Startup Life/How To/ Sifted’s Startup Dictionary It’s time for an open-door policy on the ever-growing lingo of the startup ecosystem. If you don’t know your VC from your VR: this one’s for you By Sifted reporters 2 May 2022 \Startup Life How to keep the cofounder spark alive By Jing Ouyang 22 February 2023 Startup Life/How To/ Sifted’s Startup Dictionary It’s time for an open-door policy on the ever-growing lingo of the startup ecosystem. If you don’t know your VC from your VR: this one’s for you By Sifted reporters 2 May 2022 The world of startupland and venture capital: intuitive to some, but a place of mystery to outsiders and newcomers. We know jargon can be baffling — and we want startups, and Sifted reporting, to be accessible to everyone regardless of industry or background. It’s time for an open-door policy on the ever-growing lingo of the startup ecosystem. So we’ve decoded even the most confusing of startup terminology. If you don’t know your VCs from your LPs, your VR from your AR, or if talk of the metaverse, intrapreneurship or acqui-hires goes straight over your head: this one’s for you. Here’s the Sifted glossary of every term founders and operators need to know. Sectors Biotech Biotech refers to the marriage of biology and engineering to create new products and services, from genetics to protein manufacturing, longevity to neurobiology. Biotechnology is a part of healthtech but also includes many other non-health innovations, such as lab-grown meat and materials science. Deeptech An umbrella term for innovative technologies based on scientific breakthroughs, like the development of quantum computers, robotics and artificial intelligence. Deeptech companies can be harder to scale than, for example, a software company or a gig economy startup, because there is not yet a clear market for their products, and they usually need a lot of money upfront for development with very long waits for potential market application. Edtech Edtech, short for “education technology”, refers to startups working on technological innovations for learning and teaching. That can mean tech to change the way people learn at school or university, or for upskilling employees in the workplace. Fintech Fintech is a catch-all term for any business that uses technology to provide financial services — usually with the aim of speeding them up, making things easier, or automating them. This can range from neobanks like Revolut and Starling, which have challenged traditional banks by offering customers services such as money transfer and deposits, to spend management fintechs like Spendesk, which aims to make corporate spend management easier for companies and employees. 📥 Want a regular download on neobanks, BNPL and everything in between? Get our Fintech newsletter every Tuesday— you can sign up here. Gaming Gaming startups include both games developers and providers of games infrastructure. That could mean anything from supplying cloud streaming services, to coming up with new ways for gamers to socialise. Gaming is also often seen as a stepping stone to the metaverse, as people become accustomed to interacting in virtual worlds. There is also a growing strand of cryptocurrency-backed games, where gamers can earn cryptocurrency from playing games or from creating them, such as Accel-backed Sky Mavis’s Axie Infinity. Greentech Greentech, also known as sustainability tech, refers to any type of technology that mitigates or reverses the effects of human activity on the environment. The definitions of different subsectors are still being hammered out, but related areas include cleantech, which aims to reduce environmental impact and create greater efficiencies, and climate tech, which creates solutions to reduce greenhouse gas emissions. 📥 Every Thursday, Sustain brings you the biggest stories in climate tech, from gigafactories to ESGs — you can sign up here. Healthtech Healthtech uses tech to solve issues in the healthcare market. This includes digital health, telemedicine, femtech, medical devices and software as well as some biotechnology that is specifically focused on health, like longevity and neurobiology. In a broader sense, it can also include medtech — aka, technology designed to help medical professionals with their work. Micromobility Micromobility is focused on all the smaller, more lightweight modes of transport which usually operate at slower speeds. These include, but are not limited to: escooters, ebikes, bicycles, electric skateboards and shared bikes. Startups also often develop platforms to make renting and sharing them cheaper and easier. SaaS SaaS stands for “software as a service”. It refers to software systems, which are centrally hosted by the company that sells it and then sold to others, usually on a subscription basis — so companies that buy the software don’t need to manage the infrastructure themselves. Usually, the software is being sold from one company to another company, rather than directly to a consumer, making it a B2B (business to business) SaaS. Venture capital and investing Acceleration Acceleration — or accelerated vesting — is when a startup employee’s vesting schedule is sped up — meaning they are eligible to receive more of their equity sooner. Acquisition When one company buys another company — usually a bigger company buying a smaller company. The smaller company becomes part of the bigger company and ceases to exist as an entity, though what happens to the staff can vary — some companies will keep the teams intact, others will integrate them into the rest of the business and some will make layoffs while keeping the product. Acqui-hire When one company buys another company to acquire talent in the second company. In other words, the acquirer isn’t so interested in the intellectual property or business of the target, but in bringing talented employees onto their team. Can be especially relevant in tech when fast-growing tech companies acquire other companies to quickly scale up a certain function, such as software development. Angel investor A high-net-worth individual investing in a personal capacity. Also likely to be your first source of external funding after friends and family (if you’re lucky to have rich — and possibly foolish — enough friends). Former founders who have sold their business often turn to angel investing with the money they made from the sale, creating what’s called a flywheel effect in a local startup ecosystem. Bootstrapping Bootstrapping means starting your business and building