Venture Capital Jargon
is a quick primer defining the most common start-up / venture
capital jargon that you should be familiar with if you're
seeking to raise venture capital:
(aka Incubator) = Not part of a car as one might assume,
but a center where start-ups are incubated through
mentorship, space and sometimes cash.
Investor = A rich individual potentially interested in
investing in your company. Or, more technically, according
to the SEC: A natural person with income exceeding $200,000
in each of the two most recent years or joint income with
spouse exceeding $300,000 for those years and a reasonable
expectation of the same income level in the current year;
or A natural person who has individual net worth, or joint
net worth with the persons spouse, that exceeds $1 million
at the time of the purchase, excluding the value of the primary
residence of such person. What this means for your start-up
is you must require potential investors to prove that they
can afford to risk their money in your start-up, in order
to comply with the law.
/ Advertainment = Paid content that is meant to look and
feel like a real story or blog post. More people are fooled
than youd think or as the tainment
part implies, readers are interested enough that they dont
care that they are being pitched. As display ad pricing and
effectiveness have decreased, more companies are turning to
advertorials to capture ad revenue.
Edge = My favorite definition of this came from Quin Woodward
Pu from OMA: An extremely pretentious way of saying
on the vanguard since every person in start-ups thinks he
or she is there.
Boot-Strapping = Using friends and family
cash to get going. As Carey Martell, Founder of Power Up TV
put it, Boot-strapping a startup means ramen noodle
days. Every time you want to splurge on something you think,
Well I could have that $20 steak dinner, or I could
hire a virtual assistant from the Philippines.
(See Ramen Profitable below).
= Business to Business. Your company sells things to other
= Business to Consumer. Your company sells stuff to the
Rate (aka Run Rate) = How fast you are blowing through
your cash. Its not unusual for a start-up to lose large
sums of money for several years before breaking even, or
please oh please making a profit. (See runway below).
Rate = Customers lost subsequent to acquisition in a subscription-based
business model. Because of the churn rate, your growth might
not look like you think it will.
= Usually applies to vesting schedules (shares given to
employees over time). Cliffs are a way for the CEO to fire
employees or let them leave without giving them stock within
a limited period of time (usually 1 year). Cliffs are also
used on CEOs by investors to make sure the CEO sticks around
after getting the cash.
Business/ Cottage Industry = A nice business but not something
massively scalable. If you have one, youre not a good
fit for VC, but this does not mean you should not pursue your
dream or that you will not be very successful!
(aka Pitch Deck) = A 10-slide power point presentation
that covers all aspects of your business in a concise and
compelling way. There is a standard format and real artistry
to making a good deck. Do your homework, get lots of feedback,
and consider hiring a graphic designer to polish the final
Technology = Something that completely changes the way
society does something (e.g. Uber/Lyft vs. Taxis or Amazon
vs. in-store shopping).
Strategy = How you will sell the company and make your
investors lots of money. Who is going to buy you and why?
= First Mover Advantage. Not every start-up is the first
to market, but if you are, you want to point that out to investors.
Be aware that this can be both a pro and con, as you may have
to educate your market as you go, so the sales you make will
cost more than they would in a market with clearly established
= You give the basic product away for free and then try
to upsell features to your customers. This marketing ploy
is often used in directory businesses.
= Adding a game layer to a website or product experience
that encourages people to use it with rewards of various kinds.
People love games.
Hacking = A term coined by Sean Ellis to describe a marketing
technique that focuses on quickly finding scalable growth
through non-traditional and inexpensive tactics such as the
use of social media. (See Lean Start-Up below).
Stick = The shape of the growth curve VCs want to see
and believe! This means your start-up will have to double
sales every year.
= Intellectual Property. This can be a patent (costs $25k
generally and takes time to obtain) or a secret sauce or formula
like Coke. Not every start-up has IP, but if your business
depends on it, you better protect it!
= Code for try something, do it wrong, and try it again in
a slightly different way with the hopes of achieving a better
= To start a company or push a website live. However, according
to Mirta Desir, Co-founder & CEO of Smart Coos this term
can be replaced by the word activate, as in we
activated in March. [Insert eye roll here.]
Startup = Similar to Growth Hacking. The core mission of a
lean start-up is to prove the business concept as quickly
and cheaply as possible. Learn more about this movement
= Use something technology, partnerships, etc.
to your advantage.
Leader Pricing = Selling something at a loss as a form of
marketing expense to bring in customers you expect repeat
Hanging Fruit = The easiest thing your company can do to bring
cash in the door. Often hard to identify, but crucial for
Penetration = How much of your potential market are you capturing
and how quickly. VCs want to know. Do not say, if we
just capture 1% of the market we will
want you getting a lot more than that.
= How you are making money or more often, how you plan
to make money.
= Minimum Viable Product. The bare-bones version of a product
required to achieve proof of concept. Often used in the creation
of new software that will be Beta tested, and later upgraded
with extra features.
= Change directions as a company. This is usually used to
describe going after a different market segment or using an
established technology for an entirely new purpose.
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.
To learn more about how to send your pitch deck to thousands
of Angel and VC investors with just just one click then please
review our pitch-deck distribution service
Profitable = Profitable enough to cover costs and basic living
expenses for everyone working at a startup.
Design = A site built for optimal viewing of a website across
all devices. The other options are adaptive design and bad
design. See this article for the distinctions.
= Return On Investment. What the investor can expect to get
for what they put in. It can also be used to describe the
results of a particular marketing campaigns success.
You want things to be ROI positive.
= How long you have until the cash runs out and you must turn
off the lights.
= Software As A Service. You sell subscriptions to use your
Scaleable = Something that can grow to a huge size because
the market and demand is big enough or because you will be
able to move into different markets with your product via
Pivoting or Iterating (see above).
Equity = Shares of your company given in exchange for work
done. This is a good recruiting tool to help you attract passionate
talent you cant afford to pay at market rates.
Sheet = The document that outlines what the Investors will
get for what they put in including % ownership and
voting rights. If you get a term sheet, you should get excited
(and get a good lawyer).
= Proof that people are actually buying and using your stuff.
= What your company is being valued at. Pre-money valuation
is the value before you take investors cash. Post-money
valuation is that amount plus the investment put in.
Prop = The feature(s) or elements that make your business
or product uniquely attractive to consumers.
= A product you are selling but have not actually made (and
may never make). It is a way to test market demand. Some people
think it is sleazy, but it is very common.
= Venture Capital or Venture Capitalist. They have cash, but
you might not want it.
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