Wednesday, May 12, 2021

A quick Startup Dictionary

Every new startup or entrepreneur entering the business world in 2020 must understand the most important and popular terms in the industry. This will not only provide leverage when networking or discussing new partnerships, but it could also spark ideas and grant a
better comprehension of current trends.

In this complete startup dictionary 2020 you will find the most important terms every entrepreneur or startup member needs to know:

Angel: Like a celestial guardian, an “angel” —also known as “angel investor”, “informal investor”, and “business angel”— is a person who is willing to invest their own capital, into a new business. This wealthy individual usually gets something in exchange: financial return, participation, or a leading role. Probably fair, considering that they usually invest in the early stages and at high personal risk.

Bridge loan: As the name suggests, a bridge loan refers to short-term financial loans of money to help a business reach a milestone or keep developing. Usually, these loans replace other types of financing that might be taking longer than expected. A bridge loan should be quickly approved and repaid in less than a year, more or less.

Burn rate: How fast is a startup spending their money? This rate refers to the period when a new business invests —or loses— large sums of money before making any profit.

Data Scientist: This is an expert who translates data into valuable and useful information for startups, and not just tech companies. A data scientist is usually a programmer who can create tools and use software —including artificial intelligence— to crunch data and
develop a system that helps the startup make sense of their information, users, and business data.

FMA (First Mover Advantage): When a startup is the first to implement a new business model or a disruptive idea in the market, it can use the FMA label to attract investors. It is a risky move, considering that, when a new technology comes out, there’s an education
process or learning curve that takes time and money to master. On the other hand, some venture capitalists hunt for these risky businesses.

Gamify: To add features and elements, inspired by games and videogames, on websites or software to increase engagement with their audience and add more “fun” to the business model. Usually, these features are rewards, scoring, competition, challenges, badges, etc.
It’s also a popular marketing strategy.

Growth Hacking: A trending topic in the marketing industry. The term was first implemented by the entrepreneur Sean Ellis in 2010 and it refers to the application of different techniques to grow a business in the fastest and most inexpensive way possible. It can involve non-traditional marketing campaigns, the implementation of systems, processes, designs, and almost any effective tactic; but is heavily centered on quickly testing hypotheses before big decision making or spending.

IPO (Initial Public Offering): The official debut of a startup on the stock market and transition to a more open, publicly traded company, accountable to shareholders. It usually represents a long-awaited milestone for founders and capitalists.

LTV (Lifetime Value of a Customer): A simple equation used to determine how much profit a business can expect from a single customer over a long-term period. This prediction considers the relationship between a service, a customer and its lifespan. For example, the value of a customer’s monthly subscription for a software plan that is estimated to last three years.

MVP (Minimum Viable Product): it refers to a marketing approach where a startup launches a functional but early version of their product —it can be a website, the beta version of software or just a landing page— to study their audience behavior and test whether they might buy or use the product, and quickly determine how it can be improved.

Pivot: Considering the current worldwide situation, this term will gain a lot of popularity in 2020. When a business pivots, this can mean a change in strategic direction, or can refer to a company addressing a new market or application for their technology.

Ramen profitable: This instant Japanese dish has gained so much popularity in Silicon Valley in the past few years that it is now used as a metaphor. When a startup becomes “ramen profitable” it means that it is making enough profit to cover the essential living expenses of its workers.

Traction: Term used in the business industry to refer to the proof or metrics that demonstrates that a startup is profitable and has
potential to grow. Demonstrating traction proves to investors that they should contribute capital to the startup.

Vanity metrics: After investigative reporting proved that many companies and celebrities can simply buy followers on social media or alter download metrics, investors have learned to be wary of these numbers. Instagram followers, page views, and registered users can be
considered vanity metrics. Startups shouldn’t refer to them as traction in 2020.

Vaporware: It refers to a product that is already being sold or advertised, but hasn’t been created yet. Even though it sounds dishonest, it is a common practice in the computer industry, where many technologies started this way, and developed later, such as 3G, Bluetooth, Windows Vista, and the video game The Last Guardian.

VC (Venture Capital): Venture Capital is a private equity investor —usually representing a pool of investors— that is willing to invest large sums of money into promising startups. What do VCs want in exchange? A very high rate of return, probably stock ownership, and a seat on the startup’s board of directors.

Startup business jargon can be extensive, and there’s an absurd amount of buzzwords in the field, but these terms can help any entrepreneur succeed in their next networking event or business meeting. It will be interesting to see what new terms will emerge by the end of this year.

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