Vital Startup Lingo for Brand-New Entrepreneurs
Every industry has certain buzzwords that only insiders know. If you want to know what you're talking about in the startup world, you need to be lingo-saavy.
We talked to a few big players about the terms one absolutely has to know to be taken seriously. Here are the most crucial of them:
Kendall Herbst, CEO and founder of fashion startup StyleUp, defines vesting as "the structure and pace by which someone earns shares of your company."
In most start-ups, vesting occurs over four years. That means that employee who only stay with a company for two years would only receive 50% of their stock options.
Many companies include vesting provisions for founders as well. When a company first starts, founders will buy their shares for tax purposes. However, in case one of the founders doesn't stick with the company, the company purchases a percentage of that founder's equity. Vesting is a form of protection for the company and ensures that everyone has the same goal of making the company work (not just running off with all the money).
LP stands for Limited Partner — as in limited partners of your venture capital fund — which means they generally do not have management responsibility in the partnership in which they invest. They and are not responsible for any debt that occurs. Kathryn Minshew, CEO and founder of the Muse, maintains this is a super important one to know.
3. Scope Creep
You know when a project starts, and at first it seems like it will be super simple and easy to execute? But then, as time goes on, it keeps growing and becomes the Mount Everest of projects? Scope creep refers to additional features that expand the size of a project beyond what was originally planned.
4. Lifestyle Business
Herbst said this is the term investors sometimes use to refer to a business that can't grow to make billions. So, pretty much, this defines a lot of companies first starting out. This is not to be confused with lifestyle entrepreneur, which is a business owner who prioritizes lifestyle benefits over profits.
Minshew says this is when a startup is acquired for its talent, not so much its monetary value (not one of those billion-dollar deals you hear about like when Facebook acquired "WhatsApp.")
The above tweet is acquihire being used by VC Bryce Roberts.
Herbst named this one as a major term to know. "Runway refers to how much time the cash you have in the bank translates into based on your burn rate," she said. It is the amount of time or money with which a company can operate in the red. For example, if a firm that's not generating revenue is burning $20,000 per month and has $100,000 in the bank, it has a "runway" of five months.
Ryan Rockefeller, co-founder and CEO of social media app "Radeeus," said wireframe is a terms that makes you sound like you know what you're doing. The wireframe describes the layout of content on a website, out outlines how all the different elements of a page work together.
Here's how graphic designer and blogger James Greig uses it in a sentence: "In most places the UX guys are the ones sitting in the corner not speaking to anyone else whilst drawing up wireframes that no-one else pays any attention to."
Anyone who works in a startup knows that sometimes you have to share super important, confidential information with contractors or people looking at your company. The formal definition of a non-disclosure agreement is a contract between two or more parties that deals with the exchange and handling of non-public information. Founders should use an NDA before disclosing or receiving any sensitive information that could hurt the company if it was leaked. NDAs usually center around certain competitive advantages, upcoming business opportunities and intellectual property.
9. Sweat Equity
Becca Brown, co-founder of Solemates, defines this as a term used to describe the time, effort and work that is invested in a startup usually by the founders or startup team. It is used to distinguish between equity granted for cash investments versus equity granted for work/effort investments.