15 Business Terms and Glossary Every Startup Businessman and Entrepreneur Must know
Terms you have to know when navigating your way in the business world regarding investments, product management, and business development.
Overview
To be a true professional, you need not only to walk the walk, but also to talk the talk.
Whether you are just starting your entrepreneurial life or a true veteran who always heard a couple of heavily used namedropped phrases and, for some ought reason, was too afraid to ask, we have compiled a glossary of business terms every startup entrepreneur has to know.
Investments
1. VC - Venture Capital
Firms that are focused on investing in companies and products according to their investors' wishes and portfolios.
These VCs are the main source of funding for medium to large companies before the IPO and after the Angel phase.
When investing in a company, VCs often take a certain percentage of the company's holdings and become a major player in its decision-making process when molding its vision.
2. Angel – Private Funding
Angels are private investors that usually invest in early fundraising stages – Pre-seed and Seed rounds.
These angels tend to invest, at most, several hundred thousands of dollars. This amount is adequate for the early stages in a startups' life.
3. ROI - Return On Investment
A phrase often used regarding an investors' point of view before deciding on whether to invest in a certain project or not.
The investor, may it be a private Angel or a large Venture Capital firm (VC), is looking at several calculations so that he can understand whether he should risk his money on your project or not, and at what size and terms.
The ROI factor is the basis behind investments. If the investor does not see potential, does not see a viable product or paying clients (in some fields), or generally speaking, does not believe that he will get his money's worth, he will think twice before investing in your company.
4. FFF / 3F's – Friends Family and Fools
When starting your startup adventure, you will need to raise funds quickly since launching a business can be pricy.
The first and most accessible source of funds is your immediate surroundings – your friends and family.
The third F is the "Fools" – the people that you managed to win over somehow without any business plan or anything a professional investor would have put his money in at that stage.
This source of funds can be problematic. On the one hand, it is, as stated above, it is the most accessible one. On the other hand, you may have irrelevant considerations and influences when making business-related decisions just because you will have a closer sense of responsibility for your friends' and family's funds.
5. Bootstrap
A startup business that is financially based solely on the founders' funding.
This is more common in companies where the products do not require a lot of R&D. Bootstrap is also common in companies where their founders can create most of the features, both technological and business, by themselves.
The obvious disadvantage is that the founders risk their own savings on the company. The advantage is that the company can evolve quickly in direct compliance with the founders' wishes and vision without any investor influence in the decision-making process.
Product
6. Product Market Fit
The match between your product and the needs of your target audience.
After doing your market research, you must analyze and determine who your target audience is. The next step is to understand and pinpoint your target audience's pain points. When creating your product, you must address these pain points in the best possible manner to achieve proper Product Market Fit.
7. Pain Point
When doing your market research, you have one goal and one goal only.
To discover your target audiences' pain point.
The pain point is what is bothering them. Not just bothering. Annoys them to the brink of being frustrated and exhausted. Once you discover this, you will develop a product that solves this, thus making it essential for your client and will leave them thinking of how they managed to live without your product beforehand.
Just think of a life without Waze or Google Maps. Crazy, right?
8. UX/UI – User Experience / User Interface
These two terms are different in essence but are often discussed together.
UX refers to the entire user experience from the moment he reaches your platform or product. The experience refers to the ease of navigation, product comprehension, and at the end – whether the use of the product actually helps him solve his "pain point."
User Interface is the actual product design, whether it be the user dashboard, visual design, the color of the buttons, or anything else that the user interacts with.
Think of it this way, the Ferrari Testarossas' chassis, its wheels, its motor are the UI. The history, the look, and feel, the feeling that that motor gives you when starting it, is the UX.
9. MVP -Minimal Viable Product
Since startup companies usually have a small team, a lot of passion, and not many resources, they must take this to their advantage.
Thus, speed is of the essence.
After doing their market research and realizing what "pain" their product is supposed to solve, a company must release a product that has a minimal number of features as soon as possible.
Why? Just think that the company invested and basically wasted 90% of its funding on making the perfect product with the best UX/UI just to find out that their market does not even care about most of the features.
The best solution is to launch an MVP and use their target audience for A/B testing and iteration to get the most out of their product.
Business Development
10. Pivot
A term that addresses a situation in which a company makes a rudimentary shift in its policy, product, or any crucial factor of its identity.
This is done often due to many factors, such as:
- Bad market fit – not addressing your target audience properly
- Personnel changes – sometimes team members and partners change due to various reasons
- Outside influence – a change in the company's vision due to a new investor or board member
- Various other monumental reasons
11. POC – Proof Of Concept
Proof Of Concept is the ability to show the interest of a potential client in your product.
In certain fields, before selling your product, it is crucial to have a POC to attract investments or show that your product has enough demand.
For example, a POC can be a client that has gotten a demo of your product and has started using it in a controlled manner.
12. B2B – Business to Business
A product or service that is directed at businesses. This includes enterprise software, business marketing, and many more.
Most VC investments are B2B due to the higher profit margins and reduced amount of unknown variables (market movement and behavior) than B2C.
B2B investments usually require a strong POC before the major investment rounds (A round +).
For example, CISCO server software is aimed at enterprise server network hardware.
13. B2C – Business to Consumer
Selling a product that is aimed at the consumer market. More often, these kinds of products will be marketed through social media and networks that are more exposed to a vast audience.
Propper market research, Product Market Fit, launching an MVP quickly, and implementing good A/B testing are crucial for a B2C product's success.
For example, Waze navigation software.
14. KPI – Key Performance Indicators
KPIs are the standards and goals that are set in each specific field to measure success.
KPIs vary between different fields of business. For example, if your startup is focused on marketing, you might set a KPI of the number of impressions. If your business is focused on B2B, you might set a KPI as the number of POC.
15. A/B testing
As we stated, when we spoke of launching an MVP, reaching your Product Market Fit is crucial if you want to address your audience's true Pain Point. This is done through the aid of what is called A/B testing.
Since there is no way to understand your audience's true desires and likings by pure guesstimates, you must try and iterate until you reach that sweet spot (which is never-ending since the business world is constantly changing).
This is done through launching and testing several versions of the same product with minor or isolated changes. For example, different positioning or coloring of Call To Action (CTA) buttons in your product's landing page.
By analyzing the data from the tests, you will make changes accordingly and improve your results.
Conclusion
The terms listed above are only a small portion of the business lingo often used in the startup world.
It is important to familiarize yourself with the terms and how they are used in your business, whether in the product end, the financial side, or marketing.
Read books, listen to podcasts, go to lectures and meetups, and sooner than you know it, you’ll be swimming in relevant knowledge that will assist in your entrepreneurial journey.
*Background Photo by Austin Distel on Unsplash
