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What is an Accelerator?

An organization that provides startups with mentorship, resources, and networking opportunities to help them grow and succeed.

What is an Acquisition?

The purchase of one company by another company. Acquisitions can be a successful outcome for startups, as they allow founders and investors to cash out their equity and the acquirer to gain new products, services, or technologies.

What is an Angel investor?

An individual who invests in startups, typically at the early stages. Angel investors are often wealthy individuals who have experience in the startup world. They can provide startups with valuable mentorship and advice.

What is Book value?

The net value of a company’s assets after all liabilities are deducted. Book value is calculated by subtracting the company’s total liabilities from its total assets.

What is Bootstrapping?

A startup that is self-funded, without the use of venture capital or loans. Bootstrapped startups typically start small and grow gradually, reinvesting their revenue back into the business.

What is Burn rate?

The rate at which a startup is spending money. For startups that are not yet profitable, the burn rate is a key metric to track, as it indicates how long the company can survive before running out of cash.

What is a Cap table?

A cap table, or capitalization table, is a table that shows the ownership structure of a startup. It shows the different types of equity and debt securities that have been issued, as well as the ownership percentage of each shareholder.

What is Capital structure?

The mix of equity and debt that a company uses to finance its operations. A company’s capital structure can have a significant impact on its cost of capital and its ability to grow.

What is Churn rate?

The percentage of customers that stop using a startup’s product or service over a period of time. Churn rate is a key metric for startups to track, as it can have a significant impact on revenue growth.

What is a Comparable company analysis (CCA)?

A valuation method that compares a company to similar companies in the same industry. CCA is often used to value startups and other companies that don’t have a lot of financial history.

What is Conversion rate?

The percentage of visitors to a startup’s website or landing page who take a desired action, such as signing up for a free trial or making a purchase. Conversion rate is an important metric for startups to track, as it helps them measure the effectiveness of their marketing and sales efforts.

What is a Convertible note?

A convertible note is a type of debt financing that is used by startups to raise capital from investors. Convertible notes typically convert into equity in the startup at a later date, such as when the startup raises a venture capital round.

What is Crowdfunding?

A method of raising capital from a large number of people, typically through an online platform. Crowdfunding can be a good way for startups to raise capital without having to give up equity to investors.

What is Customer acquisition cost (CAC)?

The average cost of acquiring a new customer. CAC is a key metric for startups to track, as it helps them determine whether their marketing and sales efforts are efficient.

What is the Customer lifetime value (CLV)?

The total revenue that a startup is expected to generate from a customer over the course of their relationship. CLV is an important metric for startups to track, as it helps them determine how much money they can afford to spend on acquiring and retaining customers.

What is a Discounted cash flow (DCF)?

A valuation method that calculates the present value of a company’s future cash flows. The DCF method is often used to value startups and other companies with high growth potential.

What is Disruption?

The process of creating a new market or business model that challenges the existing status quo. Disruption can lead to new products and services that are more innovative and efficient. However, it can also lead to the displacement of existing businesses and jobs.

What is Due diligence?

The process of investigating a startup before investing in it. Due diligence typically involves reviewing the startup’s business plan, financial projections, and team.

What is Earnings before interest and taxes (EBIT)?

A measure of a company’s profitability, calculated by subtracting operating expenses from revenue. EBIT is also known as operating profit.

What is Earnings per share (EPS)?

A measure of a company’s profitability per share, calculated by dividing EBIT by the number of shares outstanding. EPS is a key metric for investors to consider when evaluating a company.

What is Enterprise value (EV)?

The total value of a company, including its equity and debt. EV is calculated by adding the company’s market capitalization to its net debt.

What is Equity?

An ownership stake in a startup. Equity investors typically receive a share of the startup’s profits, as well as the potential for capital gains if the startup is sold or goes public.

What is an Exit?

The sale or initial public offering (IPO) of a startup. Exits can be a successful outcome for startups, as they allow founders and investors to cash out their equity.

What is an Exit multiple?

A valuation method that compares a company’s valuation to its exit value. Exit multiples are often used to value startups and other companies that are considering being acquired or going public.

What is an Exit strategy?

A plan for how a startup will eventually be sold or taken public. Exit strategies are important for startups to have, as they help founders and investors to think about their long-term goals.

What is a Fair market value?

The price that a willing buyer would pay and a willing seller would accept for an asset. Fair market value is often used to value assets for tax purposes and other legal purposes.

What is Free cash flow (FCF)?

