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Accelerator
An accelerator is a short-term program that provides mentorship, resources, and funding to help businesses grow rapidly. For example, HubSpot Creators supports business media creators.
Acqui-hired
This term refers to acquiring a struggling startup primarily for its talented workforce, rather than its product or services.
Angel Investor
An angel investor provides initial funding to a startup, supporting its idea and helping entrepreneurs get started.
Bootstrapping
Bootstrapping is when a startup is self-funded, relying on personal savings and support from friends and family. Over 80% of startups begin this way.
Bridge Loan
A bridge loan is a short-term loan that provides a startup with funding between investment rounds.
Burn Rate
Investors typically want to know your burn rate, which is the rate at which you're spending money relative to your capital, before providing funding.
Cliff
The vesting cliff is a period, usually one year, before employees can claim their shares. It ensures employees, especially CEOs, stay with the company during its early stages.
Co-Working Space
A co-working space is a shared office used by employees from different companies, offering startups a cost-effective alternative to renting or buying a full office.
Cottage Business
Cottage businesses are small-scale startups that thrive when operated from home rather than a traditional office space.
Crowdfunding
Crowdfunding is a democratic funding method where companies raise capital from a broad group of investors and clients interested in their offerings, often through pre-orders or discounted rates.
Dragon
A dragon is a rare startup that raises $1 billion in a single funding round, with Uber being an example.
Early Adopters
An early adopter is an influential client who uses a product or service before the general public, providing valuable feedback to improve it.
Exit Strategy
Entrepreneurs create an exit strategy to sell their company through mergers, acquisitions, or IPOs, allowing them to transfer ownership and repay investors.
Freemium
A freemium model offers customers a limited version of a product or service for free, with advanced features available for an additional cost.
Go Public/IPO
Going public is when a company offers its stock on the public market through an IPO, allowing people to invest and own portions of the company.
Growth Hacking
Growth hacking is a marketing strategy that uses low-cost methods to rapidly grow a company, often leveraging social media to go viral without spending much on marketing.
Hockey Stick
Investors seek a hockey stick-shaped growth curve for startups, where metrics like sales or active users double each year.
Incubator
An incubator provides businesses with resources and mentorship to navigate early startup challenges. It is a long-term program, unlike an accelerator, and usually takes equity in exchange for support and connections.
Launch
A startup's launch is when it introduces its product or service to the market. A soft launch, a test version with limited press and beta offerings, helps entrepreneurs gauge interest from potential clients.
Lean
The goal of a "lean" startup is to build and test products quickly and cheaply, using trial and error to improve the product, rather than fully developing it upfront without knowing if it will attract buyers.
MVP
The MVP (Minimum Viable Product) is an essential concept for startups, enabling them to launch a simple version of their product that showcases key features and tests assumptions. It helps gather user feedback, attract early adopters, and secure funding, all while minimizing initial investment. The goal is to learn quickly and refine the product based on real-world use.
Pitch Deck
To attract investors, create a strong pitch deck that covers your product, target market, and business plan.
Pivot
A pivot is a sudden, major change in a startup's business model, such as altering the product, service, or target audience. A smaller change is called an iteration, which involves refining or improving the existing model without a drastic shift.
Scalability
business's sustainability and growth potential, aiming to expand by delivering goods or services to a growing number of users through a repeatable and viable business model.
Scrum
“Scrum” is an agile project management method that promotes education, creativity, and collaboration. It involves three key roles:
- Product Owner: Manages and prioritizes products based on user knowledge.
- Scrum Master: Removes obstacles to help the team complete tasks.
- Developers: Collaborate to decide how to accomplish tasks and choose tools and techniques.
Although originally for development teams, scrum can be applied to other areas of a business.
Seed Round
The seed round is the initial stage of venture capital funding, where a business owner secures early-stage investors. It follows angel investment and is succeeded by subsequent funding rounds labeled Series A, Series B, Series C, etc.
Solopreneur
An entrepreneur plans to start and grow a business, often with a team. A solopreneur, however, starts and runs a business alone, handling all aspects of it. This model is increasingly common among freelancers, such as writers, designers, and developers.
Sweat Equity
Sweat equity refers to the value of work invested in a startup, especially when cash is limited. Employees who contribute their time and effort in the early stages can receive equity in the company, which may become valuable if the business secures funding or grows significantly.
Unicorn
A unicorn startup is a company valued at $1 billion. While rare, unicorns are more common than dragons, which are startups that raise $1 billion in a single funding round.
Valuation
Valuation is the process of determining your company's worth, assessed in two ways:
- Pre-money valuation is the estimated value of your company before receiving funding, helping investors assess its investment potential.
- Post-money valuation is the company's value after funding is added to the pre-money valuation.
Churn Rate
Churn rate is the percentage of customers who stop using a product or service, calculated by dividing the number of customers lost by the total at the start of a period. A low churn rate indicates strong customer retention.
Product-Market Fit
Product-market fit is reached when a product or service effectively satisfies the needs and demands of its target audience. This goes beyond just making a sale; it means that customers find significant value in the offering, use it regularly, and are likely to recommend it to others. Essentially, achieving product-market fit indicates that the product resonates well with the market, leading to sustained growth, user loyalty, and organic word-of-mouth.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the total cost a business incurs to acquire a new customer, encompassing all marketing and sales expenses. This includes costs for advertising, promotions, sales team salaries, and other related efforts to attract and convert prospects into paying customers.
Lifetime Value (LTV)
Yes, you're correct! LTV (Customer Lifetime Value) represents the total revenue a business can expect from a single customer account over the entire duration of their relationship with the company. It is a key metric used to understand the long-term value of customer acquisition and retention efforts. By calculating LTV, businesses can estimate how much they can afford to spend on acquiring and retaining customers while maintaining profitability.
LTV is often calculated with this formula:
Where:
- Average Purchase Value is the average amount a customer spends per transaction.
- Average Purchase Frequency is how often a customer makes a purchase over a certain period.
- Customer Lifespan is the average duration a customer continues to buy from the business.
A higher LTV indicates a more valuable customer, which allows the business to invest more in marketing and sales efforts.
Traction
Traction in startups is the measurable proof of growth, showing that a product or service is gaining market acceptance. It can be tracked through metrics like user engagement, revenue growth, or customer acquisition, and is used by investors to assess a startup's potential and attract funding.
Runway
Runway refers to the amount of time a startup can operate before running out of money, based on its current burn rate (monthly expenditure) and available cash. It is a key metric for startups to assess their financial health and how much time they have to achieve profitability or secure additional funding.
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