Maybe you’re an entrepreneur. Maybe you just want to brush up on your business acumen.
Along with our new Proof Positive series for first-time founders, the Glossary of Startup Jargon is a tool to help cut through the confusion and get to the useful knowledge: all the terminology business novices need to know, but in plain speak.
Not fully convinced you need this glossary, yet? Have you ever:
- Fake-laughed at a business joke you didn't get?
- Low-key googled terms during meetings when no one was looking?
- Looked like a deer in headlights when people discussed term sheets, Series B funding and exits?
It's me, I've done all three. Then this blog post is for you.
A program to (you guessed it) speed up the success of a startup. As you’ll see further down, if commercialization is the process, accelerators are a vehicle. The Science Center has several, and they all contain some component of funding, networking, mentorship and workspace.
This isn’t about the athletic prowess of founders. Agile is an iterative method of establishing clear organizational tasks and requirements, continuously developing solutions, and making decisions quickly. Teams break up each of these factors into small digestible pieces, to keep the momentum going.
See Funding & Funders
A statement of a company’s financial situation at a single point in time. An accountant can help and so can various sessions we’ve held through Venture Café on this same topic. Keeping this up-to-date will be useful when engaging with potential investors.
A business that sells to other businesses (i.e. a wholesaler to distributor relationship).
A business that sells directly to a customer or person without the “middle-man.”
A mutually beneficial eCommerce business model where a company teams up with their business client, to then sell jointly to an end customer, controlling more of the transaction and increasing their visibility. Amazon is the most well-known example of this in the way that they receive product form manufacturers, to ship to the consumer, but may also be selling you product directly
Blind or Anonymous Applications
A process that removes identifying information (name, gender, company name, etc.) from the application in order to reduce bias. If there is little to no identifying information on a candidate or applicant, we make decisions that are free of bias and naturally result in diverse cohorts. We employed this method in previous accelerators. TL:DR? It works.
This is a combination of personal income (assuming they are not working on the company full time) or savings, the operating revenue of said business, or Friends, Family and Fools (coming up later) to keep your business afloat. The benefit of bootstrapping is that you don’t have to answer to investors, and you have full control of your company. But you don’t want to let your friends, family and fools down either! The challenge is that you must be resourceful and attract paying customers early on.
In its simplest form, how quickly your business is spending money that is already available. A high burn rate means you are spending cash quickly (burning through money quickly). And the runway is how much time you have before you burn through it all. There’s a fancy calculation for this, but make sure you are using your net burn rate to figure it out.
Business Advisors provide guidance to companies (in our case, startups) in a variety of capacities. Business advisors might be investors, serial entrepreneurs, or seasoned experts in a specific field. The common theme is that they know a whole lot and can be hugely valuable to your early-stage company. If you are reading this, chances are you are not one (yet). Know someone who fits this description and wants to help others? Have them check us out!
Now that you’ve familiarized yourself with burn rate, there’s a fancy calculation for this one too. Churn is the rate of customer attrition. Still too jargon-y? The rate at which a customer stops doing business with you, or the opposite of retention rate.
The process by which products or services are brought to the market. For example, the process by which mRNA research transitioned into a publicly available COVID-19 vaccine. We have an entire suite of programs to help companies and entrepreneurs along different stages of their journey and many of our convening and cultivation initiatives center around this key focus.
See Funding & Funders
Corporate VC (CVC)
See Funding & Funders
Whether your company (or soon-to-be company) is a party of one or a whole team, this is a great option for getting some work done at a reasonable price, under flexible terms (ie: not a 5-year lease) in an environment surrounded by other creative and innovative neighbors. This is not quite the same as an incubator and you’ll see why.
See Funding & Funders
Customer discovery doesn’t mean looking for customers, but rather identifying who the right customer is for your product while simultaneously finetuning your offering to suit their needs. At this stage you are testing assumptions and hypotheses to validate the customer you’ve identified and their “problem” or need.
- Product/market fit
If you’ve done the work of customer discovery you may end up determining there is a big enough market or demand for your product or service. Or, you could end up deciding your idea or product is not worth pursuing further.
An ecosystem is an interconnected environment with diverse players and systems that support each other. We often define it by region, and we could frankly write a whole blog post just on this. As a first step, take a look at our ecosystem for a better idea of the resources we provide.
Economies of scale
An exit is where founders have the opportunity to liquidate or reduce their stake or ownership in their business.
A bigger fish comes along and offers to buy up most (more than 50%) or all of the company. At this point, they begin to call the shots and make the decisions.
When a company is acquired for its talent, skills or people.
- IPO or “Going Public”
“Going Public” is when a privately held company (which startups typically are) becomes a publicly traded and owned entity, enabling it to gain cheaper access to capital, expand operations and diversify ownership. The IPO is the “Initial Public Offering” or the initial selling price for shares. The IPO gets the ball rolling on the whole process.
- Joint Venture
Two separate companies join together to run or operate an already existing company or business.
Two companies mutually combine and blend, to create a new entity that benefits both parties.
