Glossary

a

Start-ups often show two different versions of the same website, or product, to their users and track which one performs better. A/B represents the version A and version B that are tested with users.

I wasn’t sure which landing page would help me gather more email addresses, so I conducted some A/B testing to find out.

The part of a website that is visible when the page first loads. Anything you are required to scroll down to see is considered "below the fold."

I put the information about our Black-Friday sale above the fold so that it is the first thing people see when they come to our e-commerce store.

Accelerators are programs in which startup founders have access to cash, mentors, and office space. In exchange, the accelerator is given partial ownership of your company. The accelerator gets a much larger stake than their investment amount would imply, because they add so much more value than just money. While an accelerator resembles an incubator in many ways, accelerators place more emphasis on fast growth in a set period of time than incubators do.

We have been getting great traction with the restaurant reservation app we built, so we applied to an accelerator to help scale the business over the next three months.

An accountant is slightly more sophisticated than a book-keeper, and in addition to tracking daily expenses of a company, an accountant can prepare annual financial statements and tax returns. Professional accounts get certified as CPA's (Certified Public Accountants) by passing certain regulatory exams. Accountants tell stories from your financials, help you follow local tax laws, and hopefully get you optimal tax breaks in ethical ways. You need an accountant to prepare your books in case you are audited, or reviewed, by an independent agency or government.

I hired an accountant to help me get the most tax-deductions possible.

A sponsored editorial post. A brand, such as Folgers, may pay you advertising money to create a piece of editorial content about your morning coffee ritual. Since this content can be read by users and potentially enjoyed as much as a normal post, advertorials are thought to be less disruptive than traditional banner ads.

Instead of placing banner ads on my site and potentially harming the user experience, I prefer to make money off of advertorials.

Anyone who provides advice, input or feedback to your business. Start-ups often formalize advisor relationships by giving the advisor 0.1%-2% (0.25% is standard) equity, signing an advisor agreement, and defining what the advisors obligations are. These obligations can range anywhere from making introductions, to monthly/weekly meetings, publicity, or expert advice. The more value an advisor will bring to your business the more equity you should give them.

I had no idea how to navigate the natural foods industry, so I brought on an advisor to show us the ropes.

Anything that is somehow associated or attached to your business. Affiliate marketing is a form of performance-based marketing that rewards your business for direct referrals that lead to purchases. Bloggers often use affiliate links to earn commission from reader purchases.

I don't want to place ads on my site, so I make all of my money from affiliate revenue.

Alexa.com is a website used to track traffic and data for other websites. Alexa also ranks websites by popularity. This information can be used for leverage in business development deals and for advertising sales.

My Alexa ranking is so high, I could probably charge a lot of money for that banner ad.

The amount of return on an investment in excess of general market performance. If a company in the beauty industry returns 50% on investment, and the beauty industry in general performs at 20% return on investment that year, then (50%-20%)=30% is considered Alpha, or attributable to the individual company's performance. In the start-up world, Alpha can also refer to the very first version of a company, or a prototype, that precedes Beta.

I just built a prototype for my manicures-on-demand app. I have not even onboarded manicurists yet, so the app is still in Alpha.

An accounting practice of decreasing the value of an asset you cannot see or feel over a period of time. This allows you to spread out its cost, at least on paper, over the course of its life.

The book value of my $5 million, 5-year loan is only $4 million after the first year due to a $1 million amortization expense.

A wealthy individual who invests in early stage businesses. As opposed to Venture Capitalists, Angels typically invest their own money (not other people's money), have an extremely high risk tolerance, and can make decisions based on intuition. Angels are good investors for a seed round of financing, after you have raised friends and family money, but before you approach professional investors. You can usually find these people as part of Angel networks, or from word-of-mouth referrals.

My pre-launch, female empowerment start-up would benefit from having a female Angel Investor who wants to see my product exist in the world, and can make financial decisions without tons of data.

API

Application Program Interface. API's are sets of tools for building apps. Essentially, API's allow the technology of one application to communicate or integrate with that of another. Many websites may integrate social media API's, like Instagram, so that the information from your Instagram account shows up on your website.

I wanted my website's readers to see the geographical location of my restaurant, so I integrated the Google Map's API.

Average Revenue Per User. You can find this number by dividing total company revenue by total number of users. By tracking ARPU over time, companies can see how effective new products and services are.

Even though my site traffic has been growing steadily for the last three years, the ARPU has been decreasing.

An official inspection of a company's books by an independent third party, performed to ensure that a company's financial statements accurately reflect reality. Audits are completed to protect investors and the IRS.

I hired Ernst & Young to audit my year-end financial statements before I published them for my share-holders.

b

Parts of a website that are not seen or experienced by the user, but instead used by those creating and uploading content.

I needed my web developer to plug the Google Maps API into the back end of my website.

The part of a website that is not visible in the browser when the page first loads. Whatever appears after you scroll down on the page is considered below the fold. Anything below the fold is implied to be less important than what appears above the fold, since there is a high possibility that people can leave a website before they ever scroll down.