The amount of cash that a company generates after paying all of its operating expenses and capital expenditures. FCF is a key metric for investors to consider when evaluating a company.

What is Freemium?

A business model where a startup offers a basic version of its product or service for free, with the option to pay for premium features. Freemium models can be a good way for startups to attract users and generate leads, but it is important to have a plan for how to convert free users into paying customers.

What is Goodwill?

The intangible asset represents the value of a company’s reputation, brand, and customer relationships. Goodwill is often generated when one company acquires another company for a price that is greater than the fair market value of the acquired company’s net assets.

What is Growth hacking?

A low-cost, creative approach to marketing and growing a startup. Growth hackers use innovative methods to attract and retain customers, such as viral marketing and content marketing.

What is an Incubator?

An organization that provides early-stage startups with resources and support. Incubators typically offer office space, mentorship, and access to investors.

What is an Initial public offering (IPO)?

The first sale of a company’s shares to the public. IPOs allow startups to raise capital from a large number of investors. However, IPOs can be complex and expensive, and they are not suitable for all startups.

What are Intangible assets?

Assets that have no physical form, such as patents, copyrights, and trademarks. Intangible assets can play a significant role in a company’s valuation.

What is Intellectual property (IP)?

Intellectual property is a legal term for creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce.

What is the Internal rate of return (IRR)?

The discount rate that makes the net present value of a company’s future cash flows equal to zero. The IRR is a measure of the profitability of an investment.

What is a Key performance indicator (KPI)?

A measurable value that tracks a startup’s progress towards its goals. Startups use KPIs to track various metrics, such as revenue growth, customer acquisition cost, and churn rate.

Recommended reading: KPIs for sales organizations and KPIs for service organizations.

What is Lean startup?

A methodology for developing and launching new products and services quickly and efficiently. Lean startups focus on building a minimum viable product (MVP) to test with customers and gather feedback before investing further in development.

What is Lifetime value (LTV)? (Customer Lifetime Value)

The total revenue that a startup is expected to generate from a customer over the course of their relationship. CLV is an important metric for startups to track, as it helps them determine how much money they can afford to spend on acquiring and retaining customers.

What is a Liquidation value?

The amount of money that would be generated if a company sold all of its assets and paid off all of its liabilities. Liquidation value is often used to determine the value of a company in the event of bankruptcy.

What is a Liquidity event?

An event that allows investors to sell their equity in a startup. Liquidity events can include IPOs, acquisitions, and buybacks.

What is Market capitalization?

The total market value of a company’s outstanding shares. Market capitalization is calculated by multiplying the number of shares outstanding by the current share price.

What is the Market condition?

The overall state of the financial markets. Market conditions can have a significant impact on the valuation of companies.

What is a Market penetration?

The percentage of a market that a startup has captured. Market penetration is calculated by dividing the number of customers a startup has by the total number of potential customers in the market.

What is a Market validation?

The process of confirming that there is a market for a startup’s product or service. Market validation can be done through customer surveys, interviews, and beta testing.

What is a Minimum viable product (MVP)?

A basic version of a product or service that is used to test demand and gather feedback from customers. Startups use MVPs to validate their ideas and make sure that there is a market for their product or service before investing too much time and money into development.

What is Monetization?

The process of generating revenue from a startup’s product or service. There are many different ways to monetize a startup, such as through subscriptions, advertising, and direct sales.

What is an NDA (Non-Disclosure Agreement)?

A legal contract that is used to protect confidential information. NDAs are often used by startups to protect their trade secrets and intellectual property. Before you share any confidential information with a potential investor or partner, it is important to have them sign an NDA.

What is Net present value (NPV)?

The difference between the present value of a company’s future cash flows and the initial investment required to generate those cash flows. A positive NPV indicates that the investment is expected to generate a return, while a negative NPV indicates that the investment is expected to lose money.

What is Net promoter score (NPS)?

A measure of customer satisfaction and loyalty. NPS is calculated by asking customers how likely they are to recommend a startup to others. Startups can use NPS to track their progress over time and identify areas where they can improve their customer experience.

What is a Pitch deck?

A presentation that startups use to introduce their business to investors and potential partners. Pitch decks typically include information about the startup’s problem, solution, team, market, and financial projections.

What is a Pivot?

A change in a startup’s business strategy or model. Pivots can be necessary for startups to adapt to changing market conditions or to learn from their mistakes.

What is Pre-money valuation?

The valuation of a startup before it raises a round of funding. The pre-money valuation is used to determine the percentage of ownership that investors will receive in exchange for their investment.

