What is a Startup Company?
Startup companies are new businesses that typically aim to develop a scalable business model around a product, service, process, or platform. These companies are often funded by an individual investor or group of investors with the goal of turning an innovative idea or technology into a successful business. Startups often focus on creating disruptive technologies and products and typically involve a high degree of risk and experimentation.
Technical Terms Used in Startup Company
Pitch: A presentation or speech made by a founder or entrepreneur to potential investors or partners in order to persuade them to support the startup.
Seed funding: An early stage of financing for a startup, typically provided by angel investors or venture capitalists.
Angel investor: An individual who provides capital to a startup in exchange for ownership equity.
Venture capital: Financing provided by firms or funds to startups or early-stage companies with high growth potential.
Incubator: A program that helps startups by providing resources such as office space, mentorship, and access to funding.
Accelerator: A program that helps startups scale and grow quickly by providing access to resources such as mentorship, funding, and networking opportunities.
Exit strategy: A plan for how a company will divest itself of its ownership stake in a startup, typically through an acquisition or an initial public offering (IPO).
Minimum viable product (MVP): A product with just enough features to satisfy early customers and provide valuable feedback for further development.
Customer development: The process of researching and validating customer needs and desires in order to create a product or service that meets those needs.
Lean startup: A method of building and scaling a startup quickly and efficiently, with a focus on continuous testing and learning.
Scalability: The ability of a company to grow and expand its operations and customer base without incurring disproportionate additional costs.
Intellectual property (IP): Legal rights to intangible assets such as patents, trademarks, and copyrights.
Market validation: The process of testing and verifying the demand for a product or service in the market.
Revenue model: The way a company generates revenue, such as through selling products or services, subscriptions, advertising, or licensing.
Funding round: A period of time in which a startup raises capital from investors.
Conversion rate: The percentage of visitors to a website or app who take a desired action, such as making a purchase or signing up for a service.
Key performance indicator (KPI): A metric used to measure the success of a company or specific aspect of a business.
Key success factor (KSF): A factor that is critical to the success of a company or specific aspect of a business.
Gross margin: The difference between a company’s revenue and the cost of goods sold, expressed as a percentage of revenue.
Net income: The difference between a company’s revenue and expenses, after taxes have been accounted for.
Burn rate: The rate at which a startup is using up its available capital, typically measured in terms of how much money is being spent each month.
Equity: Ownership stake in a company, typically in the form of stock or shares.
Dilution: The decrease in the ownership percentage of a company’s equity holders as a result of the issuance of new equity.
Valuation: The process of determining the worth of a company, typically based on factors such as revenues, assets, and growth potential.
Pre-money valuation: The valuation of a company before an investment is made.
Post-money valuation: The valuation of a company after an investment has been made.
A valuation: A valuation of a company’s common stock performed for the purpose of setting the exercise price of stock options granted to employees.
Liquidation preference: The amount of money that investors are entitled to receive before common shareholders receive any proceeds in the event that a company is sold or goes bankrupt.
Founder vesting: A schedule outlining the process by which founders earn their equity in a company over time.
Stock option pool: A reserve of a company’s equity set aside for use in granting stock options to employees.
Clawback provisions: Legal provisions that allow a company to reclaim unvested equity from founders or employees in certain circumstances, such as if the employee leaves the company before their equity has vested.
First mover advantage: The advantage a company has over its competitors by being the first to market with a particular product or service.
Disruptive innovation: An innovation that significantly changes the way an industry operates or creates a new market.
Go-to-market strategy: A plan for how a company will enter and compete in a particular market.
Market segmentation: The process of dividing a market into smaller groups of consumers with similar needs or characteristics.
Customer acquisition cost (CAC): The cost of acquiring a new customer, typically calculated as the total marketing and sales expenses divided by the number of new customers acquired.
Customer lifetime value (CLV): An estimate of the total value that a customer will bring to a company over the course of their relationship with the company.
SaaS (Software as a Service): A software delivery model in which software is provided on a subscription basis and accessed through the internet.
PaaS (Platform as a Service): A cloud computing model in which a platform for developing, testing, and deploying applications is provided as a service.
IaaS (Infrastructure as a Service): A cloud computing model in which infrastructure such as servers, storage, and networking is provided as a service.
API (Application Programming Interface): A set of protocols, routines, and tools for building software and applications.
MVP (Minimum Viable Product): A product with just enough features to satisfy early customers and provide valuable feedback for further development.
