Startup Terminology

Dr. Kalpeshkumar L Gupta

Associate Professor of Law – Parul Institute of Law
[email protected]
[email protected] 1
1. Bootstrapping

Bootstrapping is building a company from the

ground up with nothing but personal savings
and, with luck, the cash coming in from the
first sales. The term is also used as a noun: A
bootstrap is a business launched by
an entrepreneur with little or no outside cash
or other support.

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2. First Mover Advantage

FMA (first mover advantage) describes a

certain competitive advantage a company can
obtain by being the first to bring a specific
product or service to a market. This would
give such a company strong brand recognition
and customer loyalty.

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3. Lean Startup

This in a business development approach that is

based on a method of manufacturing that values
a business’ ability to change. It aims to shorten
product development cycles by adopting
experimentation methods that are based on
tentative business ideas.

The main idea behind this is based on how

startups can invest their time into repeatedly
building products or services to meet the needs
of early customers.

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4. Minimum Viable Product

Minimum viable product, or MVP, is a low-cost

lightweight prototype of a company’s product
that is used to learn more about its potential to
sell in the market. Companies use this strategy
to decide before they start mass manufacturing
the product.

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5. Seed Capital

Seed capital is a form of securities offering that

brings an investor to invest capital in exchange
for an equity stake in a company. This usually
takes place in the initial stages of the company.

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6. Sweat Equity

Sweat equity is the equity percentage that a

startup gives to a person for his or her hard
work in the company. This is a motivating
incentive that can be used in talent acquisition,
and in motivating the existing employee base.

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7. Traction

Traction refers to the proof that consumers are

actually engaging in the business by using the
product or service.

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8. Unicorn List

A startup company that is valued at over $1

billion is called a unicorn. The term for those
startups that are valued over $10 billion is
‘decacorn’, and ‘hectacorn’ is for those startups
that are valued over $100 billion.

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9. Value Proposition

Value Proposition refers to that one unique

feature of your business, product, or service
that attracts consumers or users.

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10. Angel Investor

An angel investor is a high net worth

individual who puts their own finance into the
growth of a small business in the early stage
as seed funds for debt or equity ownership.
They invest in the formative stages of the
startup’s business and usually start
contributing funds when the startup has
something to present, such as a prototype of
the product or service.

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11. Incubator

Startup incubators are groups that support

chosen entrepreneurs and/or their businesses
with mentorship and funding. In exchange, the
incubator takes an equity stake in the
company. Increasingly popular and
competitive in the tech world, incubators have
been touted as the new business schools.

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12. Venture Capitalist

A venture capitalist is one who is part of a

limited partnership who is investing in the
startup in the form of venture capital funds.
They enter in the later stages of development
for a portion of equity or debt ownership in an
effort to advance the growth of the company by
developing its market share.

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13. Non Disclosure Agreement

A legal document that protects a startup’s

secrets by holding employees responsible to pay
damages for leaking them. NDAs can be used to
protect things like proprietary code, formulas, or
customer information. You can have a “one
party” NDA where one side is receiving
confidential information from the other, or a
mutual NDA for both parties.

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14. Exit Strategy

The way you envision getting money out of your

company. It’s another way of thinking about
your future plans for the company. Either you
want to sell it, get acquired (or acqui-hire),
merge with another company, go public, or
liquidate the business completely. Having this
answer now will keep you a step ahead.

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15. Burn Rate

Burn Rate means the amount the startup will

spend over a predetermined period.

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16. Crowd Funding

A new funding model that allows entrepreneurs

to raise money from a large group of backers or
angel investors without necessarily going
through the venture capital route.

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17. RoI (Return on Investment)

Every startup expects a return on investments

in time and money whether it is on marketing,
hiring, acquisitions or other initiatives.

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18. Term Sheet

Upon interest between investors and founders, a

term sheet is used to outline the terms of the
investment. Term sheets don’t guarantee an
investment. They’re also used as a starting point
for negotiations.

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19. Case Flow

The amount of money flowing in and out of the

business. Free cash flow is the amount left in
the business after paying expenditures. Free
cash flow is used as a profitability measure of
the business.

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20. Key Performance Indicators (KPI)

KPI is the metrics by which startups judge their

performance, progress and targets. Some of the
most common KPIs include customer
acquisition cost, customer lifetime value,
monthly and annually recurring revenue.

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21. Competitive Advantage

It is how a startup is different from its

competitors. Differentiation can be through
innovation, intellectual property, exclusive
rights and partnerships or other way like
niching down and capturing a small but growing
market faster than anyone else.

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22. Pitch Deck

Before making an investment, most of the time,

investors expect a quick presentation that
highlights the key areas of a startup like team,
product, market, traction and plan.
Entrepreneurs create and use a pitch deck for
investor presentations.

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23. Business Model Canvass (BMC)

Instead of a hundred page business model, the

business model canvas categorizes the key areas
of launching a startup like customer segments,
value proposition, key partners, revenue model
and acquisition channels.

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24. Iteration

Iteration means changing features in product or

services looking at changing requirement.

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25. Accelerator

If you’re launching a startup, accelerators can

help you move your idea quickly by providing
you with mentorship and fundraising
opportunities during a few months program.

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26. Scalability

A startup is called scalable when it creates and

validates a repeatable business model that
addresses user needs around the clock.

