Business and Entrepreneurship related terms

Important business and Entrepreneurship related terms

Founder: Anyone may construct a website and business cards and self-identify as a startup’s founder. A true entrepreneur is an action-oriented individual. It makes no difference how much influence or progress you make as long as action has been done and is continuing. Entrepreneurs act.

Entrepreneur is a person who generates ideas. They are always intending to construct a startup app, regardless of their technical or non-technical background; they have several ideas but have not yet begun. Many would-be entrepreneurs remain such. Become a entrepreneur, not an entrepreneur!

Non-technical: Founders of technology firms are often divided into two categories: technical and non-technical. Technical founders are those who have a background in programming or have self-taught themselves to code. Founders who are not technical are often business or marketing professionals. That is not to say that technical entrepreneurs are incapable of selling!

Validation: While several measures indicate an idea’s validity, at the end of the day, it’s about demonstrating the product’s need and desire. Paying for a product, using it, and recommending it to others with comparable requirements is one of the strongest validation signals.

Scalability: Each startup’s objective is to create a scalable business model. A startup product may serve hundreds of thousands of consumers without requiring the same number of service providers, thanks to technology and automation. When a startup develops and tests a repeatable business model that satisfies consumer demands 24 hours a day, it is said to be scalable.

Accelerator: If you’re starting a business, accelerators may help you accelerate your progress by offering coaching and financing possibilities over a few months.

Incubators: In contrast to accelerators, incubators often provide longer-term advisory programs that include mentoring, contacts, and resources such as a coworking space. Accelerators emphasize speed and finance, while incubators often concentrate on earlier-stage firms and assist them in overcoming early-stage obstacles.

Only a few firms achieve and surpass a billion-dollar value. Unicorns are eponymous startups.

Dragon: Even fewer firms raise more than $1 billion in a single round of investment. That is what is referred to as a Dragon. Among such businesses is Uber.

Over 90% of businesses are financed solely by their founders. Indeed, I would suggest that about 100% of businesses are self-funded, much more so now that the fundraising hurdle is rising. Bootstrappers are entrepreneurs that use their human capital (knowledge, experience, and abilities) in conjunction with their funds to create and build a business without obtaining cash. Additionally, an entrepreneur may bootstrap the early phases of the business and subsequently obtain capital for expansion. This is the road that the majority of entrepreneurs have chosen.

Iteration: Ultimately, a notion is nothing more than an informed guess. How likely are entrepreneurs to estimate correctly 100% of the time? Iterating occurs when you identify a little modification that has to be made to the product, the target consumer, or any other critical part of the business model.

Pivot: Occasionally, we are confident in our plans but rapidly discover that they are incorrect. When a significant shift occurs in the business model, such as the method revenue is generated, the ideal client profile, or the solution (product), this is referred to as pivoting. Entrepreneurs must be receptive to revisions and pivots, even if they have invested a significant amount of time and money in perfecting the newest version. As a result, investing an excessive amount of time and money in testing concepts or prototypes is not a prudent execution plan. Rather than that, rapidly construct, test, and iterate.

If you ask investors what they’re looking for in a company, they’re looking for entrepreneurs who want to build goods and business models that offer a big innovation to the market and the globe. Consider Uber, which has altered the way people commute significantly.

Entrepreneurs are urged to construct a minimal viable product (MVP) to test ideas rapidly without investing significant resources in developing a product that may or may not function. It is the first version of the product that has just fundamental features that are intended to validate the riskiest assumptions before adding more complex features in subsequent versions.

Minimum viable products are a component of the lean approach, which comprises iterating via the build-measure-learn cycle, which effectively reinforces the concept of rapidly developing and testing rather than waiting for consumers to arrive.

While lean emphasizes the business side of the build-measure-learn cycle, agile development emphasizes the development side, emphasizing incremental and iterative development while testing often.

Entrepreneurs found businesses for a variety of reasons. Many entrepreneurs want to have a significant effect on the world, while others seek to exit their companies through an initial public offering (IPO) or mergers and acquisitions.

SaaS: Software as a service is one of the most prevalent business models for startups today. This is when you develop a product that has features that consumers may get via a subscription model. Exactly like if you were paying a monthly charge for hosting or an email marketing platform.

PaaS: SaaS businesses need a platform upon which to develop their applications. Rather than creating one from scratch, a more expedient and cost-effective method is to construct one on top of a current platform. SaaS firms use the platform as a service provider such as Heroku.