I charge advertisers about 75% less to place their banner ads below the fold than I do for them to place them above the fold.

A Beta version of a product is one that is still in a testing stage. People use the term "Beta" so that you know you are not working with a final product, and to make you more forgiving of errors.

Please don’t mind the bugs on my website, it is still in Beta!

Someone who records the day-to-day transactions of an organization. A bookkeeper is crucial to managing your finances, and for filing taxes.

I wanted to do a really good job of tracking my expenses and paying my bills, so I hired a bookkeeper to do it all for me.

The process of starting a company without external funding. Entrepreneurs can bootstrap a business by constantly re-investing earnings and growing organically.

Instead of giving away half of my company for venture capital money, I will try to bootstrap a little bit longer.

A short-term loan meant to get you from one period of financing to another. It is not meant to be a complete financing solution. A bridge loan can last anywhere from 2 weeks to 3 years, depending on the terms of the loans that come before and after it.

I need a bridge loan to cover me for the next few weeks since I will run out of cash before my Series B round is completed.

A business plan is the story of your business before it exists. A business plan should include the goals of your business, and exactly how you plan to achieve them.

Before I started my business, I wrote a detailed business plan to make sure I could actually bring it to life.

c

An independent legal entity owned by shareholders. The corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs. Unlike an S-Corp, a C-Corp is taxed separately from its owners, so the owners are taxed twice (on the company level, and on the individual level).

I wanted to avoid being a C-Corp for as long as I could so that I could avoid double-taxation on earnings.

The calendar year is always January 1-December 31. Unlike the fiscal year, the calendar year cannot be decided by the company.

The fiscal year for my company ends on March 31, even though the calendar year ends on December 31.

A cap table (capitalization table) shows what happens to company ownership over time, as a result of future rounds of financing. Each time a company raises money, the founders and investors of earlier rounds are diluted. A cap table outlines exactly how much money a company expects to raise in the future, at what valuation, and what will happen to all original equity ownership under these circumstances.

My early investors want me to provide them with a cap table so they can see how much their equity will be diluted when I raised another round of financing.

Capital Expenditures. All expenses made to buy single-purchase tangible objects, such as buildings, furniture and other infrastructure. If it is an ongoing, monthly cost (such as rent) it is considered overhead, not CapEx.

My company just bought a new office building to fit our growing team, so the CAPEX this year will be through the roof.

Capital means money. In finance, capitalization is the make-up of all forms of financing that had to be issued in order to infuse money into a company. Start-ups are often capitalized (or funded) by issuing stocks and bonds to investors. As more money is raised over time, the capitalization of a business shifts and original equity investors are diluted.

My company was capitalized by selling equity to five different investors.

CFA

Chartered Financial Analyst. The certification required to become a CFA involves three rounds of testing on topics ranging from accounting, investment management, financial analysis, stocks, bonds, and derivatives. The most common use of a CFA is in investment portfolio management. The CFA Institute is an independent organization that requires annual membership payment and very specific usage of their CFA title. It is possible to be a financial expert without the CFA certification. CFA's are usually investment portfolio experts, where CPA's are accounting experts.

Joe Smith, CFA, is a very knowledgeable and experienced investment portfolio manager.

The amount of time that must pass before a single unit of your equity vests. Standard terms for equity include a four-year vesting period and a one-year cliff. This means you won't own a single unit of your stock until one year after you were first issued it. Companies do this to ensure certain employees or founders stick around long enough to make an impact and actually earn their ownership stake, instead of simply being given the equity and leaving before any time passes.

I cannot leave my company before my one-year cliff, since I won't be entitled to any of my equity until then.

CMS

Content Management System. An application that exists on the back-end of a website and allows the administrators of the site to upload and manage content for their users.

When I launched a blog, I used Wordpress as my CMS to upload and schedule all of my posts for the month.

Source Code. Computer instructions written as text in a computer language. Websites are built in code, as are mobile apps. Computer programmers determine actions to be performed by a computer by writing source code that dictates those actions. Common coding languages are: Java C, C++, C#, Python, PHP, Ruby on Rails, Swift, HTML, CSS.

My entire WordPress website was written in PHP code.

The most basic form of ownership in a corporation. Most shareholders will be common stock holders. Common stock is also the last in line to be paid out in case of bankruptcy. Common stock holders get to vote on the board of director elections and corporate policy, in proportion with the number of units they own. They also get paid dividends on their stock if a company is distributing profits.

When my business was incorporated, we authorized 10 million units of common stock, issued 5 million of those units, and gave 50% of the issued units to each co-founder.

Contract employees (a.k.a. contractors) are considered to be self employed, and not the full-time responsibility of the business employing them. They must meet the following three criteria: 1) The contractor controls what they do, how they do their job and where they do it. 2) The contractor dictates how they are paid, reimbursed, and uses their own tools/supplies. 3) A contractor works on specific projects, and does not have an ongoing role in the company independent of the outcome of their project. Contractors are not eligible for employee benefits. Companies do not generally have to withhold or pay any taxes on payments to independent contractors.

