Know your start-up jargon

Today’s start-up scene is awash with jargon and for the unfamiliar this can be pretty daunting. Not only is a knowledge of start-up vocabulary essential if you want to take advantage of all the developmental tools and services available to entrepreneurs, it’s also highly advisable when pitching ideas to potential partners and stakeholders. A basic understanding of business and finance vocabulary is equally crucial, so we’ve put together a glossary of key terms for you!

Accelerator – Often used interchangeably with Incubator, however is sometimes used to describe programmes in which the provider offers seed investment or other capital in each start-up in exchange for equity. An example of an Accelerator would be the Sirius Programme – http://www.siriusprogramme.com/.

Angel Investors – An Angel Investor is typically a high net worth individual that financially aids a business’ early growth – think Dragons Den. Angels typically invest between £25,000 £100,000. Angels primarily differ from Venture Capitalists in that they invest less capital, invest earlier in a start-ups development and exercise less due diligence because they are not usually beholden to investment partners.

Boot Strapping – When an early stage entrepreneur seeks to get their business off the ground with very limited means and no external investment. On the plus side this means the entrepreneur maintains 100% control over their business, however they may also be putting themselves under significant financial risk.

Capital – Used to describe assets. This can be anything tradable or of value, e.g. real estate, commodities, collectable items, insurance or securities.

CrowdFunding – The process of funding a business or venture by asking a large number of people for a relatively small amount of money, via crowdfunding sites such as Seedr. One example is the development of Oculus Rift – a virtual reality software which Facebook purchased for $2bn after raising $2.4m on Kickstarter.

Disruptive Technology – A ‘game-changer’ – a technology which disrupts existing processes. One example might be online movie streaming versus traditional renting services.

Enterprise – A venture or project.

Freemium – A business model where the product or service is made available free of charge, however additional and more advanced features must be paid for. An example of this would be Spotify, a free music streaming service where the customer must pay a subscription in order to access Spotify Premium which includes no advertising and extra features.

Hackathon – An intensive computer programming session involving a number of people. Hacking is also used commonly across Tech Start-up to describe different areas of coding and software development.

Incubator – A programme or series of classes in which entrepreneurs receive guidance and mentorship in order to develop their ideas and business models. An example would be QMUL’s InQUBEate programme.

IP: Intellectual Property –Non-physical property protected by law (e.g. by patents, copyrights and trademarks). This could include business ideas, titles, inventions and branding such as logos and slogans.

Private Equity – Securities within a company that is not publicly traded, i.e. does not offer its securities to the general public, most commonly through a stock exchange.

ROI: Return on Investment – This is what an investor gets back from what they put in and is used as a way of gauging profitability.

Scalability/ Scalable Growth –An example of a scalable business model would be a software-based business, because once the software is developed their will be minimal costs attached to increased production/ distribution and exponential growth. If however a start-up’s growth was contingent on renting premises (i.e. a high street boutique) this would not be scalable and therefore less of an attractive investment prospect as a significant amount of revenue would need to be routed towards rent and property development. The business would also be far more limited in terms of its market or customer base.

Securities – Any form of financial asset, encompassing debt (e.g. bond), equity (e.g. stock) or derivatives (a product or contract where the value derives from an underlying asset).

Seed Accelerator – An Accelerator in which a seed investment is made in a start-up by the provider in exchange for equity.

Seed Investment – An initial or early investment designed to help launch a business in its early stages.

Social Enterprise – A company that follows a commercial business model, but primarily exists to support a social objective as opposed to making money for its shareholders. An example could be Divine Chocolate, a fair trade chocolate business which is part owned by cocoa farmers, ensuring they’re paid a fair wage. A social enterprise can be set up as a traditional limited company, or as a CIC (community interest company), which has special legislation to ensure that the company works for the benefit of its community.

 Start-Up – A newly created company with significant growth potential, i.e. is able to increase profit significantly year on year. The main difference between a start-up and a small business (a clothing store for example) would be a start-up is not physically fixed in one place so has exponential scalable growth potential (see scalability). For this reason the term Start-Up is often used to describe tech businesses, however the term is not limited to the tech industry.

Sweat Equity – Contribution to an enterprise in the form of effort and toil. Sweat equity is the increase in value created as a direct result of hard work by the owner(s).

VC: Venture Capital – A platform to match investors to businesses looking for growth. Venture Capitalists are investors who typically offer a large investment (£1m+) for a high proportion of equity in order to offset the risks associated with start-ups. The typical objective of a venture capitalist is to bring the start-up to a point where it can be traded publicly so they can sell off their shares at a profit.

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