Some important startup terms budding entrepreneurs must know

The startup industry is an ever-changing environment that necessitates a solid grasp of startup/business terms and their meanings. To effectively engage with stakeholders, entrepreneurs must be fluent in certain 'jargon' words of the startup ecosystem (terms like bootstrapping and funding rounds can come up frequently). 

Staying up-to-speed on the newest trends and startup terminology can assist new entrepreneurs remain competitive, lay a solid foundation for their firms, and pave the path to long-term success.

In this article, we'll look at a few important and prevalent startup terminology whose meanings and relevance will allow you to navigate on your journey to success with ease.

The 12 most frequently used startup terms
 

· Bootstrapping 
 

Bootstrapping is one of the most frequently used startup terms. It refers to starting a business without funding from outside sources. Entrepreneurs can 'bootstrap' their businesses by reducing expenses, funding it directly, scaling back operations, or finding other innovative short-term financing options. Many entrepreneurs believe that this method saves them time and money and is an effective way to learn how to run a company.

· Burn rate 
 

The burn rate measures how quickly a business uses up its cash in hand. It is the pace at which a startup business uses its venture capital to support overheads before realising a positive cash flow from activities. Hence, the measurement of negative cash flow as a result.

· Churn rate 
 

This refers to the frequency at which clients discontinue business with a particular firm. The percentage of customers cancelling their subscriptions within a specified period is the most popular way to quantify the churn rate. It is also the frequency with which employees leave their jobs within a set time range. Companies must have a higher growth rate than their churn rate to increase their customer base.

· Exit strategy 
 

When certain conditions have been fulfilled or surpassed, an investor, venture capitalist, or business owner implements an exit strategy to liquidate their position in a financial asset or sell off their physical company assets. This can be done by selling business shares and assets like real estate holdings, advertising contracts, etc.

Also read - 8 Steps to grow and expand your business

· Freemium 
 

Freemium is a business model wherein a corporation provides customers with minimal or free functionality at a fee for more comprehensive or advanced capabilities. This enables companies to test their product with clients, get feedback, and make necessary adjustments before investing in the creation of more expensive alternatives.

· Key Performance Indicators (KPIs)
 

KPIs determine the value of a startup's progress. They demonstrate how a company is advancing towards its goals and objectives that are used to track development and highlight areas where the startup may need improvement.

· Loss leader pricing 
 

This is a strategic marketing tactic that entails selling goods for less than it costs to produce them to draw in new consumers or encourage existing ones to make additional purchases. Businesses that want to increase their market share or expand into other regions frequently use this method.

· Minimum Viable Product (MVP)
 

MVP has just enough functionality to tempt early users and validate an idea early in the development cycle. In sectors like software, the MVP may assist the product team in receiving customer input as soon as possible to iterate and enhance the product.

· Pitch deck 
 

Often known as an investor deck, a pitch deck is a business presentation that introduces a business idea to potential investors. It is a concise and inclusive document containing all the business' core insights and aspects and is often the first and foremost impression of the business.

· Pivot strategy
 

Pivoting happens early in a company's lifespan or after one or more fundraising rounds. Pivoting implies discontinuing a crucial product, entering a new market, or both. While pivoting in the startup industry entails shifting to a new strategy, it is sometimes assumed to imply significantly overhauling an entire firm.

· Runway
 

Startup or cash runway refers to the number of months a company can operate before running out of funds. It refers to the point at which a firm cannot sustain itself in the market if its income and costs stay constant. During a company's lifespan, the startup runway is essential for budgeting, planning, forecasting, and financing. 

· Series/funding rounds 
 

The number of funding rounds is the number of times a firm returns to the market to raise further financing. The purpose of each round is for entrepreneurs to trade equity in their company for funds that may be used to take their enterprises to the next level. Each round of funding facilitates the organisation's progress to a more lucrative position.

Let's look at the fundraising rounds that are involved in the investing process -

· Pre-seed 
 

During the early round of fundraising, entrepreneurs frequently rely on bootstrapping, using pre-seed capital as the starting point. The pace of this fundraising stage might vary based on the specific qualities of the firm and the expenditure involved in bringing the business idea to reality.

· Seed 
 

At this stage, the key priority is to secure further funding. This entails attracting the attention of venture investors and/or banks. Seed investment assists a firm in financing its initial phases, such as market research and product development and helps define what its ultimate goods/services are and who its target demographic will be.

· Series A funding 
 

Series A investment is the most crucial round following the seed stage. It is critical to have a plan to build a company model that will provide long-term profits during this round. 

· Series B funding 
 

Series B capital is intended for corporate expansion rather than development. It is done for the firm's growth to guarantee that the company successfully handles all demand levels of its potential customers.

· Series C funding 
 

The Series C fundraising round is typically made for extensive growth and expansion. It follows Series A and Series B rounds and is meant to assist a firm in reaching its objectives and scaling up its operations. 

Also read - Beyond funding: How can startups benefit from IDFC FIRST WINGS?

Conclusion

The industry is loaded with plenty of startup terminology that might be difficult for some entrepreneurs to comprehend. However, understanding the basic startup terms and phrases is critical for companies to successfully engage with investors and stakeholders.

As a startup, you can also check out focused programs like the FIRST WINGS Program by IDFC FIRST Bank. Created specifically for budding entrepreneurs, it provides a variety of customised solutions to meet the unique demands of new enterprises like - 

· A zero-balance startup current account with free and unlimited IMPS/NEFT/RTGS transactions

· Founder Success Program – Leap To Unicorn that provides mentoring, networking, and fund-raising opportunities for India’s most promising startups

· Working capital solutions for pre-profit startups

· Business credit cards with step-up credit

· Networking opportunities

· and much more…

Startups can benefit from IDFC FIRST Bank's knowledge and experience in handling financial demands while gaining access to value-added services that can help them expand and scale their enterprises. The bank provides access to mentorship and capital raising programs, assisting businesses to grow and prosper at every stage of their development. Click here to know more and benefit from it.

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