I don't have steady enough revenue to pay full-time employees every month, so I hire contract employees on the months I can afford them, and do the work myself the rest of the time.

Turning fans or visitors into actual customers. For some companies this means getting a customer to sign up, for other companies it means getting their money. The most important question in a for-profit company is how it will make money. Having a well thought-out conversion strategy will be crucial for investors to see before handing over the cash.

Offering monthly discounts to newsletter subscribers has been a really effective tool for conversion.

A loan that converts into equity ownership when certain conditions are met. Start-ups often use convertible notes to finance early stages of their company. Investors who receive convertible notes get the benefit of being higher in the cap structure (meaning they are paid out before stock holders if the company goes bankrupt) and the option to convert their loan to equity ownership should they want to participate in the success of the company. Convertible notes allow founders and investors to delay valuing the company until the time they convert the notes into stock. Standard terms for convertible notes are 2 years maturity, 8% coupon and 20% discount.

My seed round investors all got convertible notes since it is too early to value my company.

A corporate lawyer specializes in corporations law, and would be the ideal person to help you incorporate your start-up, manage founders agreements and raise money. Some corporate lawyers specialize in "emerging companies," so keep a lookout for those guys as an early stage entrepreneur.

I decided to incorporate my business as an S-Corp, so I hired a corporate lawyer to complete that for me.

CPA

Certified Public Accountant. CPA's are qualified by passing a standardized test, and must be up to date with current accounting standards by taking continuing education. CPA's are good people to audit your financial statements, make sure they are in accordance with General Accepted Accounting Principles (GAAP), and to prepare your taxes. While CPA's are accounting experts, CFA's are investment portfolio experts.

I hire a CPA to audit my financial statements at the end of every fiscal year.

d
DBA

Doing Business As. A fictitious name for your business that is different from your personal name (if you are a sole proprietor), the names of your partners (in a partnership) or the officially registered name of your LLC or corporation if you have one. When you form a business, the legal name of the business defaults to the name of the person or entity that owns the business, unless you choose to rename it and register it as a DBA name.

I am a sole proprietor in my jewelry business, and I pay taxes as an individual, but instead of calling my jewelry line Jane Doe, I set it up as a DBA under "The Jewelry Collective."

The process of adding some certainty to your company's future. The sheer passing of time could de-risk your company. Securing customers, multiple key employees, and a solid product are all ways to de-risk your business. Often investors will hang around, and not invest, until you have removed a lot of the risk. Your market value should be higher after you de-risk, and investors should get lower rates of return at this point in time.

I kept visiting an Angel Investor who would only agree to give me money once I de-risked my start-up.

Money that is owed or due to someone else. Small early-stage businesses may incur debt in the form of a bank loan, a family loan, or credit card debt. If your company goes bankrupt or out of business, the debt-holders (or the people who made you the loans) get paid out before the equity holders.

All of my convertible loans show up in my financial statements as debt.

The process of decreasing the value of a physical asset over a period of time. This allows you to spread out its cost, at least on paper, over the course of its life.

Every year my financial statements need to reflect a $100,000 depreciation expense, which represents how much value my office building loses every year.

Slang for "web development firm."

I am going to hire a dev shop to code my website.

The percentage below fair market value at which investors can buy equity in a company. Convertible note holders often get to convert their loan value into equity at a discount to market value. If you own a $150,000 convertible note, and are given a 20% discount, you can trade in that note for $180,000 worth of equity at the time of conversion. (($180,000-$150,000)/($150,000))=20%. Your companies valuation, often determined by the newest investors, will determine how many shares you get for $180,000.

Since the company looked like it was going bankrupt and wouldn’t be able to pay back it's convertible notes, I was able to buy one at a significant discount, or only 20 cents on the dollar.

A new, innovative way of doing things that shakes up the status quo. Many start-ups hope to make it big by disrupting current markets, expanding them, and capturing a large part of the market share, just like Uber did with the taxi industry.

He created a technology that was so disruptive to the retail industry that no one would have to set foot in a brick and mortar store ever again.

A fundraising round in which a company is valued lower than it was in a previous round. During the fundraising process, companies tend to grow and gain value each time they go to raise. If the company is struggling and desperately needs cash, they may raise money in a down round. Down rounds send very bad signals to the market regarding the financial health of a company.

'My music streaming service is rapidly losing subscribers, so we desperately need to raise money, even if we do it in a down round.

e

Earnings Before Interest and Tax. An indicator of a company's profitability, calculated as revenue minus expenses (before you pay tax and interest).

My investors are very happy to see that my EBIT has grown 200% year over year for the past 5 years.

Earnings Before Interest, Tax, Depreciation and Amortization. Essentially, net income with interest, taxes, depreciation, and amortization added back to it. EBITDA can be used to analyze and compare profitability between companies and industries because it standardizes the unit of measurement and eliminates the effects of financing and accounting decisions.

