This article focuses on some startup terms that you should know. These terms are beneficial for entrepreneurs or your basic general knowledge.
Many of these terms did not exist or were not used in the same way ten years ago. Only with the emergence of startups throughout the world has a whole new lexicon emerged.
So much so that terms like “unicorn” and “pivot” in the context of entrepreneurship are increasingly being used by those outside the startup world.
This sort of investment is most common when a startup is in its early stages; it occurs when an investor, often known as a “business angel,” supplies a firm with initial or expansion cash in exchange for a share in the company. Jeff Bezos, CEO of Amazon, is one of the world’s most well-known angel investors, having invested in companies such as Google and Uber.
Angel investors are often high-net-worth individuals that provide funding for startups or early-stage firms. Many are accredited investors having a minimum net worth of $1 million or an annual income of at least $200,000. Angel investments range from hundreds to millions of dollars, depending on the size of the firm and the amount of ownership sold.
Seed funding refers to the first round of tiny, early-stage investment from family members, friends, banks, or an investor.
Funding is a sort of equity-based capital. In other words, investors put their money up in return for a share in a firm. In general, this is done in a less formal manner than other types of equity-based financing, such as venture capital.
Seed cash is largely utilised to fund the operations of the initial company. Seed funding, for example, might be used to fund market research or the first stages of product development (such as the building of a prototype), as well as vital running expenditures like as legal fees.
Typically, funds are raised through family members, friends, or angel investors. Angel investors are the most important actors in startup financing since they can give significant funds.
When a tiny, failing business is acquired purely for its employees. It’s similar to obtaining the intellectual capital of a pre-assembled, brilliant team. According to a CBInsights acqui-hire analysis, between 2012 and 2013, 60% of all acqui-hired IT businesses were internet companies, with 38% being mobile.
The cost of an acqui-hire is typically determined by the buyer on a per-head basis. That is, the corporation pays a predetermined sum for each new employee hired. The typical charge is at least a few hundred thousand dollars per individual, and occasionally as much as $2 million.
The acqui-hire deal combines intellectual property assignments, the transfer of different online assets, and an employment agreement:
The manner in which you want to make money from your organisation. It’s another method of thinking about your company’s future ambitions. You can either sell it, get purchased (or acqui-hire), combine with another firm, go public, or fully dissolve the business. Having this answer now will keep you one step ahead of the game.
An exit strategy is a contingency plan implemented by an investor, trader, venture capitalist, or business owner to liquidate a stake in a financial asset or dispose of tangible business assets if preset conditions for either are reached or surpassed.
To accomplish a successful “exit,” the venture capital firm expects that the business will either: a) go public or b) be bought by another firm. Assume that the startup gets purchased by another company for $800 million.
Startup incubators are organisations that provide coaching and investment to selected entrepreneurs and/or their businesses. In exchange, the incubator receives a part in the firm. Incubators, which are becoming increasingly popular and competitive in the IT industry, have been dubbed the “new business schools.”
Incubators are organisations, platforms, or teams of experienced professionals who assist businesses in their early phases by providing mentorship, coaching, co-working space, and, on occasion, finance. Incubators have always been the first port of contact for each aspiring entrepreneur.
Most startup incubators operate in a similar manner, taking between 4 and 9 percent ownership.