Must Know Startup Jargons for Indian Entrepreneurs

Today's startup eco-system is distinctly different from the startup eco-system a decade ago. Today's startup eco-system if filled with young Entrepreneurs wanting to create the next billion-dollar company using the power of the internet, social media and venture capital funds. To start a business, raise funds and successfully scale-up, the Entrepreneur must network with multiple stakeholders like legal professionals, developers, investors, etc., Each of these stakeholders uses distinct jargons and it is important for the Entrepreneur to understand these jargons to successfully to navigate the system effectively. We now present, the list of must-know startup jargons for every entrepreneur in India.

Pitch Meaning

Investors pitch is one of the most commonly used terms in the startup ecosystem. A pitch is a short presentation or introduction about the startup presented to a prospective investor. The purpose of a pitch is not to answer all possible questions about the startup, but rather to get an investor excited to know more about the startup. A good pitch must have the following areas addressed:

Vision and Mission
About the Startup and its Founders
Traction or Market Adoption
Market Opportunity
The problem the Startup Solves and Current Solutions Available
Key products or service
Revenue Model
Market Approach or Strategy
Key Financials

Pitching means to present the pitch to a prospective investor. Another popular term is "elevator pitch"; an elevator pitch is a pitch presented to an investor in less than 30 seconds. It's important for entrepreneurs to always have an elevator pitch ready, as they could run into an investor at any time.

Burn Rate Meaning

Burn rate is the amount of negative cash flow spent by a startup every month/year. Most startups require investment over the first few years to succeed. During these years, many startups do not generate positive cash flow. The rate at which cash is spent or burned each month is called the burn rate.

Run Rate Meaning

Run rate is the performance of a startup during the current period (current month or current quarter) extrapolated over the next year. If a startup has revenue of Rs.10 lakhs during the current month, then the revenue run rate of that startup would be Rs.1.20 crores.

Bootstrapping Meaning

Bootstrapping in the startup context means to raise funds from savings or friends or family during the inception stages to fund the expenses of the startup. While bootstrapping, many startups are cash-starved and working to prove their business models. If the business model is successful and an investor gets on board, then the startup is called venture funded.

ESOP Meaning

ESOP means Employee Stock Ownership Plans. Many startups provide ESOP to attract qualified talent to the startup. Most ESOPs are provided to the employee on achieving certain milestones without any up-front cost to the employee. ESOP shares could, therefore, be a part of the remuneration for work performed.

Exit Strategy Meaning

When an investor invests in a business, he/she must have an exit strategy. Angel investors or Private Equity Investors typically do not want to be owners of a company indefinitely and look for a strategy to sell off their investment in the company at the right time to make good returns. The strategy to sell the shares of the company post-investment period is called an exit strategy. Usually, the exit strategy is provided to investors through buy-back of shares by promoters/exit during additional rounds of funding / IPO.

Intellectual Property Meaning

Intellectual property is a right provided by the law for intangible assets created by the mind. Examples of intellectual property of IP could include trademark registration, patents and copyright registration.

Market Penetration Meaning

Market penetration is the amount of market share the startup has captured and the rate at which the market share of the startup is growing.

Valuation Meaning

Valuation is the value of the company as assessed by an investor. Pre-money valuation is the valuation of the company prior to the investment in the Company by the investor. Post-money valuation is the valuation of the company post-investment in the company by the investor.

Traction Meaning

Traction is proof that the product or service of the business is being accepted by the market or consumers.

Term Sheet Meaning

An agreement provided by an investor prior to the investment in the Company. The term sheet usually outlines what the Investors will get for what they put in — including ownership and voting rights.

Business Entity

The type of legal entity the business is set up under. Examples include Private Limited Company, Limited Liability Partnership, One Person Company and more.

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Frequently Asked Questions

Common questions about Essential Startup Jargon for Indian Entrepreneurs.

A pitch is a brief presentation or introduction about a startup that is presented to potential investors. It is crucial for entrepreneurs because it serves as an opportunity to excite and interest investors in their startup, potentially leading to securing funding or partnerships. A well-crafted pitch should concisely convey the startup's vision, mission, product or service, market opportunity, revenue model, and key financials.

The burn rate refers to the amount of cash a startup spends or "burns" each month or year, typically exceeding its revenue in the early stages. Understanding and monitoring the burn rate is essential for startups to ensure they have sufficient funds to sustain operations until they achieve profitability or secure additional funding.

Bootstrapping means funding a startup's initial expenses using personal savings, loans from friends or family, or revenue generated from the business itself, rather than relying on external investors. This approach allows entrepreneurs to retain complete ownership and control of their startup during the early stages, albeit with limited resources.

ESOP stands for Employee Stock Ownership Plan. Startups often offer ESOPs as a way to attract and retain talented employees by providing them with an ownership stake in the company. ESOPs can be a part of an employee's compensation package, typically awarded upon achieving certain milestones or performance goals.

An exit strategy is a plan for investors to sell their shares or ownership in a company and realize their investment returns. It is crucial for investors, such as angel investors or private equity firms, as they typically do not intend to remain indefinite owners and prefer to cash out at an opportune time, often through events like buybacks, additional funding rounds, or an initial public offering (IPO).

Market penetration refers to the extent to which a startup has captured a share of its target market and the rate at which it is growing its market share. It is an essential metric for startups to demonstrate the acceptance and adoption of their products or services among consumers.

Valuation is the estimated worth or value of a company, as assessed by investors. It is crucial for startups because it determines the amount of ownership or equity investors will receive in exchange for their investment. Valuations are typically described as pre-money (before investment) and post-money (after investment).

Traction refers to tangible evidence or proof that a startup's product or service is gaining acceptance and adoption in the market. It is a vital metric for startups to demonstrate to potential investors that their business model is viable and has the potential for growth and profitability.

A term sheet is a legal document that outlines the key terms and conditions of an investment agreement between a startup and an investor. It serves as a preliminary agreement before finalizing the investment deal and typically includes details such as the investment amount, ownership stakes, voting rights, and other provisions.

A business entity refers to the legal structure under which a startup is established, such as a private limited company, limited liability partnership, or one-person company. Choosing the appropriate business entity is crucial for startups as it determines factors like liability, taxation, ownership structure, and regulatory compliance requirements.