Let's invest in the t-shirt company instead of the sweater company since it has a consistently higher EBITDA.

Directly marketing to a group of people using email. Companies may send advertising campaigns, newsletters, or promotional messages to the subscribers of their email. The most common goal of email marketing is to turn email subscribers into paying customers.

My newsletter seems to be a very successful form of email marketing.

A person who applies scientific knowledge to solve problems. In tech, an engineer is a person who builds software/websites by developing the structure and writing code.

I needed to build a content management system, so I hired a back-end engineer to complete that for me.

Ownership stake of a company, often referred to as stock. Early on in the life of a company, when cash is an issue, employees and specialists may be willing to offer you their services in exchange for equity instead of cash. Having equity allows one to participate in the upside performance of a business.

In order to incentivize employees to come work at a risky, early-stage business, I will offer them equity in addition to a small salary.

Employee Stock Ownership Plan. In an ESOP, companies provide their employees with stock ownership, often at no up-front cost to the employees. This aligns an employee's interests with that of the company.

In order to incentivize my employees to think about long-term company goals, I created an ESOP.

When a company cashes out. The two most common exits are the sale of your company to another company, or an IPO (initial public offering). Investors care about your exit plan because they see an exit as the opportunity for them to make a big, one-time return on their investment.

My company had a huge exit when it was bought by Intuit for $100 million.

f

The process of providing money for something.

I am financing my business with a bank loan.

The time period used to calculate a company's annual financial statements. Unlike the calendar year, a company can pick their own fiscal year based on when their company started operations. For 65% of publicly traded companies, the fiscal year is the same as the calendar year (January 1-December 31).

Since I launched my company on March 1, I decided to end my fiscal year 12 months later on February 28th.

A founders' agreement is like a pre-nup for start-up founders. A founders' agreement should outline the ownership, roles and responsibilities of each founder in the business, in addition to describing what will happen should either founder leave the company.

Our founders' agreement explicitly states that if one of the founders quits, they must offer the other founder the right to buy back their equity shares at fair market value before trying to sell them to a third party.

The team that was in place when a company was founded, and usually warrants higher amounts of equity to compensate them for taking a risk on such an early stage company. It is important to distinguish that not every member of the founding team will be given the title of "Founder" or "Co-Founder."

Even though my company only has two co-founders, I consider my first engineer, marketing manager, product manager and creative director to all be part of the founding team.

A measure of financial performance in a company (Operating Cash Flow-CAPEX). Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its operations. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt.

I had about $100,000 in free cash flow this year, which gave me the flexibility of producing expensive photo-shoots and hiring contractors whenever I needed to.

Freemium is a pricing strategy where goods or services are provided free of charge, but users can pay for additional, premium goods or services. If a business can prove their value with high quality free stuff, people may be more inclined to pay for more of what the business has to offer.

My podcast is a freemium service, where I provide free episodes once a week, but more in-depth lectures for purchase daily.

Usually the first round of cash that you will raise, before you have developed a product, by those close to you who are willing to make a bet on your idea based on the relationship you have. In order to delineate between your professional and personal relationships, make sure you give your friends and family investors formal investor documents.

I used money raised from friends and family to build a a prototype of my app.

The part of a website that a user experiences when they visit. The front end of a website includes graphics, images, and words.

I wanted to change the size and colors of the font on my website, so I needed to make some adjustments to the front-end.

The marketing funnel is a system that helps track the stages consumers or purchasers travel through to eventually make a buying decision. Different strategies and channels that businesses use to acquire customers can be considered as funnel-building, which will lead fans to become users, and users to become paid customers.

I set up a sweepstakes for the subscribers to my weekly newsletter, hoping to incentivize new sign-ups and increase the effectiveness of my email marketing funnel.

g

The application of game principles or design elements to a product. Companies like to apply gamification to their products in order to engage users, and get them sucked into the product.

I hoped that people would be more engaged in using my dating app if I incorporated gamification into the experience.

The application of geographical metadata to a piece of content. By geotagging, your content will show up in search results related to the geographical location of your tag. People often use geotags on Instagram, so that if you tag a photo at Disneyland, and they search for all photos taken at Disneyland, your photo will show up. All metadata makes it easier for users to find your stuff.

When I was in NYC, I added the NYC geotag to all of my Instagram photos so that when people searched by location in NYC, my photo would come up.

Google Analytics is a freemium web analytics service offered by Google that tracks and reports website traffic.

I created a report in Google Analytics that showed the growth of unique visitors and total pageviews over the past 12-months.

All income generated from the sale of goods and services to customers before any expenses are accounted for.

I sold 10 shoes at $100/each, so my gross revenue was $1,000.

Someone who can bring viral growth to a company fairly quickly. Growth hackers can make an impact through engineering, product management or marketing.

I hired a growth-hacker to help me figure out quick user-acquisition.

h

Someone who claims to be competent at something, but later proves not to be. Also used to describe a process that impacts user growth.

