Are you a startup founder or part of a software as a service (SaaS) company? If so, you know that there is an ever-growing list of specialized terms and jargon to learn and keep up with! With the business world becoming more competitive, having a strong understanding of key concepts in your industry can give you the edge when it comes to strategic planning.
To help simplify some of these complex topics, we've put together this comprehensive Startup Words Dictionary: The Most Important Startup Terms Explained. In this guide, we'll explore different terminology used in the startup world, from funding to management strategies--so whether you're just about dip your toes into entrepreneurship or have been running a business for years--we've got something for everyone. Let's get started!
An attribution model is a rule or combination of parameters that define how to attribute conversions (sales) to a user's contact points. For example, if a user reads an email and then searches online for a brand before buying, is the email responsible for the sale or the website? Attribution modeling tries to answers these questions but is far from 100% accurate.
Conversion rate optimization (CRO) is a systematic process of improving a website or app iteratively to increase the percentage of users who complete desirable actions like purchase, registration or lead submission. It often goes hand in hand with doing a UX audit and improving the UI/UX design of the product based on the findings of the audit.
Simply put, convertible notes (CN) are a type of debt financing that converts into shares. When using a convertible note to raise initial funds, the debt is automatically converted into equity at the closing of the Series A round. Convertible investor bonds are converted into equity on pre-agreed terms, rather than loans from creditors accruing interest.
CAC is one of the most important metrics in the unit economy of a startup and allows a company to keep track of how much it costs to acquire a new customer. Calculated as direct acquisition costs (usually marketing and sales costs) divided by the number of new customers, CAC allows startups to understand which channels offer the best ROI on marketing spend.
Dilution occurs when a startup issues new shares, which reduces the ownership percentage of its current shareholders. Think of it as a cake, the more people want a piece, the more pieces you need and the smaller the pieces have to be. So, as the number of available shares increases, for example during a financing cycle, each current shareholder owns a lower or reduced percentage of the company and reduces the value of each share.But the the overall value of the cake might increase massively due to higher valuation as more investors join making even small ownership percentages very valuable for its shareholders.
When starting a new business or releasing a new product, the lean startup methodology is used to rapidly and efficiently validate a business proposition.
The process of employing software to automate marketing tasks is known as marketing automation. Automation, which is most typically used for email, is simply the usage of triggers to initiate certain tasks. When a person signs up for a newsletter, for example, they will receive an automated welcome email.
Any competitive advantage that a startup has over competitors that makes the business model "defensible" is referred to as a moat or economic moat. Potential competitors will face a significant barrier to the entrance in the future, and existing competitors will be unable to copy your business model.
Private equity (PE) is considered an alternative form of investment and is also known as equity capital. This involves equity investments in companies that do not want to or cannot finance themselves via the stock exchange, but they may nevertheless be listed on a stock exchange. Private equity can offer much better returns compared to public stock markets.
Product marketing is the process of bringing a product to market. It is a subset of marketing. With the goal of raising demand, this includes determining the product's positioning and message, launch strategy, and ensuring potential consumers understand the value of the product feature set.
The first recognized stage of equity fundraising is seed capital. It is usually the first round of institutional funding that a business receives. Seed funding is a specialty of some VCs or Angel investors, who typically demand a bigger equity position to compensate for the heightened risk of early-stage enterprises.