Startup Terminology to prepare you for the Startup Scene
If you want to start your own business, there are a few important words which you should know the meaning of.
The ambition for entrepreneurs to start their own business has never been so widely spread all over the world than it is at the moment. To get into the startup scene, one of the first things you need to do is to build up your network. For this, it is extremely important to know what you are talking about and to understand what other entrepreneurs are saying. That being said, you should know the meaning of basic startup terminology and be able to speak the “startup language”. Although the startup language changes as the scene grows, the following words are basic and therefore stay the same. A startup will stay a startup and an investor will stay an investor.
So put on your startup cap and let us get started with the startup terminology every entrepreneur should know!
A startup is a business in the first phase of its business growth. Startups are created by entrepreneurs wanting to develop a product or service which they think is needed in society and which can make a difference in people’s lives. A business is referred to being a startup when it is still in the developing phase of the first 7-10 years.
This is the start phase of the business development before the startup is publicly a reality. This is when an entrepreneur has a business idea and works on making it a reality. Now is the time to start working on a concept. In this phase, a business is also searching for seed capital in order to find funding to start creating a business or a new product.
After the entrepreneur has worked through their business idea and is satisfied that the idea could be successful, it is now the time to launch the startup business. This is known as the riskiest phase of developing a startup, since mistakes made in this specific phase may have a big influence on the business growth in the future. Due to mistakes in this phase, 25% of startups do not make it into the fifth year of business.
A business moves into the “growth phase” once it is no longer classified as a “startup”. In this phase, a business experiences an increase in competition for market share. The business should be able to produce a dependable source of income as well as show growth with new incoming customers. The profit made in this phase should improve gradually in order to cover ongoing expenses in the business.
In the expansion phase, a business starts expanding its limits by creating new offers and business layouts. In this phase, big growth in income and cash flow is recognised. It is important for business owners to stay realistic and always consult experts when they work on expanding their business. This way the current quality of the product or service would still draw the correct audience instead of chasing them away.
An incubator provides the necessary support to young businesses. This is usually done by offering a workspace, shared office and services, management training, marketing support and sometimes contact to some form of financing. An incubator is frequently sponsored by private companies or municipal entities and public institutions.
This is a program which allows developing businesses to have access to mentorship, investors and other support that help them become stable and independent businesses. These businesses are often startups which are moving into the “growth phase”. This means that the businesses are now independent but still need some direction and management support in order to grow more and better. An accelerator offers access to capital and investment in return for startup equity.
A business angel refers to a person who provides money for the development of a business. This person usually has a lot of money and their goal is investing their money in developing businesses, to help entrepreneurs succeed with a business idea.
An investor is a person who provides money to a business with the expectancy of getting financial returns which makes them differ from business angels. Different methods of investments are used in order for investors to achieve important financial purposes. For example, saving up for their retirement, for education purposes, or just to earn extra money over time.
Foreign subsidiary company
This is a company which is either partially or solely part of a larger business with headquarters in another country. These types of businesses are incorporated under the laws of the country it is located in.
This is a form of financing provided by investors (venture capitalist (VC)) to startups that are thought to have the potential of future business growth. This kind of capital is usually provided by wealthy investors, investment banks or other financial organisations. Venture capital investments are usually high risk, but offer the potential for above-average returns.
Keywords: Startup, startup terminology, startup scene, entrepreneur, business
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