The social media strategist I hired turned out to be a hack, and was completely ineffective. On the other hand, my engineer figured out that if I follow a lot of people on instagram, they will look at my profile and sign-up for my newsletter, which turned out to be a great hack.

A hashtag is a type of label or metadata tag used on social networks to make it easier for users to find messages with a specific theme or content. To add a hashtag put a # symbol, followed by the word you are tagging. Whenever someone searches for that hashtag, your message will come up as a search result. Hashtags are particularly popular on Instagram.

I added a hashtag to my photo in Instagram that says "#fashion" so that my photo will come up as a search result every time someone clicks on the hashtag "#fashion."

i

The process of brainstorming and developing ideas.

I know I want to be a start-up founder in the beauty space, so I am going through the process of ideation in order to figure out exactly what I will want my company to do.

Refers to a situation where a company's profits are negative, or their expenses are greater than their revenues.

After 3 consecutive months of slowing sales and increasing expenses, my store was officially in the red.

Incubators are communal work spaces that nurture entrepreneurs and foster ideas. Incubators take an ownership stake, but are more concerned with developing ideas than they are with fast growth in a set period of time.

My team was trying to figure out how to solve cyber-security breaches, so we joined an incubator to develop our idea.

A professional investor who invests other people's money. These guys need to manage risk, and will not be as aggressive as an angel investor.

I needed a more sophisticated investor to help me scale my technology company, so instead of raising friends and family money or angel money, I looked for an institutional investor.

Interstitial ads are full screen ads that pop up at natural transition points in the user flow, such as between slides in a slideshow, or between levels in a video game.

My slideshow keeps getting interrupted by interstitial ads.

A collection of different investments all grouped together into a larger, diversified investment.

My investment portfolio includes stocks, bonds, private equity and real estate.

IP

Intellectual Property refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used to make money.

All of the original content on my site is considered IP, and must be protected by law.

IPO

Initial Public Offering. The process of a company going public, or selling their stock to the public for the first time. By selling stock, a company can raise large amounts of cash, and give the public the opportunity to participate in the future success of the business.

Facebook raised $16 billion in cash during their IPO and gave away 421 million shares of equity in the process.

IRR

Internal rate of return. The most common unit of measurement to represent how successful an investment is. The IRR is a standard measure of profitability that can be used to compare all different types of investments to one another.

His fund was so successful, it had a 30% IRR.

A new version of the same product. Iterations are slight variations of the original, in pursuit of the ideal version of a product.

The website layout you are looking at now is the second iteration of the one we launched with.

k
KPI

Key Performance Indicator. Metrics that companies track over time to measure success of their business. For example, an email marketer may want to track how many email subscribers open an email, how many visit the site after reading an email, and how many end up becoming paying customers as a result of those two prior actions. By tracking KPI's over time, you can gage which marketing methods are working, and which are not.

I use KPI's to measure which marketing tools are converting users into paying customers, and give these numbers to my investors every month so they can see how well my business is doing.

l

Businesses set up and run primarily with the aim of sustaining a particular level of income and no more; or to provide a foundation from which to enjoy a particular lifestyle.

Rachel knew she wanted to be a very hands-on mom, so when she started Cookie Cakes, she always intended to keep it a lifestyle business.

LLC

A limited liability company (LLC) is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. Some institutional investors may not want to invest in a company that is set up as an LLC because they miss out on certain corporate tax breaks.

I decided to incorporate my company as an LLC so that my taxes would be lower than if I formed my company as a corporation.

LLP

A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities. It contains elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner's misconduct or negligence.

Law firms are usually formed as an LLP so that they are legally protected if their partners misbehave.

A product or service that is offered at a price that is not profitable in order to attract customers who will later pay for another product or service that is profitable. This is a common practice when a business first enters the market; a loss leader introduces new customers to a service or product in the hope of building a customer base and securing future revenue.

Gillette razors are either given away for free or sold at a loss, and serve as a loss leader for future sales of replacement razor blades.

LP

Limited Partner. Usually used to refer to an investor in a fund. The LP gives their money to a professional investor, who invests on the LP's behalf.

I am an LP in a life-sciences fund, which I hope returns the expected 30% IRR.

m

The size of a public company, found by multiplying the price of one unit of equity by the total number of equity shares outstanding.

Google's market cap is $400 billion dollars.

The length of time an investment is outstanding. Also used to identify the time the investment is completed. If you issue an investor a two-year convertible note, the maturity is two years.

My investor decided to redeem the face value of his convertible note at maturity instead of converting it to equity.

Metadata is data that describes other data. Meta is a prefix that in most information technology usages means "an underlying definition or description." Metadata summarizes basic information about data, which can make finding and working with it easier.

Including metadata in the images and sub-text of your site will significantly help with SEO.

n
NDA

Non-Disclosure Agreement. A legal agreement that requires someone not to repeat anything they see or hear in the process of working with your company. Most investors will not sign an NDA since part of their value proposition is access to information in the start-up scene, and signing one would make them unnecessarily vulnerable to being sued. Since they control the cash, they have the upper hand, and it is commonly accepted that prospective investors should not sign NDA's.

