The Blade

With subcultures come jargon. Every group from snowboarders to computer programmers to musicians has lingo that is native to the culture, though to outsiders, it sounds like a foreign language. I often meet 20-something investment bankers on airplanes. When I ask what they do for a living, they look put out and say, “I trade buy-side covered call derivatives for our institutional and high net worth clients, etc., etc.…” and I think, “So in simpler terms, you’re a trader.”

Talk the talk

Like the financial industry, the startup subculture has its own semi-obnoxious colloquialisms. In case you’re intimated by all the fancy pants startup talk between your friends, here are the plain-English translations of some of the trickiest startup words:

Accelerators—a shared workspace that provides startup support such as networking connections, mentorship, and investment (not to be confused with incubators or shared space).

Angel group—a group of angel investors that pools their resources and develops portfolios of companies they’ve invested in. You can find a listing of them online from Angel Capital Association (ACA), a trade association of angel groups.

Angel investor—an accredited individual investor who must have a net worth of at least $1 million and have an income of at least $200,000 a year (or $300,000 a year jointly with a spouse).

Entrepreneurs—those who start any type of business, including startups but also small trade businesses, solo businesses, restaurants, and anything in between (not to be confused with startup founders).

Founders—those who start companies with new ideas including technology or new inventions (not to be confused with entrepreneurs).

Growth capital—money invested to help you expand your business after your product has matured and has established customers.

Incubators—groups that provide mentoring support, funding, grants, investments, and physical locations to work for entrepreneurs (not to be confused with accelerators).

Key performance indicators (KPIs)—measurements of important data that help you manage your company, such as revenue per employee, customer retention rates, lead to closed sales conversion rate, inventory shrinkage rate, etc.

Limited partner (LP)—an investor in a venture capital fund who isn’t responsible for choosing investments, raising money, or managing and organizing the day-to-day operations of the fund. An LP’s liability is limited to the amount they invest in the fund.

Love money—capital invested in a startup based on the relationship between the founder and the investors rather than analysis of the business idea and its associated risk.

Mezzanine financing round—late-stage, high-interest-rate debt capital that is often a bridge loan between financing rounds. The debt may be converted into equity if not repaid.

Minimal viable product (MVP)—an inexpensive version of your product that includes only enough features to satisfy early adopter customers; used to get on the market quickly and then learn from customers about improvements to make. The term MVP was popularized by authors Eric Ries and Steve Blank.

Pitch book—a detailed information packet provided to potential acquirers about the financial performance, business model, and operating plan of a business.

Pitch-offs (or demo days)—events or conferences where you usually pitch for a short amount of time to several investors all at once. These are often held by universities and local entrepreneurial organizations. Winning a pitch-off results in a certain amount of prize money, which varies anywhere from the low five figures to seven figures.

Pivoting—changing direction or trying something new when some aspect of your business model isn’t working (e.g., market, price, sales method, product features, etc.). For example, if you are unsuccessfully selling your product to restaurants, you could “pivot” and begin trying to sell it to a different market, such as hotels or grocery stores.

Premature scaling—trying to grow operating expenses and overbuild product features before substantial customer growth has occurred.

Pretailing (or pre-commerce)—preselling products.

Ramen profitability—the point when a startup is earning just enough income to pay its founder the bare minimum to live on—or enough to buy inexpensive ramen noodles.

Scaling—the ability of a company to grow its operating margins (profits) as its revenue increases.

Seed capital—pre-revenue money used by a startup company for operating expenses, research and development, and capital expenditures.

Software as a Service (SaaS)—a business model in which software is licensed to customers on a subscription basis. Unlike installed software that is purchased and installed on local servers or computers, SaaS resides on an external, off-site server accessed via the Internet.

Stock option plan—contract between your company and a person (e.g., employee or partner) that provides him or her the right (but not the obligation) to buy shares of stock at a predetermined price within a fixed period of time. Stock options incentivize those vested in your company to increase the value of your company.

Term sheet—a negotiable document provided by an investor (i.e., venture capitalist) that describes the terms and conditions by which an investment will be made into your company. A term sheet outlines the investment amount, ownership, and legal terms, such as issuing new shares of stock, raising additional money, selling the company, and appointing directors to the board.

Vaporware—a product that is announced to the public but is not yet manufactured into a finished product. Vaporware is often a demonstration of the product that is planned.

Venture capital—professionally managed capital invested into high-growth-potential startups. The minimum investment into each company is normally $500,000, but the average investment is $3-5 million.

I left exit strategy off the list. Feel free to Google that one.