Ultimate Startup Glossary: Key Terms and Abbreviations Explained for Entrepreneurs

This glossary covers a range of essential concepts, from financial mechanisms to strategic approaches, that are integral to understanding and engaging with the startup ecosystem.

Angel Investor

An individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity.

Bootstrapping

The process of starting a company with personal finances or the operating revenues of the new company.

Burn Rate

The rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations.

Cap Table (Capitalization Table)

A table providing an analysis of the founders' and investors' percentage of ownership, equity dilution, and value of equity in each round of investment.

Convertible Note

A form of short-term debt that converts into equity, typically in conjunction with a future financing round.

Due Diligence

An investigation or audit of a potential investment or product to confirm all facts, such as reviewing all financial records, plus anything else deemed material.

Equity

The ownership interest of investors in a startup, represented in the form of shares.

Exit Strategy

A strategic plan developed by a business owner to sell their investment in a company they founded.

IP Protection

IP is the legal right to your creative and inventive ideas.

IPO (Initial Public Offering)

The first time that the stock of a private company is offered to the public.

Lean Startup

A methodology for developing businesses and products, which aims to shorten product development cycles and rapidly discover if a proposed business model is viable.

MVP (Minimum Viable Product)

A version of a product with just enough features to satisfy early customers and provide feedback for future product development.

Pivot

A structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.

Pre-Money Valuation

The valuation of a company prior to an investment or financing.

Runway

The amount of time until a startup goes out of business, assuming current income and expenses stay constant.

Seed Capital

The initial capital used to start a business, often coming from the founders' personal assets, friends, or family, and typically representing the first official money that a business venture or enterprise raises.

Series A/B/C Funding

Refers to the different stages of financing a startup goes through as it grows and expands. Each series has different investor expectations, and the stakes sold become progressively larger.

Startup Accelerator

A fixed-term, cohort-based program, that includes mentorship and educational components and culminates in a public pitch event or demo day.

Term Sheet

A non-binding agreement setting forth the basic terms and conditions under which an investment will be made.

Unicorn

A startup company valued at over $1 billion.

VC (Venture Capital)

A form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.