Does your startup provide an “end-to-end solution that synergises content across platforms”? Startups were warned at this year’s RISE Conference about jargon overuse – not only do they mean nothing, they also make it difficult for ordinary people to understand what your company actually does.
But is it possible to completely steer clear of jargon? Terms like exit strategy, ROI, and minimum viable product are thrown around the room with our speakers, panelists and attendees at our Dragon Academy series. Jargon, when used right, can help to articulate your ideas in a clear manner. But most importantly… you have to understand what they mean!
In today’s post, we have identified, defined, and put to use the most commonly used terms every entrepreneur should know at each stage of your business. Read on to start speaking the same lingo as your investors do:
Early stage: Defining your business
Accelerator = A centre that provides your startup with resources (such as mentorship, office space, or money) to help it grow. Offers help for a shorter time than an incubator.
“I have this great FinTech idea, but I need some more development time until it’s viable. I’m considering joining the OCBC Open Vault accelerator programme.”
Bleeding Edge = Technology that’s very new. Usually high-risk, high-reward.
“I’m working on a blockchain accounting platform. It’s very bleeding edge stuff, but my Co-Founder has a PhD in Computer Science, so we’ll manage.”
Bootstrapping = Starting a company with little or no money / using personal finances to start a company.
“Look, getting investors right now will just hurt your profitability in the long run. Why don’t you bootstrap this startup instead?”
Deck (aka Pitch Deck) = A 10-slide powerpoint presentation that covers all aspects of your business in a concise and compelling way. There is a standard format and real artistry to making a good deck. Do your homework, get lots of feedback, and consider hiring a graphic designer to polish the final version.
“Did you ask the intern to update the deck with the new testimonials?”
First Mover Advantage (FMA) = The benefits (in brand recognition and monopoly profits) you get when you launch a product in a previously empty market niche. However the term in itself can be misleading: it’s not necessarily an advantage if there a gap in the market, but no market in the gap!
“There aren’t yet any mobile apps in Singapore that let you compare cat food at the click of a button. If we develop one quickly, we’ll get first mover advantage!”
Incubator = Like an accelerator, it provides your startup with support to help it become viable. Suitable if you are creating highly-complex products that take longer to go to market.
“Since we’re developing this technology from scratch, we’re going to need more than twelve weeks in an accelerator. Let’s apply to join the JFDI’s incubator programme instead?”
Lean Startup = Prove your business concept early and quickly by launching and running with low overhead costs.
“We could hire two more people, but I think we’d be better off running as a lean startup for now. That inspires more investor confidence when we succeed.”
Monetise = To make money from an idea. Many people can make a game app – the challenge is figuring out how you can make money from it.
“I get that we’d be the first app that allows you to instantly compare cat food, but how do you plan to monetise that idea? Who would pay for that?”
Minimum Viable Product (MVP) = The “minimum” version of the end-product your company is wishing to achieve.
“I think our MVP is simply when we have about one half of the features ready to go; it won’t be polished, but it’ll work.”
Product-Market Fit = How well your product meets the needs of a large enough market.
“Although you have an elegant solution to a problem, are you sure this is a problem people in this country actually have? Have you thought about product-market fit or just about the product?”
Runway = How long until your business can stay afloat for at the current cost and revenue trajectory.
“With the 10k we’ve sunk into this idea, and our current revenues and costs, our cash runway lasts approximately until… four months from now. Better get to work!”
Software as a Service (SaaS) = Instead of buying a program (like Photoshop) you pay a monthly or annual fee to use it (like Xero or Dragon Law).
“Dragon Law isn’t just paid access to legal templates, it’s SaaS that allows you to easily draft legal documents perfectly customized to your business!”
Sweat Equity = Paying your early employees or consultants in shares instead of dollars.
“Usually you’d get paid $4,000 for branding work, but we’re willing to offer you $5,000 worth of shares instead.”
Valuation = How much a company is worth, theoretically.
“Since we raised put in $2 million by giving out 20% of our shares in our series A round, our evaluation is at least $10 million!”
Growth stage: Demonstrating value for investors
Accredited Investor (AI) = A wealthy individual willing to risk money by investing in your startup. In Singapore, AIs are permitted to make larger and riskier investments than regular investors. Everyone can apply to become an AI – the only prerequisite is that you are wealthy enough.
“I’d like to introduce you to Mr. Tan here. He’s an accredited investor who is looking to invest in startups with potential for high returns.”