When a public "blank check" or shell company acquires a private company to take it public. It's a particular type of IPO that involves buying a company that's already listed but doesn't have an on-going business. It's technical, it's jargon-y, it's legal.
Funding & Funders
Moolah, scratch, dough, Benjamins, coins, $$$...and the people that have it.
Angel investors are individuals with a degree of personal wealth, who invest in early-stage companies. They usually come along at an earlier stage of the business, and since their risk is greater than other investors, they typically invest smaller dollar amounts. They are generally accredited investors, as determined by the SEC.
- Bridge Loan
A short term loan from investors to hold you over until the next round of funding or more capital can be secured. Think they’re rare? Think again. The average company that successfully raises a Series A raises three to five bridge rounds after their seed round.
- Convertible Note
A convertible note - or convertible debt - is a kind of loan that can be issued towards a round of future funding. If you invest in a convertible note, you're getting debt with an interest rate, but you're explicitly saying "we are not going to agree on a stock price now. We'll decide that later. When we make that decision, you'll get a discount of X% off of the agree-upon price." Unlike a SAFE note, a convertible note has an interest rate and maturity date, like a loan. Both a SAFE and Convertible Note are designed to convert to equity when the company raises more money (how much is negotiated).
- Corporate VC (CVC)
This investment is coming from within a corporation, and it could also include industry insights and connections. Beyond equity, the CVCs may be looking for a collaboration agreement or they may see your company as an acquisition target. Local examples includes Comcast Ventures, originally run by Julian Brodsky, Comcast’s co-founder and Touchdown Ventures, which runs outsourced CVCs for corporations, founded by Comcast Ventures alumni, David Horowitz.
Asking the public for funding (there are various websites that help with this). You may or may not offer equity in exchange. Disadvantages could include theft of your idea, loss of reputation if things go awry with your company, or the inability to crowdfund again in subsequent stages of investment. One of the larger equity crowdfunding platforms, SeedInvest, was founded just across Chestnut Street at Wharton.
- Follow-on funding
A repeat investment from a funder who previously provided capital, now at a later stage in the business. For example, startups participating in the Science Center’s Commercialization programs raised over $43 million in follow-on funding in 2020.
- Friends, Family and Fools
This is mostly what it sounds like, it’s fairly common and tends to happen early on in a business venture. The “3 F’s” represent the earliest capital a new company may receive from those closest to them. The addition of “fools” refers to the high level of risk associated with this type of transaction.
- Pre/Post money valuation
The value of a company before external investments or the latest round of funding/ the value of company after external investments or the latest round of funding.
- Priced Round
This is an investment where the valuation of the company is determined as a negotiation between the company and the investor, and includes a price-per-share so it's clear how much of the company everyone owns.
- SAFE Note
A non-debt convertible security. The “non-debt” part sounds safe, but let’s break that down even further. It will eventually convert into equity or something of value, in a future investment round (see Series A, B, C, D…below). Even simpler still: an investor is betting on the future potential of the company. SAFE notes exists as one option in a range of options between debt and a publicly traded stock price.
- Seed Funding
The first official round of startup funding or equity funding (selling shares or ownership). Investors are involved here.
- Series A Funding
The second stage of startup funding, but the first stage of venture capital financing. This comes before the B funding round.
- Series B Funding
The second stage of venture capital financing. It sometimes features many of the same investors from the previous round, Series A, but may bring in additional prospects.
- Series C, D, etc.
By the time a company reaches Series C funding, they may want to expand into another market (internationally, for example) or may be preparing themselves to go public or for an acquisition (i.e. an exit). For most companies, this is the final phase of funding.
- Venture Capitalists or VCs
Private investors or investment firms that use money from pension plans, insurance companies, and wealthy people to place bets (capital) in exchange for equity in companies they believe have lots of growth potential, usually of (planned) unicorn proportions. Locally, the best example is none-other than First Round Capital, founded by Wharton alum, Josh Kopelman, and they have a pretty good sense of humor.
Free support-- whether it’s space, equipment, human resources, creative skills, or professional services. For example, a university may donate lab space to a startup company as an in-kind donation.
Intellectual Property (IP)
A category of property that can be legally protected. Types of IP include patents, trademarks, copyrights, and trade secrets. And it’s one of the many reasons why your startup attorney is your best friend.
IPO or “Going Public”
KIZ (Keystone Innovation Zone)
The KIZ is a tax credit program for Pennsylvania-based startups operating within predefined geographical districts. Beyond being located within one of the 28 designated zones, eligible companies must be less than eight years old and develop their own tech or life sciences IP. The tax credits, which are based on year-over-year revenue, can be up to $100,000eannually and are sellable. The Science Center is a partner in the University City KIZ - among the most dense in the commonwealth. The Science Center works closely with local startups to help them navigate and complete this complex application process.
KOZ (Keystone Opportunity Zones)
Another state-wide economic stimulus program where business owners in the commonwealth can operate out of specific areas at a greatly reduced or no tax burden.
A business arrangement where a company sells the right to use their IP to another company to use its brand (trademark), copyrights, or a specific technology, usually patented or protected by trade secrets. These agreements are commonly used to pull technology out of TTO’s (see below).