I have every prospective employee I interview sign an NDA so that they wont steal my IP and replicate my app.

a.k.a. net earnings, net profit, and bottom line. It is the difference between all revenues and gains minus all expenses and losses for the period. Regulatory agencies often require companies to report their income statement, which breaks down all contributing factors to a company's net income. The income statement is often called the statement of profit and loss, or the P&L.

I had to adjust the gross revenue by expenses and losses to come up with our company's net income for the year.

A loan that usually lasts between two and five years. The person who gives the loan gets the note in return, or the note can be traded from the original owner to a new buyer. Notes are sold at, above or below face (par) value, make regular interest payments and have a specified term until maturity.

I needed to finance the purchase of an office building, so I issued a 4-year note to get that done.

o

The process of bringing a new person into your company, either as a customer or as an employee. Sometimes this means training them, gathering their information, or simply communicating with them.

I created an on-demand massage app that required me to onboard 100 licensed massage therapists in Los Angeles.

Growth that happens naturally for a company as a result of increased customers or product output, not as a result of paid tactics.

I was hoping that word of mouth and social media would allow my company to experience organic growth instead of having to pay for growth.

An ongoing expense of operating a business, a.k.a. operating expense.

Our biggest overhead expense is the office lease.

p
P&L

A profit and loss statement (P&L) is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year.

The director of each department acts as a mini CEO, and is responsible for their own P&L.

A company known for their color-matching system. The Pantone Color Matching System is standardized color reproduction system. By standardizing the colors, different manufacturers in different locations can all refer to the Pantone system to make sure colors match without direct contact with one another.

I gave my graphic designer the Pantone blue color we used for my logo so he could ensure the shade of blue he was using for the website matched exactly to the logo.

Income received on a regular basis, with little to no effort required in maintenance. Investments often provide passive income, where running daily operations of a business provides active income.

I decided to rent out my guest house on AirBNB since that will provide me a steady stream of passive income.

A shorter version of your business plan, meant to explain your business idea, describe why you are the right person to start it, and to convince investors that your business will make them money.

Since a business plan is too long to expect an investor to read, most start-up founders create a pitch deck, which is much more concise and to the point.

When your original start-up idea doesn’t pan out, and instead of abandoning the idea altogether you slightly alter it so that it has a better chance of succeeding.

My food-delivery company wasn’t getting very many orders, but my YouTube channel was doing great, so I decided to pivot the business to a food content site instead of a food delivery business.

Investment that happens before you have a product or prototype. Pre-Seed investment is often thought of as a bridge loan, to carry you through to your seed investing round. Pre-Seed investment rounds are usually less than $500k.

My business needs more cash, but has no user data to show institutional investors at this point, so I will raise a pre-seed round to get me to the point where institutional investors will be interested.

What you are building for customer consumption. In the tech world this often refers to a website or app.

I just built a juice-delivery app, and the product is very streamlined and user-friendly.

In technology, the product usually refers to the app or the website. A product manager is a role that intersects user experience, technology and business. The product manager helps translate business goals to a technology team, monitors how users are interacting with the product and helps to tweak the product so that it achieves the desired business goals.

My Product Manager is in charge of translating all of our business goals into plans of action for the engineers.

The money a business makes after accounting for all the expenses. (Revenues-Expenses)

After 10 years of steady revenue, the firm had still not turned a profit.

Something that is owned and controlled by you. In the software industry, proprietary software describes software that is closed-source, and specific to one company, often protected by intellectual property rights.

My engineer built proprietary software for our e-commerce platform, so no one else will be able to use it.

A preliminary model of something from which other forms are developed or copied. Prototypes have limited functionality, and are merely created to simulate an experience or prove a concept.

I built a prototype of the new car I am developing so that investors can see what it will be like.

Public relations (PR) is the practice of managing the spread of information between an individual or an organization (such as a business, government agency, or a nonprofit organization) and the public.

I always debate whether or not public relations is something I should pay for, or if my press contacts will allow me to do it well enough myself.

q
QA

Quality Assurance. After products are manufactured, or web products/apps are built, there is a thorough review process, called QA, meant to catch and clean up all errors and bugs.

After my web developers finished building my site, we had two weeks of QA to find and correct all of the bugs.

Every 3 months (4 times a year). Quarters can match a calendar year, or a fiscal year. Usually, Q1=Jan-March, Q2=April-June, Q3=July-Sept, and Q4=Oct-Dec.

Many public companies pay out dividends to their share-holders quarterly.

The simplest and most accessible book-keeping software. Used to track all daily transactions made by a company.

I balance my own books daily in QuickBooks.

r

A central location in which data is stored and managed.

My friend offered to clean up all of the front-end code my web-development firm wrote, so I needed to get him access to the code repository.