Burn Rate (aka Run Rate) = The rate at which money is spent, or “burnt”, in your startup.
“I won’t invest in your startup – the burn rate is way too high! You have to either pay yourself and your people less or figure out some other way to cut costs.”
Cottage Business = A business that is sustainable on a small scale but is not scalable.
“Your grandma bakes great cookies, but I really don’t see how you can scale this. You have to rethink the premises or this is going to remain a cottage business.”
Churn Rate = The rate at which customers stop subscribing to your services. Since each new customer takes time to nurture, the churn is a major hindrance to long-term growth.
“You signed up 200 new subscribers this month? That’s great, but what’s the churn rate?”
Exit Strategy = Strategy that outlines how and when your investors get their money back.
“I want to make sure we have a clear exit strategy or I’m not giving you any money. How will I cash out these shares – are you looking to get your company bought out, or will you buy them back later?”
Hockey Stick = An exponential graph, purporting to show how your company will grow over the next few years. Shaped like a hockey stick.
“Make sure to include a hockey stick graph in our pitch deck!”
Market Penetration = Percentage of market share currently held.
“We only have 4% market penetration among adults, but 60% of people under 18 have downloaded our app.”
Seed funding = Very early-stage investment, often provided before it is clear whether the project is viable. Comes from friends and family or angel investors.
“We’re fortunate that we manage to convince Mr. Tan to give us seed funding, given that we don’t yet have our MVP ready.”
Series A, B, and C funding = Different rounds of funding. Each new round adds more funds but dilutes the ownership of the founders.
“We just closed our series A round, raising over $1.5 million!”
Related reading: Avenues to raising funds for your startup
Traction = Quantitative proof that there is an actual demand for your product.
“The fact that we’ve managed to get five hundred backers on Kickstarter in two days is pretty clear evidence that we have traction!”
Value Proposition = The qualities of your business that attract customers.
“Our value proposition is: We bring instant gratification and happiness to our clients by providing them with up-to-date cat food comparisons.”
Venture capital (VC) = Capital provided in exchange for your stocks/shares, usually by larger institutional players. Often comes with more complex contracts and requirements.
“We now have enough capital to expand into Malaysia, but we first need it to clear it with our VC investors.”
Day-to-day: Business as usual
A/B-testing = Running two very similar versions of your ad or landing page at the same time to find out which one is most effective.
“Do you think we should go for more or less text in the copy?”
“Let’s just run an A/B test and find out what works!”
Customer relationship management (CRM) software = A platform that lets you easily track your customers and how different members of your sales and marketing teams have interacted with them.
“Sarah, have you logged Tony’s details into our CRM system?”
Freemium = A service that is offered free-of-charge, but requires payment for access to premium features.
“I just need some simple accounting software that gets the job done – just look online for some freemium software.”
Growth Hacking = Utilising technology and social media to gain users at low cost.
“Peter here is our growth hacker. He’s currently running an A/B test on our social media pitch.”
Loss Leader Pricing = Heavily marketing underpriced products in order to entice customers who will then, in theory, wind up buying products with large contribution margins.
“As we enter this market, we’ll have to engage in some loss leader pricing: market our starter pack heavily even though it loses us money, and then convince them to switch to professional.”
Low Hanging Fruit = The easiest path to make money, at least in the short run.
“It’s relatively easy to sell automation software to startups, so let’s make sure we market to them first. Let’s pick the low hanging fruit and then broaden our appeal!”
Pivot or Persevere = When your company goes after a different market segment or continues working with the market they have.
“Our cat food app is not taking off. We have two options: we can pivot into the dog food market, or persevere and maybe ramp up our marketing.”
Ramen Profitable = When a startup makes enough money to cover overhead.
“We’re finally ramen profitable! Everyone’s getting paid this month!”
Responsive Design = A website designed to be accessed on different devices.
“Have you checked out Unbounce? It’s a software builder that makes it really easy to create responsive websites.”
Return On Investment (ROI) = How much benefit you expect to get from the money you put into a project or product.
“If we subscribe to Dragon Law, how much money will we save on our legal needs? What’s the ROI, in time and money?”
“Well Bid4Ad told us that they saved 78% on their legal needs, but why don’t you try for yourself?”
I’m sure you’ve had enough of hearing these terms get thrown around the room! Did we miss out on any? Tell us in the comments below!