Whether you are mulling over an idea for a startup or you are a couple of years in and looking to grow, it is likely that you have come across some words and phrases that have left you scratching your head in confusion. Maybe you think a ‘lean canvas’ is something used by an artist, or the term ‘design sprint’ was actually coined by Usain Bolt?
Unfortunately the amount of acronyms, buzzwords and idioms in the tech startup vocabulary is ever increasing. But fear not! I have compiled some of the most commonly misunderstood terms, along with simple explanations, that you are likely to encounter during the 6 key stages on your tech startup journey. Daniel Owen of Nova, explains all to help you master the startup jargon once and for all.
Stage 1: Eureka – You have an idea!
Both scary and exciting, you have started to research as you plan the first steps.
- Pre-seed: A startup is pre-seed before any money is invested in it and a ‘pre-seed’ funding round is what young startups will look for to fund initial stages of their development.
- Lean Canvas: This is a 1-page ‘living’ business plan that you should update as your startup progresses. The concept was originally developed by Ash Maurya, a founder of the Lean Stack and the aim was to replace long complex business plans with a much ‘leaner’ single page business model.
- Deck (aka pitch deck): A presentation that covers all aspects of your business in a succinct and compelling way. This is most commonly used when presenting your startup in a pitch for funding.
- Value Proposition: The features or elements that make your business uniquely attractive to customers.
- Exit strategy: How you plan to sell the business in the future. (Pro tip: this is something investors like to hear before they fund your startup!)
- Solution bias: When you jump straight into solution mode before really understanding the problem your business will solve.
Stage 2: You have a team, but what happens next?
You have gathered some people who share your vision and it is time to take your startup to the next level.
- Lean Startup: The core mission of a lean start-up is to validate your business concept as quickly and cheaply as possible. (Pro tip: you can find out more about this here).
- Cofoundery: A concept created and coined by Nova. The Cofoundery model offers mentorship, guidance, investment and a full team for the first 12 months of a startups life. It is a combination of an accelerator and an incubator with a ready-to-go experienced team who are equally as committed as the founder. Learn more about why the Cofoundery model is unique here.
- Idea validation: The process of testing and proving your idea. It can be done way before you have a physical product through things like user interviews and marketing activities.
- Seed round: The first official investment round for a startup. At this stage, a company is usually raising money for proof of concept or to build a prototype. They tend to be referred to as a ‘seed stage’ company.
- Design sprint: A design sprint is a time-constrained, five-phase process for solving problems through design thinking, prototyping and testing ideas. Design sprints quickly align teams under a shared vision with clearly defined goals and deliverables.
- Buyer persona: A fictional character created to represent a user who would use your product. Your buyer persona will inform product, design and marketing decisions to help you appeal to your target audience.
Stage 3: You have a product… let’s take it to market.
You have built/ are building something but urgently need some market feedback.
- Vaporware: A product you are selling, but have not actually made. Vaporware is a way to test market demand, and see whether people actually want your product or service.
- MVP: Stands for a minimum viable product. This is a product which has just enough features to satisfy early customers whilst providing feedback for future product development.
- SaaS: Stands for ‘software as a service’. SaaS is a software product that is hosted remotely, usually over the internet i.e ‘in the cloud’.
- A/B Testing: An experiment where you compare two variants by showing users them at the same time and seeing which performs better. For example, you could show two different versions of copy on your website and see which copy achieves a high conversion rate.
- Gamification: The application of elements of gameplay to other areas of activity. This technique is typically used to encourage engagement with a product or service.
Step 4: Congratulations – people want your product!
People are using your product, you have data, feedback, and a list of improvements to make – it seems everything is going pretty well.
- Series A: This funding round functions to optimise your startup’s product or user base and push a potential profit generating idea.
- Traction: Proof that people are actually buying and using your product or service.
- Iterate: Trying something out, learning from what could be improved on, and doing it again in a slightly different way to achieve a better result.
- Pivot: A course of correction for startups based on findings in user testing and analysis (Pro tip: a startup could choose to pivot for things like discovering people don’t want their product, or if they realise they’re selling to the wrong market).
- Early adopters: Some of the first people to use your product or service. Early adopters are arguably the most influential customers within the market as they tend to be thought leaders, encouraging other people to follow in their steps.
- Beta: The initial testing stages of a product or a company that relies heavily on feedback from beta testers. Products in beta are testing the technicality of the product, not the concept or idea. For example, this could be looking for bugs in the code.
Stage 5: Your business develops traction.
You have learnt what works, and what doesn’t, now we need to figure out how to get more users.
- Disruptive: When your innovation or technology challenges an existing market. This includes offering a lower price, displacing old technology, or changing the market audience.
- Series B: A funding round focused on advancing a startup beyond the development stage by expanding the company’s market reach.
- Freemium: A business model that allows users to access basic features for free with an option to pay for more advanced services. (Pro tip: this model is commonly used in internet-based businesses, particularly web and mobile apps).
- B2B (Business to Business): When a business sells their product to other businesses.
- B2C (Business to Consumer): When a business sells their product directly to the consumer. In this scenario, the consumer is the end-user and customer of the product or services on offer.
- Daily active users: The number of users who engage with your product on a given day.
Stage 6: Time to expand – taking your business into the wider market.
The numbers are looking good and you’re ready to ramp things up. It is time to think global.
- Series C: A funding round that aims to scale up your startup in this stage. There is a substantial inflow of capital to up returns and tackle competitors. (Pro tip: recruiting additional team members is often advised at this point).
- Burn Rate: How fast you’re burning through your money. It is not unusual for a start-up to lose large amounts of money for a number of years before breaking even or making a profit.
- Churn Rate: The annual percentage rate at which customers stop subscribing to your product or service (this only applies to subscription-based businesses). Due to churn rate, your projected growth might not look how you think it will.
- Activation rate: The rate at which your acquired customers become active customers by initiating an activation ‘event’. This could be the number of people who download your app or the number of people who click on a certain URL in an email campaign. Startups generally use activation rates as a way of measuring the success of a campaign.
- Hockey stick: When a startup experiences steady growth and then it rises suddenly. When this is represented on a graph, it looks a bit like a hockey stick, hence the name.
- Unicorn: A unicorn is a startup valued at over $1 billion. The term was coined in 2013 by venture capitalist Aileen Lee. She chose the mythical animal to represent the statistical rarity of such successful businesses.
These are just some of the most common startup terms and hopefully this guide can equip you to deal with them at every stage of your tech startup journey!
About We Are Nova
Nova is a UK -based tech ‘cofoundery’, launched in 2014. It partners with entrepreneurs to turn great ideas into successful, scalable tech startups, in sectors including healthtech, fintech, education tech and eGaming. Nova has launched over 50 tech startups in the past 5 years and its startup success rate is six times higher than the industry average.
Visit Nova at: www.wearenova.co.uk