Must Know Startup Jargons for Every Entrepreneur
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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