In the land of startups, scale-ups and Venture Capitalism, jargon and abbreviations are absolutely everywhere. Use this startup glossary of terms to search 101 definitions every startup founder should know.
Accelerator
Typically, the a programme that offers mentorship, brand/marketing crash course and some capital for startups in exchange for equity. Offering varies by accelerator but is usually suited to early stage startups with inexperienced founding teams.
Acquihire
The act of acquiring a company for the purpose of hiring the team behind it. Key employees may be tied in for a specified period of time.
Acquisition (business)
An acquisition is when one company or investment group buys another company. This is a common mechanism for exit.
Acquisition (customer)
The act of winning a new customer.
Allocation
The size of the round that is set aside for a specific investor (or fund, group of investors etc), usually communicated in a £ value.
Analytics (Web)
Web analytics is the measurement, collection, analysis, and reporting of web data to understand and optimise web usage. Put simply, tools such as Google Analytics provide and overview of how users interact with your website.
Angel Investor
An angel investor is someone who invests their own capital into the growth of a small business at an early stage (an alternative to VC as a source of equity capital, often associated with earlier stager businesses).
Annual Recurring Revenue (ARR)
Annual recurring revenue is predictable income that a business receives each year. Annualised version of MRR.
Anti-dilution Clause
A contractual clause that protects an investor from having their investment (as a percentage of ownership) significantly reduced in subsequent fundraising rounds.
Attribution (Modelling)
An attribution model is the rule, or set of rules, that determines how credit for conversions (sales) is assigned to user touchpoints. For example, if a user reads an email then searches for a brand online before purchasing, is the email responsible for the sale or the website? Attribution modelling answers these questions.
Attrition
The number of customers lost within a given period of time expressed as a percentage. See also churn / retention rate.
BHAG
Big Hairy Audacious Goal. Am extremely ambitious target to motivate progress.
Bootstrapping
A startup which is able to self-finance, often eliminating the need for seed or angel investment rounds. This can be achieved through early revenue generation, lean operations (typically in bootstrapped startups the founders take a low or no salary).
Bubble
A bubble describes a timeframe in an economic ecosystem where an industry does not realise that it might be overvalued and over-inflated.
Burn Rate
Rate at which a company spends cash reserves to cover expenses, expressed monthly or weekly. Usually applied to a company with little or no revenues.
Cap Table
An official document that described the capital structure of a startup, generally used to view the percentage ownership that each investor or employee owns of the company.
Capital
Capital is a term for financial assets, such as funds held in deposit accounts and/or funds obtained from special financing sources such as investment or loans.
Carried Interest ('The Carry')
The share of generated profits that an investment manager is entitled to keep as compensation. Can also be referred to as an “Incentive Fee” or a “Performance Fee.”, ranging from 15%-30%.
Churn Rate (Retention)
Also known as retention rate, the churn rate is the annual percentage rate at which customers stop subscribing to a product or service. In this context, it reflects how many customers leave a startup annually, as a %.
Cliff
Usually applying to vesting schedules, Cliff vesting is when an employee or investor becomes fully vested on a specified date rather than becoming partially vested in increasing amounts over an extended period.
CMO (Chief Marketing Officer)
A chief marketing officer (CMO) is the executive in charge of an organisation's strategic marketing initiatives. They steer the overarching direction of a brand's marketing communications.
Content Marketing
A form of marketing which involves the creation and distribution of content (in any medium) that does not explicitly promote a brand but is intended to generate interest in products or services.
Conversion Rate Optimisation (CRO)
Conversion rate optimisation (CRO) is the methodical process of making iterative changes to a website or app to increase the percentage of users who take a desired action (usually sign up, purchase, register etc).
Convertible Note
Put simply, a Convertible Note (CN) is debt finance, a type of convertible security that converts into equity.
In terms of using a convertible note for seed funding, the debt automatically converts into shares when Series A closes. Rather than a loan from a creditor accumulating interest, a convertible note from an investor converts into equity based on pre-agreed terms. Read more.
Cottage Business / Lifestyle Business
A cottage business is one that is unlikely to scale dramatically and therefore does not present a viable investment for a VC or Angel, but could lifestyle business for a founder.
CPO (Chief Product Officer)
A chief product officer (CPO) is the executive in charge of an organisation's strategic product initiatives. They steer the overarching direction of a brand's product, including features and how to articulate them.
Crowdfunding
Crowdfunding (not to be confused with crowdsourcing) refers to generating capital from brand advocates or early adopters in place of giving away equity, usually via a third party platform. In simple terms, asking a large number of people for a small amount of money each. See also equity crowdfunding.
Crowdsourcing
Crowdsourcing (not to be confused with crowdfunding) refers to obtaining input into a task or project by enlisting a large number of people, generally for free. For example, asking a Reddit sub for an opinion on a rapid prototype rather than paying for a focus group.
CTO (Chief Technology Officer)
A chief technology officer (CTO) is the executive in charge of an organisation's technological needs and strategic decision making in terms of tech. Often in technology start-ups the CTO is a co-founder and/or shareholder.
Customer Acquisition Cost (CAC)
An important metric in unit economics, the CAC allows a company to keep track of how much it costs to acquire a new customer. Calculated as direct acquisition costs (generally marketing and sales expenses) divided by the number of new customers, the CAC allows a startup to understand which channels deliver the best ROI for marketing spend.
Customer Relationship Management (CRM)
CRM refers to the process (but is generally synonymous with software enabling the process) of keeping track of and managing customer relationships. For example, automated email updates to customers may be part of a CRM strategy.
Data room
A data room (also known as a virtual data room) is an online repository of information that is used for the storing and distribution of documents. Generally used to house documents relating to due diligence in funding rounds.
Debt Capital
Debt capital is the capital/finance that a business raises by taking out a loan or other financial security (in this context, debt capital can be an alternative to equity capital).
Dilution
Dilution occurs when a startup issues new shares that result in a decrease in existing shareholders' ownership percentage of that company. When the number of shares outstanding increases, such as during a funding round, each existing shareholder owns a smaller, or diluted, percentage of the company, making each share less valuable.
Down Round
A fundraising round in which the startup is valued at a lower value per share than previous rounds (i.e. the valuation has gone down)
Drag-Along Rights / Drag-Along Clause
The right of the owners of a specified percentage of the shares of the startup to require other shareholders to sell their shares or to approve sale of the company. This prevents one group of shareholders from blocking sale of the company.