A pocket dictionary of basic buzzwords for startup newbies

How to
Nearly every field has its own specific jargon, and startups are no exception. If you don’t want to feel like a fish out of water, your everyday vocabulary should include terms like “burn rate,” “due diligence,” and “elevator pitch.” And if you have no idea what we’re talking about here, the following text is made just for you.

Angel Investor

An angel investor is someone who comes out of a successful startup or other business. They are typically still very active in their field, and have a good bit of money, which they like to share under the right circumstances. As our CFO Martin Vápeník says: “

Angel investors don’t just bring money to a startup, but also their valuable experience from the field – because they know the specific market, they know how to properly advise others. However, be prepared that an angel investor will probably want a decent share of your project. A reasonable amount is something between 5 and 20%.”

API

An Application Programming Interface is a handy means by which various types of applications can be connected to each other. The API specifies what is necessary for the developer to access the important data which he can then work with.

Burn Rate

When someone asks you what kind of burn rate you have, they’re interested in the rate at which the startup is spending money. Usually it’s in terms of how much you “burn” per month, but it can also be for other time intervals.

Cap Table

The abbreviation from Capitalization Table refers to a convenient table providing an overview of ownership percentages and equity in a startup. Read more about “equity” below.

Due diligence

The term Due diligence refers to a set of information, which includes the most important information about a startup for potential investors, be it financial, tax, personal, or even legal and technical information. Due diligence helps investors assess risks and more accurately determine the size of the investment they’d like to make.

Elevator Pitch

Imagine that you’re in an elevator, and you run into the investor of your dreams. Would you be able to sell them on your idea before they got out on their floor? This is exactly what the term “elevator pitch” comes from: it’s a short presentation, which should briefly introduce the product, startup, or whatever else your business is about, in an engaging manner. It’s a speech that comes in handy on the lift, at conferences, and other networking events.

Equity

In short, a share that an investor asks for and receives if a startup is successful. The more complicated definition: total assets after settling total liabilities and debts.

Growth Hacking

A data-driven process where startups use various communication channels to try to quickly reach as many target customers as possible through a variety of innovative approaches. It’s a proven way to get ideas into the world.

Inkubátor/Akcelerátor

Two similar things, with one fundamental difference. An incubator is a place where you are physically located with your startup, where you develop it and meet with other founders, investors, and mentors.

An accelerator works similarly, but in a shorter period of time - it’s usually a matter of months of intensive focus which allows you to completely flesh out a product or service and get it from seed investment to a venture capital fund or angel investor.

LTV/CAC

Numbers are everything in startups, and so these are two terms you’d better remember. LTV (lifetime value) refers to how much money will come from users of a product, and CAC (cost of acquiring) means how much it costs to acquire one such customer. The resulting balance between these two figures in most cases allows you to estimate if the startup has a chance of success.

Market-fit

Market-fit means the stage in the development of a product or service when customers start to buy the product (there is interest on the market for it). With market-fit the first customers are acquired, the first feedback comes in, and the amount of interest in the product is measured. 

MVP

Minimum viable product is a product with the minimum possible functionality necessary for it to be launched, with the goal of attracting the first users and gathering the first feedback. It helps clarify what the market wants and expects, and to avoid dead ends in development.

This is not a work in progress, but a product with the key features whose testing helps shorten the amount of time to full project launch, and to launch a project that has a greater chance of success.

Pain Point

Every startup is created in order to try and solve something - a gap in the market, demand for something that doesn’t exist. And that’s what a pain point is. A lack of something or shortcoming on the market that calls for a solution.

Venture Financing

In other words, risky financing - venture capital funds invest to fast-growing project in their early stages.

Martin Vápeník, CFO UP21. Martin helps our startups with finacial and strategic planning (budgeting), financial management and he is also and Investment Partner at venture capital fond STAR*21.

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