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27. Business Model

A business model describes the rationale of how

an organization creates, delivers, and
captures value in economic, social, cultural or
other contexts. The process of business model
construction and modification is also
called business model innovation and forms a
part of business strategy

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28. Revenue Model

A revenue model is a framework for generating

financial income. It identifies which revenue
source to pursue, what value to offer, how to price
the value, and who pays for the value.

It is a key component of a company's business

model. It primarily identifies what product or
service will be created in order to generate
revenues and the ways in which the product or
service will be sold.

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29. SWOT

A SWOT analysis is an incredibly simple, yet powerful tool to

help you develop your business strategy, whether you’re
building a startup or guiding an existing company.

SWOT stands for Strengths, Weaknesses, Opportunities, and

Threats.

Strengths and Weaknesses are internal to your company—

things that you have some control over and can change.
Examples include who is on your team, your patents and
intellectual property, and your location.

Opportunities and Threats are external - things that are

going on outside your company, in the larger market. You
can take advantage of opportunities and protect against
threats, but you can’t change them. Examples include
competitors, prices of raw materials, and customer shopping
trends.
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30. Design Thinking

Design thinking is a non-linear, iterative process

which seeks to understand users, challenge
assumptions, redefine problems and create
innovative solutions to prototype and test.

The method consists of 5 phases - Empathize,

Define, Ideate, Prototype and Test and is most
useful when you want to tackle problems that
are ill-defined or unknown.

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31. Strategy

Strategy is an action that managers take to

attain one or more of the organization's goals.

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32. PoC

A proof of concept (POC) is a demonstration to

verify that certain concepts or theories have the
potential for real-world application.

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33. Prototype

A prototype is an early sample, model, or release

of a product built to test a concept or process.

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34. Mentor

Startup Mentor is your friend that person you

talk to about anything and everything related to
business and expect an honest and brutal
discussion. Startup Mentors play a very crucial
role in guiding the startup throughout their
journey and it is highly important to find the
right mentor.

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35. ESOP

Employee stock ownership, or employee share

ownership, is where a company's employees own
shares in that company. Employees typically
acquire shares through a share option plan.

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36. Pre Money and Post Money Valuation

The value of a company immediately prior to

receiving an investment, used to determine what
percentage of a company's ownership will be
purchased in exchange for a specified
investment amount.

The value of a company immediately after it has

received an equity investment, including both
the company's pre-money valuation and the
amount it received from the investment.

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37. Blue Ocean Strategy

Blue ocean strategy is the simultaneous

pursuit of differentiation and low cost to open
up a new market space and create new
demand.

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38. Red Ocean Strategy

A red ocean strategy involves competing in

industries that are currently in existence.

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39. Equity

Ownership in the capital of a Company. In

corporations, it is called “stock”

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40. Demo Day

A public pitch event or “graduation” day for a

group of startups in an accelerator or other
program at which each company has 5–15
minutes to present its investment opportunity to
potential investors in attendance.

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41. IPR

An intangible asset of value. The protections of

IP—trademarks, copyrights and patents—
determine if you can prevent other people from
copying these creations, and whether or not you
yourself can use them freely.

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42. Pitch

A presentation, typically supported by slides, in

which a startup company's founder describes
his or her company and seeks an investment
from angels or venture capitalists.

An elevator pitch is a brief presentation,

typically 30 – 60 seconds in duration, presenting
the entrepreneur’s concept / solution, business
model, “go to market” strategy and value
proposition to potential angel or venture capital
investors, in order to obtain the attention of the
investors, such that they are compelled to learn
more about the opportunity.

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43. Serial Entrepreneur

An entrepreneur who has previously founded

and run one or more ventures.

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44. Social Entrepreneur

A person who establishes an enterprise with the

aim of solving social problems or effecting social
change.

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45. Wantrepreneur

An individual who continuously ponders, desires

or wants to start a business, acts as if they are
an entrepreneur but fails to take the steps
necessary to establish and operate a business.

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46. Buyout

A buyout is defined as the purchase of a

company or a controlling interest of a
corporation's shares, product line or business.

Leveraged Buyout A takeover of a company,

using a combination of equity and borrowed
funds.

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47. Break Even

Break-even analysis entails the calculation and

examination of the margin of safety for an entity
based on the revenues collected and associated
costs.

Break-even analysis tells you at what level an

investment must reach to recover your initial
outlay.

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48. Due Diligence

A process undertaken by potential investors —

individuals or institutions — to analyze and
assess the desirability, value, and potential of
an investment opportunity.

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49. Non-Compete Agreement

An agreement between two parties under which

one party agrees not to become employed by,
enter into or establish a similar business, trade
or profession in competition with the other
party. Such agreements typically restrict
competition on a geographic basis for a certain
period of time.

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50. Business Plan

A business plan is also a road map that provides

directions so a business can plan its future and
helps it avoid bumps in the road.

An executive summary (part of B Plan) is a one

to two page document which provides an
overview of a startup entrepreneur’s business
opportunity. It summarizes the key points of the
startup’s business plan with a focus on
obtaining investor interest, for potential
investment.

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51. Risk Analysis

Risk analysis is the process of identifying and

analyzing potential issues that could negatively
impact key business initiatives or projects.

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52. Idea Validation

Idea validation is the process of testing

and validating your idea prior to launching your
business name, tagline, product, service or
website. This is like the research and
development process big companies use to test
product ideas before they're released to the
general public.

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Dr. Kalpeshkumar L Gupta
Mob. 99248 97691

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