Think you’ve got the next big idea? Great!- Capitalism Terms
Now it’s time to prove it. And here’s the catch: to get there, you’re going to need some capital, and if you’re an entrepreneur, you’ll have to prove to potential investors that you’re more than just an idea.
But to do that, you need to know some of the jargon that investors use. Read on to learn the terms you should familiarize yourself with when looking to pitch your startup.
Seed Funding
Seed funding is a vital part of the startup process, providing the financial resources necessary to get a business off the ground. It can cover costs such as research and development, marketing, and hiring new employees.
Angel Investor
An angel investor is a wealthy individual who invests their funds in promising startups and new businesses.
They are typically motivated by high returns. They can play an essential role in the startup process by providing early investments in a company. Sites like this one offer personal profiles of notable investors.
Bootstrapping
Bootstrapping is the process of starting a business without outside funding or loans. Companies that choose to bootstrap often do so because they keep the employee salaries and overhead costs low during the first phases of the business to minimize overhead costs and maximize profit margins.
Series A Funding
Series A funding is the next stage in the startup process when a business raises venture capital to build on its first success. The company will typically generate enough revenue to sustain itself at this stage but may lack the funds to expand and develop further.
Venture Capitalist- Capitalism Terms
A venture capitalist is an individual who invests their funds in promising startups and new businesses in the hope of a notable return on their initial investment. Note that venture capitalists typically invest at the seed funding stage.
They usually invest considerable money in a startup, making their involvement highly significant.
Accelerator- Capitalism Terms
Accelerator programs aim to boost the rate at which startups gain traction in the marketplace by raising their profile and providing essential business and networking connections.
Board Of Directors- Capitalism Terms
Board members are members of a board responsible for setting overall policy for an organization and ensuring that the company conforms to established practices. The board of directors consists primarily of investors with financial expertise and industry experience in startups.
Key Performance Indicator (KPI)
Key performance indicators are metrics used to measure the success of a company and the effectiveness of its management team.
KPIs vary based on the company’s industry and include metrics like average revenue per customer or the number of new customers acquired each month.
When setting goals and evaluating their success, KPIs are crucial for management.
Venture Capital (VC)
Venture capital (VC) is money provided by an investor who looks to see a return on their investment in a startup or early-stage company. Some venture capitalists prefer to participate in the seed funding stage.
In contrast, others prefer to wait until the company has developed a product and is ready to grow before beginning to invest.
Bridge Loan
A bridge loan is a short-term loan used to help a startup or early-stage company through a difficult time while they try to secure long-term financing.
Debt Financing
Debt financing is money borrowed from a lender by the business in exchange for a fixed interest and repayment schedule. Business loans are the most common form of debt financing.
Due Diligence
Due diligence is the research buyers conduct on a potential investment or acquisition, including everything from initial interviews to financial and legal analysis to on-site inspections.
This is a crucial part of the startup process because it allows investors to make informed decisions about the potential success of a business before they invest money.
Exit Strategy
An exit strategy is a plan a business uses to sell or dispose of an asset, enterprise, or investment. An exit strategy is typically planned for early in the business lifecycle and can involve everything from an eventual IPO to a merger or acquisition with another company. Incubator
Conclusion
We’ve only scratched the surface here, but hopefully, that’s enough to give you an idea of what goes into starting a new business.
As you progress through the startup process, you will need to understand more and more jargon like this when raising money and convincing investors that you’re a good investment.
