From Solopreneur To Bootstrapping: 15 Commonly Used Startup Terms Entrepreneurs Must Know

The last decade has witnessed how startups have been a big boost to India¡¯s trillion-dollar economy. Lots of people have already started ground-breaking startups and even evolved them into large-scale companies, while many still have the dream in their eyes to become an entrepreneur by giving wings to their startup journey.

Shark Tank India last year was also an example of the immense talent the budding entrepreneurs in our country have, and the unique ideas they have for their startups. Even recently, one of India¡¯s premier educational institutes, BITS Pilani permitted a one-year gap for students and faculty members to take up to a year off to build startups.

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Certainly, the startup ecosystem in our country is growing by leaps and bounds, isn't it?

But is having a great idea enough to sail your startup's boat? No. As a budding entrepreneur, you have to be well-versed with certain terms so that you are not blank when it comes to dealing with investors or understanding the common terminologies in the startup ecosystem¡¯s day-to-day work.

Also Read: Top 25 Startups In India As Per 2022 LinkedIn List

1. Bootstrapping

This term is used when a startup is self-funded. Especially for new startups, entrepreneurs may choose to use their own savings as well as money instead of external investors to get the business started. So, bootstrapping is generally referred to as the process of building a business from scratch without attracting external investment or with minimal external capital.

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2. Venture Capitalist (VC)

A professional individual who invests money in other businesses in exchange for an equity share of the company is termed a venture capitalist. And the firms that do so are known as venture capital firms.

3. Go Public/IPO

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Another commonly used term is IPO. An initial public offering (IPO) is a process through which a company goes public by putting its shares on the stock market for broader, public investment. Simply put, IPO is a process through which shares of a private company are offered to the public through new stock issuance.

4. MVP

MVP for startups stands for Minimum Viable Product, which is a bare-bones model of a startup's product that shows its key features and selling points without costing a fortune to make a full-fledged product before it gets funding. So basically, a minimum viable product (MVP) is a version of a product with just enough features to be usable by early customers and potential investors who can then provide feedback if needed.

5. ESOP

For not just startups but also big companies, a commonly used term is ESOPs. ESOP means Employee Stock Ownership Plans. ESOP is an employee benefit plan that gives employees ownership of the company, in the form of company stocks.

6. Seed Rounds

In the early stages of startups seeking funding, this is a common term. The seed round refers to the very first stage of venture capital funding, where a business owner finds early-stage investors. This funding round usually comes after finding angel investors and is followed by rounds of funding named by various ¡°series¡± (Series A, Series B, Series C, and so on).

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Series A rounds of funding are usually meant for the optimisation of the product or the user base of a certain startup. It builds on plans that aim at reaping long-term capital to push a potential profit-generating idea.

Series B rounds of funding are focused on advancing a business beyond the initial development stage by expanding the company¡¯s market reach and products. At this stage, venture capitalists who are investing usually go ahead to make a huge call on the business plans ahead.

Series C rounds of funding aim at scaling up. At this stage, several investors contribute funds to tackle competitors; several acquisitions often tend to take place.

Series D and further funding rounds may occur if the company was not able to raise enough money through its Series C or has further plans to expand.

7. Sweat equity

Not many people are aware of this term as well. Sweat equity is the equity percentage that a startup gives to a person for his or her hard work in the company. This acts as a motivating incentive that can be used in talent acquisition, and also to motivate existing employees.

8. Solopreneur

As the name suggests, a solopreneur starts and potentially even grows a business all alone. Nowadays with freelancing and moonlighting becoming common practices, this solopreneur model is becoming more and more prevalent.

9. Unicorn

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India's startup ecosystem has over 100 unicorns already! But what exactly are unicorns?

A unicorn startup is a company that is valued at $1 billion or more. Those with a $10 billion valuation are termed decacorn.

Also Read: Only 18 Out Of India's 100 Unicorns Profitable

10. First mover advantage

As the name suggests, first-mover advantage refers to an advantage gained by a company which is the first one to introduce a product or service in the market. A first-mover advantage enables a company to establish strong brand recognition and product/service loyalty as well before other entrants join the race and enter the market.

Also Read: Inspired By Warren Buffett, 79YO Indian Techie Ashok Soota Launches His Third Startup

11. Valuation

Another commonly used term right from the beginning to the end of a company is valuation. Valuation refers to how much your company is worth. Valuation is a quantitative process of determining the fair value of a firm.

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There are many techniques used for conducting the valuation. The business's management, the composition of its capital structure, the prospect of future earnings, and the market value of its assets, etc are among the metrics factored in to arrive at the valuation.

Also Read: Factors That Determine Share Price & Valuation In IPO

12. Pitch Deck

If an entrepreneur wants to attract investors for funding, they need a strong pitch deck. It is a presentation on key aspects of the startup's business, including the product/service to be offered, the target market, and the business plan. The pitch deck's goal is to entice and show investors that what are you pitching is an idea worth investing in and is also sustainable and capable of giving good returns on their investments.

13. Burn Rate

More often than not, investors wish to know your burn rate, i.e. how quickly you are spending money compared to your capital during a particular period. Simply put, the burn rate is typically used to describe the rate at which a new company is spending its venture capital before generating positive cash flow from operations. The burn rate is usually quoted in terms of cash spent per month.

14. Angel Investor

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Another common term is this. An angel investor is someone who gives the first funding to a startup. This person is generally the one who believes in the startup¡¯s idea and provides the entrepreneurs behind it with the required money to get started.

15. Exit Strategy

While starting a business, it's no less important to have an exit strategy in place. This is because investors would be curious to know how entrepreneurs have planned any form of exit, like the founder(s) or investors, or in case they happen to plan to someday sell their company via mergers, acquisitions, etc. if any. Doing so gives an idea regarding any plan to transfer ownership and the way money would be paid back to investors.

Also Read: 10 Bollywood Celebrities And Their Startup Investments

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