The amount of money you make from a specific investment is considered the return on investment.

Venture Capitalists look for high growth companies that will provide out-sized returns.

All income generated from the sale of goods and services to customers.

My t-shirt company sold 1,000 shirts, and generated $20,000 in revenue from those sales.

RFP

Request for Proposal. When a company is in the process of hiring third party specialists, or creating business development deals, it is good practice to give the other party an RFP that outlines the exact services you require from them. When the prospective specialist puts together their proposal, they will know exactly the scope of the work you want and they can give you a more accurate estimate of time and costs for such a project.

I wanted to hire a creative agency to help me with my company name and logo design, so I sent an RFP to multiple agencies in order to compare their proposals to one another.

How much risk a person is able to tolerate, a.k.a. risk tolerance. People with a low risk profile often invest in conservative investments, such as bonds. People with a high risk profile can invest in much more ambitious investments, such as start-ups, and be able to handle the possibility that they may lose their money.

Even though I have a lot of money, my risk profile is too low for me to invest in your start-up.

ROI

ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio. ROI is a standard measure that can be used to compare the efficiency of a number of different investments to each other.

My fashion startup and the healthcare startup both had an ROI of 30%, so they were equally great investments.

The amount of time until your startup goes out of business, assuming your current revenues and expenses stay the same. You can find this number by dividing your total remaining cash by the current monthly burn rate.

My company has $100K left in the bank, which should give us 4 months of runway.

s

The capability to handle a growing amount of work, and the potential a company has to grow.

When investors put money into a business, one thing they seriously consider is potential scalability.

Traditionally, the seed round was the initial capital used to start a business. Seed capital often came from the company founders' personal assets or from friends and family. Today, people consider the seed round to be a separate and later round of fundraising than the friends and family round, and often the first time angels or professional investors will put money in your business. The amount of money is usually relatively small for a professional investment round ($500k-$2million) because the business is in its early stages.

I raised $500,000 from Angel Investors to finance my seed round.

SEM

Search Engine Marketing. A form of marketing that increases a website's visibility as a result of a search engine query. The most popular form of SEM is Google Ad Words, which allows you to pay per click, or pay per views, for your site to show up high in the results for words that are related to your business. For example, if you are an athletic company, like Nike, you may buy the word "running" through Google Ad Words. When a potential customer types "running" into a Google search, and Nike shows up as a top result, you pay Google $5 for every person who actually clicks on the Nike link and visits your website.

Google Ad Words is the most effective form of SEM that I use.

SEO

Search Engine Optimization. Doing whatever it takes to make your company show up at the top of search results (usually through a Google query) without actually paying money. Some basic techniques for making your results show up on top include meta-tagging (tagging images within the pages of your site), linking out to other websites, and including really popular search terms in the copy of your website.

When I hire engineers and product managers, I make sure they are well-versed in SEO, so that the architecture of the site will attract as many readers as possible.

The name of a company's first significant round of venture capital financing. Series A is usually the first round where investor's get equity, instead of convertible notes, for their investment dollars, and the company is formally valued. Over the past few years, what people refer to as "Series A" has been getting larger and larger. A Series A round is usually between $2 million and $10 million, and a company tends to give away between 10% and 30% of their company.

After raising a seed round from Angel Investors, I decided to raise a Series A from Venture Capitalists in order to launch my business in five new cities.

The round of financing that follows Series A. A company will usually have achieved the goals set out during their Series A round, and be perusing further business expansion. Investors still get equity in exchange for cash. During a Series B round of financing, a new valuation is set. Companies usually raised more money with each progressive round of financing. Valuation usually increases with every round of financing you raise, so you need to give away less of your company in exchange for cash (on a per/dollar basis). In the rare case that your company is valued less than it was in the previous round, this is called a "down round."

After successfully launching in five different cities, I decided to raise a Series B from my current investors to scale the business to 20 cities!

The round of financing that follows Series B. A company will usually have achieved the goals set out during their Series B round, and be pursuing further business expansion. Investors still get equity in exchange for cash. During a Series C round of financing, a new valuation is set. Companies usually raised more money with each progressive round of financing. Valuation usually increases with every round of financing you raise, so you need to give away less of your company in exchange for cash (on a per/dollar basis). In the rare case that your company is valued less than it was in the previous round, this is called a "down round."

After successfully launching in 20 different cities, I decided to raise a Series C from my current investors in order to go global!

An unofficial launch, usually to a limited number of select people. A soft launched is used to gather data on usage and response before formally opening to the public.

The soft launch of my website was in February, but all readers needed access codes to see the content.

A company who focuses on growth and innovation from the outset as opposed to slow, organic growth. Start-ups often need to raise money from investors so they can scale their company quickly, before they have validated revenue streams. Start-ups often focus more on user acquisition than on revenue generation. They are distinctly different from young revenue generating businesses (who focus on making money early on) and lifestyle businesses (who prefer to stay small to allow for work/life balance).

My tech start-up needs to raise money from investors since we expect exponential user growth, but no revenue streams for five years!