Acqui-hire: A startup’s most significant asset, particularly in its early stages, is its people. It’s not simple to build an enthusiastic startup team comprised of individuals with complementary abilities. Numerous large organizations acquire smaller enterprises or startups only for the human capital (team) they develop. This kind of acquisition is referred to as acqui-hire.

Alpha release: Because continuous testing is critical for software success, teams conduct internal alpha tests before releasing the beta version of the product for public testing.

After doing internal alpha testing, beta tests include customers or prospective users who offer input and assist the team in making the last adjustments before launching.

Governing body: Mentorship, direction and connections are critical components of a startup’s success. Typically, the board of directors includes people who can assist the founders in making more informed judgments while also contributing to areas like recruiting, company growth, and financing.

On a high level, there are two critical functions in a technological startup. The technical founder is accountable for the development and enhancement of the product. The non-technical founder assumes the business role, whether it is developing partnerships or strategizing and executing strategy. Non-technical founders are more often than not business developers.

Instead of a hundred-page business model, the business model canvas categorizes critical aspects of startup development such as client segmentation, value proposition, strategic partners, revenue model, and acquisition methods.

Business related terms

Growth of the wacky stick: Every entrepreneur seeks to dramatically increase their business. In practice, such rapid and predictable development is unusual. The typical course of initiation and development is marked by frequent oscillations and near-death experiences.

Pitch deck: Before investing, most investors anticipate a brief presentation that emphasizes the startup’s important aspects such as team, product, market, traction, and strategy. Entrepreneurs develop and utilize a pitch deck to present to investors.

Fermium: A popular customer acquisition technique for SaaS firms is to provide a free plan with limited production capabilities while luring consumers to upgrade to paid plans with more features and benefits.

B2C Business is about resolving a customer’s issue by giving a solution that is superior to or has distinct advantages over the competitors.

Consumer goods may also be characterized in terms of B2C and B2B transactions. Businesses that sell to customers develop consumer goods. These are items bought and utilized by private individuals, not businesses. Apple, for example, offers the iPhone as a consumer product. Additionally, Uber provides a consumer product, while it has evolved to include business solutions over time.

Unlike consumer items, enterprise products are used by businesses.

Competitive advantage: is what distinguishes a startup from its competition. Differentiation may be achieved by innovation, intellectual property, exclusive rights, and alliances, or through other strategies such as niching down and rapidly conquering a small but increasing market.

Hackers: A brilliant programmer who always finds a way to complete a project regardless of the challenges.

Intellectual property: An innovation that is protected by patents, copyrights, trademarks, or other means.

Customer development: As part of the lean approach, customer development is the step in which you identify and validate the customer, mostly via interviews and qualitative and quantitative testing of ideas.

Product/Market fit :may be defined in a variety of ways. Essentially, you attain p/m fit when your customer acquisition cost is less than your customers’ lifetime value and current customers suggest buyers like them, decreasing your acquisition cost and boosting your net promoter score.

Growth hacking: A successful marketing effort accomplishes its goal at a cost that is less than the return created. Growth hackers use unusual tactics to drive exponential growth at considerably lower costs than the “normal” amounts required to get the same objectives.

The Chasm: Many firms are successful in attracting believers, known as innovators, but fail to grab the rest of the market. The chasm is the distance between the innovators and the rest of the population.

SEO: Search engines such as Google and Yahoo are becoming more important in the success of a business. Without them, a business must continue to engage in paid advertising to get new clients. Search engine optimization refers to the techniques and tactics used by businesses to improve their search engine rankings.

Your ideal consumers are your target market. A group of consumers that have similar requirements and goals. You may narrow down your target clients based on demographics, psychographics, and other factors.

Traction: The assessment of your important KPIs. Investors will assess the investment possibility based on your traction over time. You may get momentum as a company entrepreneur even before you produce a product. Before releasing the initial version of their apps, companies like Buffer and Robinhood created a list of tens of thousands of prospective consumers. Inbound marketing is a popular and successful method for gaining momentum.

Inbound marketing is time-consuming but very beneficial in the long term. This is when you develop quality content for your target clients that ranks high in search engines and drives traffic to your website. Writing manuals, generating informative films and training, publishing podcast episodes, and creating infographics are all ways to communicate your material.

Outbound marketing: Inbound marketing requires a time investment, while outbound marketing necessitates a cash commitment since it comprises paying platforms such as Facebook, Google, and LinkedIn to promote your product to customers.

KPI stands for key performance indicators, which are the measures used by startups to assess their performance, development, and goals. Client acquisition cost, customer lifetime value, and monthly and yearly recurring income are some of the most prevalent KPIs.