it using your own money, managing day-to-day life from the operating cash flow. The advantage to bootstrapping over raising from venture capitalists is that you don’t have to raise money from outside investors and give away ownership in the company in return for giving them a stake in the business. Burn rate The burn rate is literally that — the rate at which a startup burns through the VC cash it’s raised — so, it’s essentially a measure of negative cash flow. You’ll usually see it quoted in terms of monthly startup spending. Cap table A capitalisation table (frequently abbreviated to cap table) is the document detailing the breakdown of the company’s ownership structure and current valuation. They can become extremely complicated. Make sure you have one written down (your VCs will expect this)! Cliff Employee or founder equity options often have a so-called cliff, which means that they cannot be converted into shares for a set period of time. So, for example, an employee might get 100 share options over four years. They might also have a one-year cliff, meaning that none of the options will vest (be given over to them) until the employee has been working for 12 months. Often used to ensure early-stage employees don’t gain access to all of their agreed equity immediately upon starting, in case they leave after a short period of time. In the case of founders, the cliff is used to ensure they earn their equity back and stay focused after a fundraise (or so say VCs). Crowdfunding Crowdfunding is where early-stage startups raise money from the public. It means thousands of “everyday” investors coming together to write small cheques to support companies. It’s usually done via online platforms, like Seedrs and Crowdcube. Direct listing A direct listing is when a company directly offers their shares to the public on a stock exchange without using intermediaries (banks) to facilitate the listing process. No new shares are created, versus a traditional initial public offering (IPO) when new shares are created and underwritten by banks. The most prominent example of a European tech company using a direct listing was Spotify’s 2018 direct listing on the NYSE. For a great overview of why Spotify took this decision, read here. Equity Equity refers to shares in a company. These can be held by founders, investors in a company, and also a company’s employees. It’s commonplace for startups to offer equity, or ‘stock options’ to employees, though some are much more generous than others. Exit Often referred to as a liquidity event or payday, this is when the investment is sold, turning an equity stake into cash. It normally happens either when a startup goes from being a private company to a public one, through an IPO or SPAC, or by being acquired by another company. Exit can also refer to when a founder sells their shares in the company, to exit as an individual. Gross margin A metric used to measure a company’s profitability — i.e., the percentage of revenue left over when costs are accounted for. It’s calculated by taking away the costs of goods sold (COGS) from your net sales revenue, dividing by the revenue and multiplying by 100. Gross margin is a key metric for working out your startup’s break-even point and how efficient the business model is. Impact investing Impact investing relates to any investment which intends to generate a positive social or environmental impact (alongside a financial return). There are a plethora of ways to benchmark the impact of an investment; one of the commonly used frameworks is the 17 UN Sustainable Development Goals (SDGs). IPO (initial public offering) Graduation — once this happens you’re officially no longer a startup! Your initial public offering turns your private venture into one listed on a stock exchange, where shares can be publicly traded by anyone. This step entails greater market scrutiny as well as regulatory obligations. LP (limited partner) The investors who supply venture capital firms with money to invest. They can be governments, pension funds, family offices, sovereign wealth funds or really wealthy individuals. Merger Two companies of a similar size decide to merge into a new company. Can result in a completely new company. They follow a similar process to acquisitions, so are often lumped in together under M&A — mergers and acquisitions. MRR/ARR MRR refers to monthly recurring revenue — i.e., the amount going into the business each month from its subscribed customers. ARR is annual recurring revenue. A metric usually tracked by SaaS (software as a service) companies because subscription businesses mean recurring revenue. Portfolio An investor’s portfolio refers to the businesses that it has invested in. You might hear the word in the context of VCs or angel investors describing a startup they’ve invested in as one of their “portfolio companies.” Pre-seed and seed Often the first institutional money that goes into a startup after the founders have exhausted their friends, family and personal savings. These rounds can be provided by angel investors and sometimes institutional investors (seed funds). Pro-rata rights Pro-rata rights give investors the right to maintain their ownership percentage in later financing rounds. It’s great for investors because it guarantees them a seat at the table in later rounds, but it can be tricky for entrepreneurs. Giving pro-rata rights to future investors can shut out good investors from future rounds, or founders can be forced to give up some of their share in the startup in order to fulfil the ownership requirements of previous investors. Fred Wilson of Union Square Ventures has a good overview here. Series A, B, C etc. A Series A is the first large round of money raised after a seed round, usually once the startup has demonstrated real potential through product/market fit. Series B, C and so on describe subsequent rounds. SPAC SPAC stands for ‘Special Purpose Acquisition Company’, and they became pretty popular in 2020 and 2021 among tech companies aiming to IPO quickly with minimal regulatory hassles. A SPAC is a company that’s listed on a stock exchange and is loaded with money raised from investors so as to acquire a target that isn’t yet public. So when media say a tech company does a SPAC, they’re usually referring to the process of this listed company buying a private tech company or startup and taking it public. Sweat equity When founders don’t have a lot of cash but need help getting things off the ground, they sometimes choose to offer