What is the Price-to-earnings ratio (P/E)?

A ratio that compares a company’s share price to its earnings per share. The P/E ratio is used to evaluate a company’s valuation relative to its peers.

What is Product/market fit?

The achievement of a product or service that satisfies the needs of a particular market. Product/market fit is a key milestone for startups to achieve, as it indicates that there is a demand for their product or service.

What is a Revenue multiple?

A valuation method that compares a company’s valuation to its revenue. Revenue multiples are often used to value startups and other companies with high growth potential.

What is a Runway?

The amount of time a startup has before it runs out of cash. The runway is calculated by dividing the startup’s cash on hand by its burn rate.

What is a Scaleup?

A scaleup is a startup that has achieved rapid growth and is now expanding its operations. Scaleups typically have a clear business model, a large addressable market, and a strong team. They are often seen as the engines of economic growth, as they create jobs and generate new wealth.

What is a Seed funding or a Seed Round?

The first round of funding that a startup receives, is typically from angel investors or venture capitalists. Seed funding is used to develop the startup’s product or service and launch it to market.

What is a Series A round?

The second round of funding that a startup receives, is typically from venture capitalists. Series A funding is used to grow the startup’s customer base and expand its operations.

What is Series A, B, and C funding?

Subsequent rounds of funding that a startup receives, typically from venture capitalists. Each round of funding is used to grow the startup’s business and expand its operations.

What is a Series B round?

The third round of funding that a startup receives, is typically from venture capitalists. Series B funding is used to scale the startup’s business and reach profitability.

What is a Stealth mode?

A period of time during which a startup keeps its business operations secret from the public. Startups may choose to go into stealth mode to develop their product or service without attracting competition or to build excitement and anticipation before launching.

What is an Sweat equity?

Equity that is granted to an employee in exchange for their work. Sweat equity is a common way for startups to compensate employees when they don’t have a lot of cash.

What is a Tangible asset?

Assets that have a physical form, such as cash, inventory, property, plant, and equipment. Tangible assets are often easier to value than intangible assets.

What is a Term sheet?

A non-binding agreement that outlines the key terms of a funding deal between a startup and an investor. The term sheet typically includes the amount of funding, the valuation of the startup, and the ownership structure.

What is a Terminal value?

The value of a company’s future cash flows beyond the explicit forecast period. Terminal value is often calculated using the perpetual growth formula or the Gordon Growth Model.

What is Traction?

Evidence that a startup is gaining traction in the market. Traction is important for startups to raise funding and attract new customers.

What is a Unicorn?

A startup that is valued at over $1 billion. Unicorns are rare, but they represent some of the most successful startups in the world.

What is Valuation?

The estimated value of a startup. Valuation is typically based on factors such as the startup’s revenue, customer growth, and market potential.

What is a Vanity metrics?

Metrics that are impressive at first glance, but don’t actually indicate the health of a startup. Examples of vanity metrics include page views, social media followers, and email subscribers.

What is a Venture capital (VC)?

A type of financing that is provided to startups by venture capitalists. VC firms invest in startups that they believe have the potential to generate high returns. In exchange for their investment, VC firms typically receive equity in the startup.

What is a Vertical?

A specific industry or market segment. Startups often focus on a specific vertical in order to gain a deep understanding of the market and its customers.

What is a Vesting schedule?

A schedule that outlines how much equity an employee will earn over time. Vesting schedules are typically used to retain employees and ensure that they are aligned with the long-term success of the startup.

What is a Viral coefficient?

The average number of new users that each user generates for a product or service. A viral coefficient greater than 1 indicates that the product or service is growing exponentially.

What is a Weighted average cost of capital (WACC)?

The average cost of capital that a company uses to finance its operations. WACC is calculated by taking a weighted average of the company’s cost of equity and cost of debt.

What is a White paper?

A comprehensive document that provides information about a product or service, including its features, benefits, and technical specifications. White papers are often used by startups to educate potential customers about their products or services.

What is a Wholesale model?

A business model where a company sells its products to retailers at a discounted price. The retailers then sell the products to consumers at a higher price. The wholesale model is often used by startups to get their products into retail stores.

What is Working capital?

The current assets of a company are used to finance its day-to-day operations. Working capital includes things like cash, inventory, and accounts receivable.

What is a Zombie company?

A company that is unable to generate enough revenue to cover its costs. Zombie companies often stay in business by borrowing money or taking on debt. Zombie companies can have a negative impact on the economy, as they can take away jobs and resources from healthy companies.