A strategy or methodology that focuses on creating the most value, using the least resources possible.
MVP (Minimum Viable Product)
Sorry there are no trophies for this MVP. An MVP is a stripped-down version of the prototype with just the essential features and no bells and whistles. This allows the developers to save time while they validate a product idea and gather feedback on what to improve.
Like the name implies, you founded a tech or tech-enabled company, but do not code or build hardware. Maybe you’ve designed the business model, are leading first sales, or are overseeing operations. Non-technical founders might have a technical cofounder and will surround themselves with good tech talent to focus on the nitty gritty.
Net Present Value (NPV)
The current value of future streams of income, minus future streams of cash outflow (read: costs). This is a good way to calculate whether a future project or big spend is worth it (or the ROI).
How you present and sell your idea or product to investors. A good accelerator or business advisor will help you perfect this tirelessly, making sure you have a solid business plan to back it up. It is a choreographed performance.
- Elevator pitch
A much shorter, condensed version of your regular pitch that you could effectively give to an investor during a short elevator ride. Keeping it simple is key here. At Venture Café Philadelphia, we once had attendees literally try this out, with investors from Robin Hood Ventures. In better forms, it will likely answer (nicely) “What do you do and why should we care?”
- Pitch competition
We hold regular pitch competitions through Venture Café Philadelphia. Sometimes the winner receives more than just bragging rights and you never know if a potential investor is listening in the audience.
- Pitch deck
A presentation to help you make your case. Ideally you should keep it to less than ten slides and between 5-10 minutes in duration.
Pre/Post money valuation
See Funding & Funders
See Funding & Funders
See Customer discovery
Evidence that demonstrates the feasibility of your concept. Our Proof Positive program helps bridge the gap between proof-of-concept and an effective business plan. It’s also what occurs when your MVP is validated.
An early model of your product, built to test the concept. There are various types of prototypes, depending on what you are trying to test.
The process of repetition to continuously improve. You’re going to continue testing and improving on your prototype, each time creating a different version. That will take time…and also funding.
R&D (Research and development)
The process of testing, iterating and developing new products. A major phase of commercialization that also requires its fair share funding.
R&D Tax Credit
A federal income tax liability offset, used to stimulate startups and companies’ spending on research and development.
Return on Investment (ROI)
The ROI is a measure of the level of profitability of an investment. Even more plainly: What’s in it for investors? Or for founder(s)?
The income generated by a company, usually through pilots, sales, or corporate partnerships. This does not include investments. A good rule of thumb is to aim to have as much of this as possible.
See Funding & Funders
This is the point where a company’s revenue is outpacing its costs substantially. At this stage, real growth can begin to happen because automating and ramping up production becomes more affordable.
- Economies of scale
The cost benefits that a company may experience when it does ramp up production, (i.e. cost per unit decreases with increased production).
See Funding & Funders
Series A, B, C... Funding
See Funding & Funders
You need to raise capital, but you want to minimize the amount of debt you are saddled with. Founders and other employees contribute “sweat equity” (read blood, sweat and tears) as a share of the company with a monetary value, paid in equity in the company. Believe it or not, there is a way to calculate this.
These companies are not the same as “tech companies” because the product or service is powered by another already existing platform or technology (i.e. the internet). Companies that don’t create new technology, but leverage existing technology to provide a platform or service.
Tech Transfer Office (TTO)
The department, typically within an academic institution, responsible for transitioning research or a technology from their institution for the commercialization of research. The Science Center works with about 25 TTOs across PA, NJ, and DE through our QED Program—we help them commercialize research by providing access to industry experts, business advisors, and other experts who can help them develop and accomplish milestones to turn their research into a product.
This type of founder is building the product whereas non-technical founders typically focus on business models, financial models, early sales, or overseeing operations.
The first formal document between the investor and startup. The term sheet will outline the conditions of the potential investment, leaving room for future negotiations between the two parties. This is different from a contract as it’s typically not legally binding (but could be) and is more of an initial step. Want to dig deeper? Generate your own.
The Valley of Death
The large gap in funding for early-stage startups or research. This is problematic for many startups and makes it challenging for success at an early stage-- it can deprive society of a potentially lifesaving or life changing innovation.
A private tech startup, which investors have valued at over $1 billion. They are special because they are a rarity. The three recent Philly examples include Spark Therapeutics, Phenom People, and GoPuff.
University/Academic Spin-out (or Spin-off)
When the intellectual property of a technology developed at a particular university is transferred or licensed to a company. This transaction typically happens through a University’s TTO (see above).
You want customers and investors to show you the money. You’re gonna have to explain why they should choose your product. What’s special or different about you? This is your value prop.
Venture Capital or VCs
Private investors or investment firms that use money from pension plans, insurance companies, and wealthy people to place bets (capital) in exchange for equity in companies they believe have lots of growth potential, usually of (planned) unicorn proportions. Locally, the best example is none-other than First Round Capital, founded by Wharton alum, Josh Kopelman, and they have a pretty good sense of humor. Also, see Funding & Funders.
Are we missing jargon that you hear regularly? Let us know and we'll consider it for the glossary.
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