shares (equity) to employees in exchange for their hard work and time — instead of a salary. This doesn’t drain their cash flow as much as conventional salaries do, but it’s a controversial tactic. Term sheet The document outlining the key terms of a proposed investment, and will likely refer to the cap table, anti-dilution, liquidation preference, pre/post-money valuations, etc. A signed term sheet does not constitute an investment, but rather outlines how to proceed should both parties agree on the terms. Valuation A company’s valuation indicates its current worth and is calculated as the number of outstanding shares multiplied by the share price. For private companies, like many startups, the number of shares and their value can be closely guarded secrets. Vesting The rate at which equity is earned, for example in a vesting schedule of four years, each year will earn 25% of the total amount. Usually subject to a cliff — see above. VC Stands for venture capital — AKA the people who fund startups in exchange for equity — or venture capital. VC is different from other capital sources available to new companies, like loans, because startups don’t pay it back. It is generally seen as a good fit for fast-growing businesses (or at least those that hope to grow fast) with the potential to become seriously valuable in a short period of time. VCs (the people) usually offer their expertise alongside their capital — not that startups always want it. Venture partner A venture partner is someone who is usually not a full-time member of the investment team at a VC and works with a limited scope. They can be full or part-time, and might assist the VC with anything from sourcing deals or LPs, or working directly with portfolio companies post-investment. For the entrepreneurs… Accelerator An accelerator is an organisation that plans cohort-based programmes for startups to gain access to capital, mentors and a network of others in the ecosystem — most importantly, investors! The world’s most famous accelerator is Y Combinator. Beta release A beta release is part of software and product development cycle for startups. The beta release is not the final version of the software or product — and often has some issues that the developers hope will be found by the first batch of users. It can be an open beta – released to the entire public – or a closed beta – released only to a selected group of users. Cockroach Being a successful company isn’t all about hitting sky-high valuations, it’s also about survival. That’s exactly what a cockroach is: a company that is optimised for sustainable, steady growth. The term was coined by 500 Startups founder Dave McClure in 2013. Common characteristics of a cockroach include preserving resources, reducing costs to optimise profits and hiring just a few people in the team. Decacorn A unicorn on steroids. This is when a company hits a valuation of $10bn+. Early adopters Early adopters are the people who use a startup’s product or service first (or early in a startup’s journey). This group of users start using the product during the beta release and are usually more tech-savvy than later users. They are the ones that a company hopes will give the feedback on the product and will also give a first idea of whether the product will be successful or not. Founder A founder is someone who has founded a startup — potentially solo, or as a cofounder. Friends and family round A type of early-stage investment given to startup founders from close friends, family or peers who believe in their idea. Friends and family rounds usually occur at the very start of an entrepreneur’s journey to help get the business off the ground. Gigacorn A sustainable twist on the unicorn. Gigacorns are a theoretical group of companies that could each remove one gigatonne (one billion tonnes) of CO₂ from the atmosphere per year — that’s more than produced by all flights in 2019 (before the pandemic). No business has got there yet! Go to market (GTM) Go to market strategy is the plan for the company to release its product to the market successfully. It can include a number of different steps but the main things are to find market-fit with customers, develop a marketing strategy and position the product against competitors. Iteration Iteration means making minor changes to a startup’s business model based on the results of testing its product or service, aiming to refine it continually. Launch A launch is when a company makes access available to its product or website — essentially, kicking off the public-facing section of the business. MVP (minimum viable product) A startup’s minimal viable product (MVP) is usually an early version of its product, minus any bells and whistles — enough features to be usable. Developers and teams can release an MVP to get feedback from customers and get an early product to the market quickly so they can start getting feedback and iterating (see above). Pitch deck A pitch deck is a presentation that founders create to explain to investors the purpose of their startup, the problem they are trying to solve, how far along they are and what they see as their potential growth within five to ten years. It usually includes information on the key people on the team and what their strengths are. Pivot When a startup changes its business model or strategy from its original plan. It can be in response to market changes (i.e. a travel company that “pivoted” when flights and people were grounded during Covid-19) or if they struggle to find product-market fit for their original idea (i.e. a startup selling to one segment finds that is not their core customer, and pivots to sell to another type of customer). Soonicorn Companies which haven’t yet hit that seven-figure valuation, but aren’t far from touching the $1bn milestone. Generally, a soonicorn is a high-growth company with a valuation of $400m+, and will likely hit the $1bn valuation mark within 24 months. TAM A startup’s total addressable market, often shortened to TAM and occasionally also called total available market, refers to the total market demand — and therefore total revenue opportunity — for a product or service that a startup offers. Unicorn NOT a mythical creature in the tech world (we wish). A unicorn is a private company that is valued by its investors at over $1bn. There are many ways in which companies can calculate their value. Zebra Much like the gigacorn, zebras act as a greener sibling to the unicorn. 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