A/B testing: The practice of testing two or more versions of a product or marketing campaign to determine which performs better.
Growth hacking: The use of creative, low-cost, and scalable marketing techniques to drive rapid growth for a startup.
Landing page: A standalone web page, created specifically for the purpose of a marketing or advertising campaign, that is designed to direct the visitor to take a specific action.
Funnel: A visual representation of the steps a customer goes through in order to complete a specific action, such as making a purchase.
Viral marketing: A marketing technique that relies on individuals to pass along a marketing message to others, creating the potential for exponential growth.
Referral marketing: A type of marketing that relies on individuals to refer products or services to others, typically through word of mouth or referrals.
Content marketing: A marketing strategy that involves creating and distributing valuable, relevant, and consistent content in order to attract and retain a clearly defined audience.
Influencer marketing: A marketing strategy that involves collaborating with individuals who have a large following or influence on social media or other platforms in order to promote a product or service.
Affiliate marketing: A marketing strategy that involves earning a commission for promoting someone else’s products or services.
User experience (UX): The overall experience of a person using a product or service, including the usability, accessibility, and pleasure provided in the interaction.
User interface (UI): The way in which a user interacts with a product or service, including the layout, design, and controls.
User testing: The practice of testing a product or service with a group of representative users in order to gather feedback and identify any usability issues.
Wireframe: A visual representation of a website or app’s user interface, typically used to plan the layout and functionality.
Prototyping: The process of creating a simplified version of a product or service in order to test and refine the design and functionality.
Beta testing: The process of testing a product or service with a group of representative users before its official release.
Agile development: A method of software development that emphasizes rapid iteration and continuous delivery.
Scrum: A framework for managing and completing complex projects, typically used in agile development.
Kanban: A visual system for managing and optimizing the flow of work, typically used in agile development.
Lean manufacturing: A method of manufacturing that emphasizes efficiency and waste reduction.
Lean management: A method of management that emphasizes continuous improvement and the elimination of waste.
Six Sigma: A method of process improvement that aims to achieve near-perfection by identifying and eliminating defects.
Design thinking: A problem-solving approach that combines creativity and empathy with analytical thinking and prototyping.
Human-centered design: A design approach that puts the needs and desires of the user at the center of the design process.
Crowdfunding: The practice of funding a project or venture by raising small amounts of money from a large number of people, typically through an online platform.
Crowdsourcing: The practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, especially from the online community.
Freelancing: The practice of working independently on a project-by-project basis, rather than as a full-time employee.
Remote work: The practice of working from a location other than a traditional office, typically using technology such as video conferencing and collaboration tools.
Co-working: The practice of sharing office space and resources with other professionals, typically on a flexible basis.
Virtual assistant: A person who provides administrative, technical, or creative assistance to clients remotely.
Side hustle: A part-time business or project that is pursued in addition to a full-time job.
Solopreneur: An individual who runs a business on their own, without any employees.
Bootstrapping: Building and growing a company using only personal or internal resources, without the need for external funding.
Crowdsourced equity funding (CSEF): A fundraising method in which a company raises capital from a large number of investors through an online platform.
Initial coin offering (ICO): A fundraising method in which a company sells digital tokens, often in the form of cryptocurrency, to investors in exchange for capital.
Security token offering (STO): A fundraising method in which a company sells digital tokens that represent ownership in a company or asset, and are subject to regulatory oversight.
Non-disclosure agreement (NDA): A legal agreement in which one party agrees to keep certain information confidential.
Vesting: The process by which employees or founders earn the right to ownership in a company over time, typically through a vesting schedule.
Option pool shuffle: A strategy used by startups to increase the size of the option pool in order to attract and retain talent.
Double trigger: A provision in a stock option plan that allows employees to vest their options immediately upon the occurrence of certain events, such as a change in control or termination of employment.
Drag-along rights: A provision in a shareholders agreement that allows a majority shareholder to require the minority shareholders to sell their shares in the event that the majority shareholder receives an offer to sell their shares.
Tag-along rights: A provision in a shareholders agreement that allows minority shareholders to require the majority shareholder to include their shares in the event that the majority shareholder receives an offer to sell their shares.
Down round: A financing round in which a company raises capital at a lower valuation than in previous rounds.
Up round: A financing round in which a company raises capital at a higher valuation than in previous rounds.
Earnouts: A provision in a merger or acquisition agreement in which a portion of the purchase price is paid to the seller based on the performance of the company after the acquisition.