A business or product that has not yet launched, a.k.a. pre-launch.

My product is still being developed and is in stealth mode.

Photographs that are licensed for specific uses. Stock photos can be used to fulfill creative requirements instead of hiring a photographer or capturing original images yourself. While it is easier to use stock photos in many cases, the images tend to be more generic, and you don't have full ownership rights over them. Stock photos can be purchased and delivered through online databases such as Getty Images and Stocksy.

I didn’t have time to produce an entire photoshoot to create an image for my landing page, so I licensed a stock photo instead.

A secondary logo, often smaller than, or a piece of, the main logo. A sub mark can be used as a favicon, profile picture or watermark. Sub marks are especially helpful to brands with long business names because they provide a simple alternative to their logo.

I used my sub mark as all of my social media profile pictures so that viewers would know the profile belonged to me without seeing my entire company name.

t

The term sheet is the document that outlines the terms by which an investor (angel or venture capital investor) will make a financial investment in your company. Term sheets tend to consist of three sections: funding, corporate governance and liquidation.

I always send my investors a terms sheet in addition to the convertible note document, since it is so much more concise, but says the same thing.

A recognizable sign, design, or expression which identifies products or services of a particular source from those of others (or a brand mark). Trademarks are central to corporate identity, and may be located on a package, a label, a voucher, or on the product itself.

I had to trademark my company's name and logo to make sure that no competitors tried to use them as their own.

u

The process of issuing insurance policies, or the process by which investment bankers raise money from investors by issuing equity or debt on behalf of corporations and governments.

The investment bankers are Goldman Sachs were responsible for underwriting my company's IPO.

A term used in the Venture Capital world to describe a company whose valuation exceeds $1 Billion. A company's valuation is set, seemingly arbitrarily, by investors in the most recent round of fundraising. If your company raises $100 million, and gives away 10% of the company for that $100 million dollars, then your valuation is $1 Billion, and you are a unicorn. Some examples of unicorns are Snapchat, Facebook and Uber.

The Honest Company just raised a round of financing at $1.7 Billion dollars, making it a unicorn just 3 years after it launched.

How likeable, functional, and enjoyable (i.e., usable) a company’s product is.

When I built my store's ecommerce site I was much more concerned with usability than aesthetics.

When a startup tests its user experience by having people test the product. This gives the startup a chance to work out bugs before the official launch and makes sure people are interested in the product before additional money is spent.

I wanted to make sure users understood how to buy insurance once they opened the app, so I conducted a user test to see their interactions.

v

An estimate of what something is worth. Companies are usually valued by their long-term potential earnings. There are multiple ways to come up with a valuation, but most industries have industry-specific standards. Company valuations are usually set during times of fundraising, often by professional investors, who expect to get partial ownership of a company in exchange for cash.

According to its latest round of financing, Uber's valuation is a whopping $70 billion!

The one thing that sets your company apart from others. What is it that you do better than anyone else? Do you have a superior product? Do you offer a lower price? Is your solution faster? These are all potential value propositions.

Uber's value proposition is clear: provide a more convenient service at a lower cost.

Venture capital (VC) is money provided to start-ups by professional investors. Venture Capital funds invest in companies in exchange for equity in the companies they invest in. Venture capitalists are interested in companies that aim to disrupt markets and make extremely large investment returns. People must be qualified (deemed rich enough) to make investments in venture capital rounds since such young and growth-oriented companies tend to be very ambitious and risky.

In order to scale my high growth biotech firm, I raised a $100 million round of venture capital.

The period of time before equity shares that have been granted to someone are unconditionally owned by them. Investors are usually not subject to a vesting schedule since their primary function is providing money, but Advisors often get a 2-year vesting period, and employees (and often founders) are often subject to a 4-year vesting period. Vesting incentivizes long-term relationships, so that advisors and employees stick around long enough for their efforts to make an impact, and their shares to be rightly "earned."

Although I was issued 10,000 share of stock, I will not own it out right until my 4-year vesting period has passed.

Growth at an exponential rate. Many start-ups hope they can achieve viral growth, but most have difficulty scaling that quickly. Often times start-ups who experience viral growth need to raise investor money to scale quickly enough to meet their demand.

The comedy video we produced was emailed to thousands of people, each of whom passed it on to someone else, creating viral growth for the company.

w

Something that takes up space, but has very limited functionality. Widgets are placeholders, and often show up while you are waiting for the useful functions to load.

When my computer goes to sleep, a widget of a clock pops up as a screen-saver.

A technique used to side-step problems in order to continue moving forward.

If a prospective investor does not qualify as rich enough to invest in start-ups, they can find a work-around by pooling their money together with other small investors in formalized funds.

y

The percentage income return on an investment. For stocks and bonds, this can be calculated by total interest and dividends earned in a year, divided by the current market value of that stock or bond.

A venture capitalist usually expects his winning investments to yield exponential returns to make up for all of the start-ups he invests in that go under.

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