of the stages of startup funding, along with pre-seed and series A, B, C. This stage goes after pre-seed funding and is considered the first real funding stage for startups as it is geared towards raising capital from investors to launch the product and hire people.
Ordinarily, seed funding investors are offered a stake in exchange as the product might not even exist yet, making it a risky investment. Angel investors, close relatives and friends, crowdfunding, and micro VC are common seed funding investors.
Companies offering SaaS application development services or some software-as-a-service create and sell digital products that are available on Internet-connected devices. Such on-demand products are web-hosted, are often offered based on subscription, and come in a variety of shapes and sizes.
As such, communication tools like Zoom or Slack, CRMs such as Salesforce, project management software like Trello or ClickUp, marketing tools like Ahrefs or MailChimp, and tons of other SaaS ideas can fall into this category.
Combining two words, "entrepreneur" and "solo", the term describes a person who has founded a business and runs it on their own. That is, no one else is helping them manage and grow the business. They handle all the company-related matters independently without external support, employees, or co-founders.
A stockholder, also referred to as a shareholder, is someone who possesses a company's shares (or specific corporate ownership units). This means that they get profit or dividends from these stocks and may have a vote when major decisions are made. They differ from stakeholders who have other forms of interest in the company apart from stocks.
A unicorn company or a unicorn startup is a business term used to describe a company with a startup valuation of more than 1 billion USD in terms of venture capital. The definition also implies that these are private startups. They are referred to as unicorns because companies that manage to achieve such success are very rare.
According to the November 2022 statistics, most startup unicorns around the world are from the software industry, followed by the financial sphere.
User Experience (UX) and User Interface (UI)
UX/UI are two sides of the delivered product or MVP design. User experience is responsible for providing an intuitive interaction with the product, making it easy for a person to browse, use, or take any expected action. It must be logical, answer to user needs and expectations, and not have excessive steps or non-user-friendly elements that would ruin the perception.
User interface is responsible for the appearance of the product and the elements that form the user journey. All details and touchpoints (buttons, scrolls, droplists, etc.) should be visually accessible and simple to engage with.
A value proposition includes the unique selling points that a product offers. It explains what makes your product unique and how it solves an existing problem. This is what makes a product or feature attractive to potential customers, giving them a reason to choose, use, or purchase it. Generally, the value proposition states the benefits for a user or client. At times, when there's a sudden market change or other circumstances, the value proposition or other parts of the product may be changed during a startup pivot.
Venture Capital (VC)
The money invested in a startup or early-stage emerging company is called venture capital. Such private equity funds are used to drive small business growth and are usually obtained from VC investors or firms that get stakes. These partners can also assist the company by providing support and expertise.
Wireframing is one of the first design stages used to outline the structure of the future solution. Wireframes are often created using tools like Balsamiq to line out feature placement and the relation of elements.
Frequently, wireframes are used as a basis for then creating mockups and solution designs with styling and sample content. This stage is then followed by making clickable prototypes and MVPs.
Final Thoughts on Startup Lingo
So there we have it, a list of frequently used startup jargon. If you know the meaning of all the terms, give yourself a pat on the back! And in case this article cleared up some terminology gaps, we're glad that you found this resource helpful.
If you have questions regarding MVP development services for early-stage startups and would like to discuss your project ideas, don't hesitate to contact Upsilon for a consultation, our experts will be happy to assist you in bringing your product to life.