Startup Jargons for Indian Entrepreneurs
Being a novice to startup jargons, required to swiftly sail through your entrepreneurial journey can make you wonder whether it is going to be easy communicating with multiple stakeholders involved in the process of establishing and expanding your business. The list of stakeholders might include legal professionals, investors, developers, financial advisors, etc. Being aware about jargons as a startup makes you sound more aware, alert and updated and enables you to be on the same platform as your stakeholders. As distinct jargons are used by each of these stakeholders, we present to you the list of startup jargons that a novice Indian entrepreneur must know:
Business Entity Meaning
As per the definition of Wikipedia “A business entity is an entity that is formed and administered as per commercial law in order to engage in business activities, charitable work, or other activities allowable.” Usually, business entities such as Private Limited Company, One Person Company, Public Limited Company or Limited Liability Partnership, etc. are formed to sell a product or a service.
Meaning of Pitch
The most commonly used jargon in today’s startup ecosystem is investors Pitch. A pitch is presented to the prospective investor in the form of a short presentation or introduction about the startup. The purpose behind presenting a pitch is to get the investor excited and more interested in the startup. A good pitch must cover all the given areas:
- Vision and Mission
- About the Startup and its Founders
- Traction or Market Adoption
- Problem the Startup Solves and Current Solutions Available
- Market Opportunity
- Key products or services
- Revenue Model
- Market Approach or Strategy
- Key Financials
Another famous pitch is Elevator Pitch. A pitch presented in less than 30 seconds is popularly known as “Elevator Pitch”. You might get many opportunities as a startup entrepreneur to meet different investors at any point of time. Hence, keeping your elevator pitch always ready will serve you well at such times.
Most often, a startup raises funds from friends, family or savings during its inception stages to meet all of its expenses. This is commonly known as Bootstrapping. As most of the startups have limited funds, they work hard to prove their business models. The startup is called venture funded, in case the business model is successful and is approved and funded by an investor.
Burn Rate Meaning
Most of the startups fail to generate positive cash flow in the early stages of their establishment and hence, require investments to succeed. The amount of cash burned or the negative cash flow spent by a startup every month or year is known as Burn Rate.
Run Rate Meaning
The performance of a startup during the current period (current month or current quarter) extrapolated over the next year is known as the Run rate. The revenue run rate of a startup would be Rs.1.20 crores in case the startup has a revenue of Rs.10 lakhs during the current month.
Intellectual Property Rights Meaning
This is a term that every startup should be familiar with. Intellectual Property Rights as the name suggests are the rights conferred by law to the creations of mind or intellect. In order to protect your IP you need to go for either trademark registration, Patent registration, Copyright registration or Design registration depending on the nature and purpose of your creation.
Employee Stock Ownership Plans (ESOP) is provided by startups to attract qualified talent. Hence, on achieving certain milestones most ESOPs are provided to the employee without any up-front cost to the employee. As a part of the remuneration for the work performed, ESOP shares could be provided to the employees.
Market Penetration Meaning
The amount of market share captured by a startup and the rate at which its market share grows is known as market penetration.
It is both critical and imperative for an investor to assess the value of a company before investing in it. This process of value assessment of a company is known as Valuation. An investor can get the valuation of the company done prior to the investment in the company or post investment in the company known as pre-money valuation or post-money valuation respectively.
As per the definition provided by chron.com “Business traction refers to the progress of a start-up company and the momentum it gains as the business grows.” In order to measure business traction, customer response and revenue generated are the common factors on which the company usually relies. Apparently traction is an abstract concept however, it is still very important as it assists a company in understanding its current position in an industry and where it would like to be.
Term Sheet Meaning
Prior to the investment in a company an agreement is provided by an investor which is commonly known as Term Sheet. What an investor will get in lieu of their investment in the company is generally mentioned in the Term Sheet. This might include ownership and voting rights.
Exit Strategy Meaning
Post investment in a company an investor, usually angel or private equity investor, might wish to sell the shares of the company at the right time to make good returns. Hence, an investor prior to investing in a business must have an exit strategy. The strategy to sell off the investment in a company by an investor post investment is called an Exit Strategy. Usually an exit strategy is executed through exit during additional rounds of funding/ buy-back of shares by promoters/ IPO.