Sandbox: A simulated environment in which startups can test and develop new products or services without the risk of real-world consequences.
Soft landing: A program or initiative designed to help startups transition from a startup accelerator or incubator to operating independently.
Legal structure: The way in which a company is organized and operates, including its ownership, management, and liability.
Sole proprietorship: A business owned and operated by a single individual, who is personally responsible for all aspects of the business.
Partnership: A business owned and operated by two or more individuals, who share responsibility for all aspects of the business.
Limited liability company (LLC): A business structure that combines elements of both a corporation and a partnership, offering the liability protection of a corporation with the tax benefits of a partnership.
Corporation: A legal entity separate from its owners, with the ability to own property, incur debt, and enter into contracts in its own name.
S corporation: A type of corporation that is taxed as a partnership, with the income and losses flowing through to the shareholders.
C corporation: A type of corporation that is taxed as a separate entity, with the income and losses being taxed at the corporate level.
Initial public offering (IPO): The process by which a company raises capital by selling shares of stock to the public for the first time.
Reverse merger: The process by which a private company becomes a publicly traded company by merging with a publicly traded shell company.
Merger: The combination of two companies into a single entity.
Acquisition: The process by which one company buys another company.
Due diligence: The process of reviewing and verifying the information provided by a company in order to evaluate the potential risks and benefits of an investment or acquisition.
Non-compete clause: A provision in an employment contract that prohibits an employee from working for a competitor for a specified period of time after leaving the company.
Confidentiality agreement: A legal agreement in which one party agrees to keep certain information confidential.
Stock grant: The issuance of stock or stock options to an employee as a form of compensation.
Stock option: The right to purchase a specified number of shares of company stock at a predetermined price at a later date.
Exercise price: The price at which an employee may purchase shares of company stock through the exercise of a stock option.
Strike price: The price at which an employee may purchase shares of company stock through the exercise of a stock option.
Expiration date: The date on which a stock option expires and may no longer be exercised.
Cliff vesting: A vesting schedule in which no vesting occurs until a certain number of years have passed, after which vesting occurs all at once.
Graded vesting: A vesting schedule in which vesting occurs gradually over a period of time.
Phantom stock: A form of equity compensation in which an employee is granted the right to receive cash or stock at a future date based on the value of the company’s stock.
Restricted stock: A form of equity compensation in which an employee is granted the right to receive shares of company stock, subject to certain restrictions or conditions.
Stock appreciation rights (SARs): A form of equity compensation in which an employee is granted the right to receive cash or stock based on the appreciation in the value of the company’s stock.
Convertible debt: A form of financing in which the lender has the option to convert the debt into equity at a later date.
Convertible note: A form of financing that is structured as a loan, but includes the option to convert the debt into equity at a later date.
SAFE (Simple Agreement for Future Equity): A financing instrument developed by Y Combinator that is similar to a convertible note, but does not accrue interest or have a maturity date.
KISS (Keep It Simple Security): A financing instrument developed by Startups that is similar to a SAFE, but with simpler terms and a shorter document.
Cap table: A record of the ownership and equity in a company, including the names and ownership percentages of all shareholders.
Preferred stock: A type of stock that has a higher claim on the assets and earnings of a company than common stock.
Common stock: A type of stock that represents ownership in a company and entitles the holder to a share of the company’s profits and assets.
Dividend: A distribution of a portion of a company’s profits to its shareholders.
Board of directors: The governing body of a company, responsible for setting the overall direction and strategy of the company.
Board observer: An individual who is not a member of a company’s board of directors, but is granted the right to attend board meetings and observe proceedings.
Advisory board: A group of individuals who provide guidance and advice to a company, but do not have formal decision-making power.
Corporate governance: The system of rules, practices, and processes by which a company is directed and controlled.
Bylaws: The formal rules and regulations that govern the internal affairs of a company.
Shareholders agreement: A legal agreement between the shareholders of a company that sets out the terms of their relationship and the management of the company.
Operating agreement: A legal agreement that sets out the terms of a limited liability company, including the rights and responsibilities of the members.
Corporate resolution: A formal document that records a decision made by a company’s board of directors or shareholders.
Corporate seal: A stamp or embossed emblem that is used to authenticate official documents of a company.
Stock certificate: A document that serves as proof of ownership of a certain number of shares of a company’s stock.
Incorporation: The process of legally creating a corporation.