Bounce rate: A critical indicator that gauges how long website users stay on a page before departing. The objective is to have a low bounce rate, which indicates that the site’s content or services are worth the time of the visitor.

A/B testing: To understand what could improve vital metrics, perform a test with multiple variants such as a call to action or copy. These are known as A/B testing. Many systems now allow you to perform A/B testing with the touch of a button. LTV: Stands for the lifetime value of the customer. LTV is calculated by multiplying the average revenue per account by the gross margin and dividing the total by the customer turnover rate. Many systems can now assist you in calculating and projecting your LTV.

Customer acquisition cost (CAC) is one of the most essential measures in business. In other words, how much does acquire a client cost you? It is difficult to fund marketing efforts or develop estimates without knowing this amount.

Churn: What is your churn rate? This is one of the most often asked investor questions. That is, how many of your paying customers cancel the service. Your objective is to keep churn to a minimum.

Retention: Maintain a low turnover rate while increasing retention. A high retention rate, particularly if it is much greater than turnover, indicates a strong firm.

Activation: Most SaaS firms provide a free trial period or a freemium plan. The firm will only profit if the users renew their membership after the trial period. The aim is to enhance activations, and several ways may assist you in achieving this goal. A solid onboarding procedure, for example, makes a difference.

More business related terms

Angel investors are the ideal organizations to search for if you’re looking for cash for a project. Individual investors, family members, and friends are more likely to support and finance a good enterprise at an early stage for a potentially significant return.

VC: In contrast to angels, most venture capitalists invest for a living. Typically, they are looking for businesses with traction and evidence that investment can help them speed their road to success.

Seed: Immediately after an angel round is a seed round, albeit there is no prescribed order to follow. Companies that earn a seed round are more likely to have a sustainable business strategy with clients.

Series A, B, and C: Companies that earn a series A investment have often achieved product/market fit, and the financing will assist them in scaling more quickly. Series B and C are for companies that are on their way to being acquired or going public.

The quantity of money coming in and out of the firm is referred to as cash flow. The amount remaining in the firm after paying expenses is referred to as free cash flow. Free cash flow is a measure of a company’s profitability.

Pre-money valuation: It is critical for founders, investors, and other stakeholders to understand a startup’s worth before receiving financing. This helps in estimating the worth of a business once it has been financed.

Post-money valuation: After a round of investment, the value of a business either grows or declines. It falls if the new fundraising round puts a lower value on the firm than it was before it was financed. To determine a startup’s post-money value, divide the investment dollar amount by the investor’s stake in the firm. Pre-money value is calculated by subtracting the company’s post-money worth from the amount invested in the firm.

One of the most often asked investor questions is, “What is your burn rate or how much do you expect to burn over the next 18 months?” It simply refers to the amount of money that the startup will spend over a certain period.

A cap table is used by investors and entrepreneurs to arrange the holdings of each owner or investor in a firm.

Crowdfunding is a novel fundraising mechanism that enables businesses to obtain funds from a big number of supporters or angel investors without having to go through the venture capital process.

ROI: Every company expects a return on time and money invested in marketing, recruiting, acquisitions, and other efforts.

Term sheet: When investors and founders express interest in a venture, a term sheet is used to explain the terms of the investment. Term sheets do not guarantee a return on investment. They are also utilized as a starting point for discussions.

Self-funding entrepreneurs convert human capital (time, skills, and knowledge) into financial capital via sweat equity (money). Human capital is analogous to sweat equity in that it does not need a monetary investment but may result in future financial rewards.

Run rate: One of the most important startup metrics is run rate. Based on current data, it forecasts the startup’s future performance. For example, if a firm earns $100,000 in the first quarter, its annual revenue is $400,000 ($100,000 x 4).

Revenue: Revenue is the amount you produce before paying costs and appears at the top of your financial statement. Revenue as a stand-alone indicator is not an adequate measure of startup success since expenditures, particularly in the early stages, might be much greater than revenue.

Income: After subtracting expenditures from revenue, the difference is the amount of money you keep in the firm for reinvestment or withdrawal. Income is a superior performance statistic for determining a company’s stability and health. High revenue even at a loss (negative income) might, on the other hand, indicate promise.

Vesting: To assure investors’ and workers’ long-term commitment to the business, vesting schedules require stock option holders (employees) to remain involved in the firm for a defined time, generally, four years, before they can claim their shares.

Cliff: A cliff period is used investing to force stock option holders to stay with the business for at least one year before they may collect a portion of their shares. Vesting and cliff periods both assist businesses in aligning employee interests with startup success.